LOL. An unintended double entendre. However, I would agree with the vertical approach.
First option trade help
- Thread starter Somadis
- Start date
LOL. An unintended double entendre. However, I would agree with the vertical approach.
Spoon feeding is not a good way to learn options trading. Checkout CBOE.com, seek and you shall find.
lylec I agree with you that beginners should read, experiment and figure out what works best for themselves. It is a far better approach than laying out hundreds if not thousands of $$ in these courses. I have actually seen courses > $4000 for options 101 stuff.
'tis also true that you can analyze something to death and still lose $$ specially in the options space. What is a tragedy however, is in not analyzing something, losing money and not knowing why you lost money for you will be bound to repeat it in the future. A greater tragedy is in not analyzing something, making money, then sizing up because you think you are good vs. happenstance.
Somadis , If you just buy a put , let's say 1 week before earnings, some options get bid up so high that even when the stocks goes down, your put does not appreciate anywhere near where it should (which means you took risk and did not get adequately compensated for it). A stock might make earnings , open unchanged the next AM and the options are down $1. I have been there and it is not pleasant. My suggestion is to read books by S Natenburg,, C Cottle, L Mcmillan.... start slow, trade 1 lots, open up a ThinkorSwim account , they have a good simulator where you can put on trades and move the rewind /fforward button to see how your trades would've done.
'tis also true that you can analyze something to death and still lose $$ specially in the options space. What is a tragedy however, is in not analyzing something, losing money and not knowing why you lost money for you will be bound to repeat it in the future. A greater tragedy is in not analyzing something, making money, then sizing up because you think you are good vs. happenstance.
Somadis , If you just buy a put , let's say 1 week before earnings, some options get bid up so high that even when the stocks goes down, your put does not appreciate anywhere near where it should (which means you took risk and did not get adequately compensated for it). A stock might make earnings , open unchanged the next AM and the options are down $1. I have been there and it is not pleasant. My suggestion is to read books by S Natenburg,, C Cottle, L Mcmillan.... start slow, trade 1 lots, open up a ThinkorSwim account , they have a good simulator where you can put on trades and move the rewind /fforward button to see how your trades would've done.
I agree. If the OP is not sure whether he should buy a put option or sell a put option...I'd study options a bit longer before trading. Also, retail has been getting hammered lately. Sears is one of the weaker retail stores possibly heading towards bankruptcy. So a lot of people are expecting Sears to be at or below $8 next week...how much of your expected weakness is already priced in?
Buy Put options at the $9 strike price. -- if you think Sears stock will fall.
If you're right...the new value of those options will be a beautiful thing.
Like another person said: KISS...keep it simple stupid.
I'm personally not a fan of complex and weird options strategies.
I use Charles Schwab as my broker. Would something like this works or should I increase my expiration date if I think Sears will fall to $8 by May 25th?
SHLD 05/26/2017 9.50 P Buy to Open Quantity 100
Also, thanks to everyone for their advice. It is much appreciated.
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You probably don't like to hear this:
It appears to me you are just guessing. Trading options around earning is a very difficult play that even experts often got it wrong. All the volatilities and uncertainties are already priced in so even if your guess is correct chances are you won't profit much from the trade. A spread like the other posters said is a good way to start but it limits both your gain and loss and it takes experience to set up correctly.
If you are new to options, you probably should not trade around earning period. And, if it were me, I would trade a few covered calls or cash secured puts to get my feet wet and try to trade regular periods options to first get a feel.
I am new to options too, (I have been trading only since 2013) and still have lots to learn.
Good luck and best wishes.
Quantity 100 in the Schwab options trading box means you are trading 100 contracts or 10,000 shares. That is a sizable lot. Before you execute, look at the bid/ask sizes to make sure the volume can support the trade.
That would work.
The nearest in the money put usually captures about 70 percent of a move. This means if the stock is trading at 9.25 and you buy the 9 put and the stock goes to 8.25 you would get about 70 cents off that move. I agree with the other guys though, its too soon for you to be trading options.
You should google "options calculator" and "options greeks" Youtube also.
Yes you have the right idea, that should work.
I don't mean add confusion, but here's something to think about and practice. To pay for the long put option, consider selling deep in-the-money call. Or sell another month otm put. The short option premium is used to pay for the long put position. You'll need to determine the strike range, works well with range bound stocks. Then you will have a synthetic short.
Thank you everyone. Options aint easy, but I like to learn by doing it correctly. What is a better way to learn then to ask questions then dive in? I am only focusing on puts right now as I don't plan to do too much options. I only do it on stocks that I strongly believe will go down. I'll just buy regular stock if I think it will go up since I have all the time in the world. Thank you all once again.