For Directional traders
- Thread starter palawan
- Start date
Thanks for the support. Trading options is harder than trading the underlying (bigger spread, time limits, etc), so you have to be more selective. I can still remember yesterday that I brought my laptop to lunch trying to see if I might be able to put in a position (calls or puts) on GOOG before they announce earnings. I was looking at the Aug 260 puts and the Aug 360 calls. From experience, I knew that GOOG would need to move about 30 points in the direction I pick or I will lose money. I think 20 points would be just enough for the position to stay even to compensate for the collapse in the IV after earnings. So, I decided not to do anything.... After lunch, GOOG was going down very fast AH. It was down as much as 31 points (could have been more as that was only the highest I saw). I didn't feel bad at all eventhough I was looking at the puts more than the calls coz they were "cheaper". Sure enough, today even as GOOG is down 11 points for the day, the 260 puts are down over 70% from yesterday's close. When I was just starting to trade options, I didn't understand things like that.
If you have time, you might want to sign-up for free as a guest at Motley fool and search for posts of a user named ttm This guy made tens of thousands of dollars by keeping it simple trading options on the most unlikely of candidates - PEPsi His trading idea on PEP was based on the way PEP had a predictable trading range which became even more consistent during earnings announcement. He liked PEP options because it was almost like trading the underlying - very liquid and the minimum spread between the bid and ask. If it was more than .5 (or could have been back in the days of the 1/16's), he would put in a limit order in the middle and was patient for it to get hit by the MM's. It was significant money at the size of his trades. He advocated his directional plays, eventhough he seemed to understand the greeks based on his discussion with other posters. It's too bad that when Motley fool announced the fee-structure, all the good posters on the options discussion board voted not to stick around. Many people posted that they would pay for the membership fee of the knowledgeable contributors (I would have paid for ttm's subscription for sure), but they all turned it down, saying it's the principle. True, Motley fool was getting more from them than they were from the site. And they didn't like the idea of Motley fool cashing in on their knowlege and experience...
Good luck.
For my part, I am just going to focus on observing as much as possible about the activity of options on particular stocks. The two that I have picked are TASR and NVDA, the former needs no introduction, the latter is a company that I am very comfortable with, know a great deal about their products, etc.
Are there any free sites that offer historical options pricing data? For the moment I'm just taking screenshots of long range puts/calls from the Nasdaq website and pasting them into a Word document, along with a text notation of what the closing price was for the underlying equity.
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Chagi;
Right on risk can be figured more precisly ;
however timing is much more critical & important because of time decay for buyers.
OptionsXpress has free historical data under ''quotes;''
for current contracts, anyway
If everything is right on trade but you over pay ;
options still will lose money for buyer !!
And like Natenburg says, if moderately bearish or moderately bullish;
buy underlying, [Not options]
Palawan;
Dont try to catch the exact bottom myself when trading , but do like to try catch the last or next to last tick in exit of long call/long puts;
scale out 2 or 3 times in same position helps some.
you can try www.ivolatility.com but i think they only have historical IV data not the options prices. historical options pricing is hard to find coz options don't always trade everyday. good luck.
Idea for the week of 7/25/2005:
GOOG 320 calls - got filled for 7 of them at 1.35/each (Risk-capital of about $960 with commissions). Currently 1.30 x 1.40
Reasoning: gamble (speculative) play till Friday 7/29 I was doing well in my other position (VPHM) and when I'm ahead, I get into this antsy mood and I gotta gamble, er, I mean, speculate
. Seriously, though, I'm in a bullish mode and was looking at a volatile stock to just play for the week. I kinda threw this order not really thinking the price I put in would get hit. I put this in before lunch when GOOG was only down ~4.7 and GGDHF was 1.40 x 1.45 I think NASDAQ starts going up starting by end of day tomorrow. GOOG doesn''t have anymore major news (earnings has been announced) coming out and will probably trade with the market. IV has totally collapsed and at around 32 of IV, the Aug 320 calls are "cheap". Very cheap compared to the VPHM Aug 10 calls' IV of 84.5. No real price-target for GOOG as I don't expect it to make any major moves one way or another. More of a time-target as I don't plan to hold it after Friday. I'll be looking to close-out position by Thursday or Friday depending on market conditions.
Updates on my other positions:
VPHM 10 calls (Qty=15). Entered at 1.5 each last Friday. Cost-basis is much lower because of previous profit-taking last Wednesday. Current 1.9 x 2.05 - price target on the underlying is still $13/share if hit before 8/2/2005. Otherwise...
