FAS/FAZ for New Week 4/27

Quote from sudhaker:

Yeah, that was a perfect sell for today morning. People do short term trading with options and speculate the market with great leverage.

But here are few hurdles with this approach

* Equity options are also subjected to "Pattern Day Trading" limitations.
* A huge bid/ask spread works against you.
* You can easily lose 100% of your investment if market goes in other direction. So risk management is absolutely required.

I'll start doing more of it when my IB account is ready (in 4 days). It is not fun to make $80 in such piking and pay $20 as commission (and $10 to market maker as bid/ask spread loss).
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No kidding about the leverage. FAS/FAZ are both around $1, so if you had $5000 in your account, you could get ~ 50 calls or puts = 5000 shares, vs ~ 900 shares in a margin account at 1.5x. SCARY!! :eek:

I didn't know that options count against the PDT rule. I just thought that those with small accounts didn't use it cuz they were less understood. Interesting.

Yep, the bid/ask on these to account for ~5% at this low price. Big. But it also means that one tick (.05) ~ 3.5%.

It looks like IB's commish is .70/contract.
 
Quote from scot.mcpherson:

I am just waiting for the reversal. I know the Dow has gotta go down from here, but it could go up 25-35 points more before the plunge. FAZ tends to bias downward, so I don't want that chewed away by holding too long.

I think you gotta good price though...

I ended up hopping on at 8.47 as I was typing this.
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Yeah DOW looks unsustainable at that level and guess the reversal is happening now.

I also hold following 2 lots of FAZ

100 FAZ @ 10.55 (impulse buying)
100 FAZ @ 8.40 (loaded today - stop 8.15)

I could not stop out my first lot at 10.25 because I already had 2 day trade for that day. Now I'm in a worst possible situation of hoping-praying.

Never buy these ETFs without hard stop. Mental stop does not work :-( Stay away if your account does not have 25K+, your chances of success with FAZ/FAS is very slim.

Everyday is a learning.

Thanks,
PikerSu
 
and why not go long with FAZ at 8.40-8.50 when it is likely to gain a $1, but has a fair likelihood to gain as much as $3-5. FAS isn't going to make that dramtic a drop, it will drop to 6 at most unless things go really crazy, but if they DO go really crazy, don't you want to be on FAZ and take that ride?


Maybe you can just explain to me what makes shorting FAS more attractive than going long FAZ?

Forgive me, I just don't get that either....
 
Agree that didn't make sense to me either.

Although, this makes me think about how to avoid the PDT rule.

Assume that you only have 1 daytrade left "in the hole", and you were short C and long FAZ, and the market goes big against you.

You could dump the C position, but not the FAZ, cuz you'd be at 4 daytrades, and that would lock up your account for 90 days.

So instead, buy FAS, and there wouldn't be any more downside that day. Then dump whichever one you see to be the loser in the morning and go from there.

Note that you'd have to do it this way, since you couldn't also go long C in the same account.
 
How about you don't go short C and long FAZ at the same time ?!? I understand about spreading your eggs, but C short derivitives is one of FAZ's eggs anyway.

By trading ETFs you are spreading your eggs and affected by the greater market rather than one company, so....

I am just saying because you bring up PDT, why would you hold more positions if you were concerned about getting a PDT margin call ?
 
You shouldn't.

But that also works if you only have 1 "in the hole" and won't have any day trades available for 2 more days.

Assume you're short FAZ and the market goes against you big.

As long as you're not using more than your account balance - not using margin - you can buy FAS and sit out the day neutral.

Otherwise, you'd have to sell FAZ and then sit on the sidelines for 2 days.
 
I'd also rather side on the sidelines for 2 days than loose a ton of cash. So for being all-in as I was talking about, the only way to avoid getting a PDT margin call is to NEVER enter a position unless you have an available day trade as an exit hatch...OR....be willing to loose a lot of money to NOT get a margin call.

twice I have painted myself into a corner making a "sure thing" bet and then eating the losses because I couldn't exit the position. That is literally the ONLY reason I don't have double the money I started with. Sure I have lost some here and there, but nothing like those two times. Still its more expensive having your account locked than it is loosing 20-25%. I make 15% - 20% in a week (barring those two bad deals), so I chose to lose the money instead. I made it back within a week.

But now no matter how comfortable an entry looks, I don't take it without having a day trade....the only exception might be a end of the day intentional overnight or over the weekend hold like I do for FAZ. I'll do that within the last 30 minutes of the day...maybe depending on how good it looks. Obviously it doesn't alway work, I lost money this morning to an FAZ overnight, not a ton but it was still a red transaction.
 
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