KSS Jan 50 puts (Qty=14) Cost-basis is 1.95 - Bad entry point from a while ago and can only remember being ahead on this position for a couple of days. Hoping for an earnings warning by Thursday 7/28. If not, quiet period for 2 weeks and earnings announcement on 8/11. Hoping that's gonna be horrible and the stock crashes the next day... Currently 1.50 x 1.6
DWA Dec 30 calls (Qty=14) practically dead. Just waiting for next quarter's earnings announcement. Cost basis is 1.25. Currently .25 x .35
GOOG 320 calls - got filled for 7 of them at 1.35/each (Risk-capital of about $960 with commissions). Currently 1.30 x 1.40
Reasoning: gamble (speculative) play till Friday 7/29 I was doing well in my other position (VPHM) and when I'm ahead, I get into this antsy mood and I gotta gamble, er, I mean, speculate
. Seriously, though, I'm in a bullish mode and was looking at a volatile stock to just play for the week. I kinda threw this order not really thinking the price I put in would get hit. I put this in before lunch when GOOG was only down ~4.7 and GGDHF was 1.40 x 1.45 I think NASDAQ starts going up starting by end of day tomorrow. GOOG doesn''t have anymore major news (earnings has been announced) coming out and will probably trade with the market. IV has totally collapsed and at around 32 of IV, the Aug 320 calls are "cheap". Very cheap compared to the VPHM Aug 10 calls' IV of 84.5. No real price-target for GOOG as I don't expect it to make any major moves one way or another. More of a time-target as I don't plan to hold it after Friday. I'll be looking to close-out position by Thursday or Friday depending on market conditions.Updates on my other positions:
VPHM 10 calls (Qty=15). Entered at 1.5 each last Friday. Cost-basis is much lower because of previous profit-taking last Wednesday. Current 1.9 x 2.05 - price target on the underlying is still $13/share if hit before 8/2/2005. Otherwise...
KSS Jan 50 puts (Qty=14) Cost-basis is 1.95 - Bad entry point from a while ago and can only remember being ahead on this position for a couple of days. Hoping for an earnings warning by Thursday 7/28. If not, quiet period for 2 weeks and earnings announcement on 8/11. Hoping that's gonna be horrible and the stock crashes the next day... Currently 1.50 x 1.6
DWA Dec 30 calls (Qty=14) practically dead. Just waiting for next quarter's earnings announcement. Cost basis is 1.25. Currently .25 x .35
I was just looking at GOOG options, are you sure you don't mean GOOG 330 calls?
GOOG options are pretty interesting to look over. I'm not in a position to play around with options, won't be until sometime in 2006, but I think the only thing I would be remotely comfortable with at this point would be buying puts.
Eventually the bubble is going to pop, and GOOG is trading at very high P/E ratios, it could drop very steeply once it starts to fall out of favour. Those long range puts come at very steep premium s though (not suprisingly), yikes.
I would personally categorize GOOG as a "learning experience" stock - something to sit back and watch, but not touch.
Quote from palawan:
Idea for the week of 7/25/2005:
GOOG 320 calls - got filled for 7 of them at 1.35/each (Risk-capital of about $960 with commissions). Currently 1.30 x 1.40
Reasoning: gamble (speculative) play till Friday 7/29 I was doing well in my other position (VPHM) and when I'm ahead, I get into this antsy mood and I gotta gamble, er, I mean, speculate
Updates on my other positions:
VPHM 10 calls (Qty=15). Entered at 1.5 each last Friday. Cost-basis is much lower because of previous profit-taking last Wednesday. Current 1.9 x 2.05 - price target on the underlying is still $13/share if hit before 8/2/2005. Otherwise...
KSS Jan 50 puts (Qty=14) Cost-basis is 1.95 - Bad entry point from a while ago and can only remember being ahead on this position for a couple of days. Hoping for an earnings warning by Thursday 7/28. If not, quiet period for 2 weeks and earnings announcement on 8/11. Hoping that's gonna be horrible and the stock crashes the next day... Currently 1.50 x 1.6
DWA Dec 30 calls (Qty=14) practically dead. Just waiting for next quarter's earnings announcement. Cost basis is 1.25. Currently .25 x .35
That option has theo value of .88. So not sure 1.35 is "cheap."
But Goog has historica1 mean IV of about 40 (give or take). If if it hits 40 in a month (I'm assuming you mean Aug option), then theo goes to about 2.4, without any change in stock price. So might work if for some reason IV goes up in Aug, though not much news in Aug to increase IV imho.
oopss. sorry, my bad... i do mean the goog aug 330 calls. this is not really a goog trade, but rather a proxy trade for the tech market. it's a swing trade of about 4 days. i should use the QQQQ's as they are more liquid and have smaller spreads, but i like GOOG more as it has that extra "oomph" when it starts going. shorts get squeezed and traders/hedge funds start to pile on it. of course, it can go down just as fast, but this sucker doesn't seem to be ready to crash, just yet. it had every reason to right after earnings and it found some support in the low 290's. seems a lot of long term shorters are just happy to get out now. next support is the low 280's/high 270's. resistance on the upside seems to be around 305-309.
agree on everything you say about long-term puts. i could have made a lot of money on KKD when it started to stabilize and long-term puts were reasonable, but alas...
of course, many people have been predicting GM to go bankrupt, but everytime that sucker starts to go down, it comes right back to life. same with the homebuilders. i like KBH for long term puts. it's a double-whammy homebuilder company with exposure in the mortgage business. i actually bought 15 Jan 65 puts on KBH for 2.0 but I chickened out coz after Greenspan spoke, the homebuilders were up the next day (or maybe it was the same day). i got out of it for minimal profit $225 (before commissions). I see today the homebuilders were pretty weak, but I need more reasons to re-enter this trade. Maybe when the 30-year fixed rates are above 6.5, I will look to buy long-term puts on KBH.
Peace.