For Directional traders

It's interesting that you mention stability in relation to option pricing, I understand that volatility is a factor, but haven't gotten into too much detail yet with calculating valuations.

Anyways, one of the stocks I mentioned previously, TASR, sure has settled down a lot lately. I was browsing through the options, and the thing that suprises me is that even the longer rang options seem to be attractively priced. The reason that this suprises me is that TASR has historically been a very, very volatile stock.

These observations are starting to give me a better feel for the impact of volatility on options pricing.
 
Quote from Chagi:


Anyways, one of the stocks I mentioned previously, TASR, sure has settled down a lot lately. I was browsing through the options, and the thing that suprises me is that even the longer rang options seem to be attractively priced. The reason that this suprises me is that TASR has historically been a very, very volatile stock.
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TASR split several times which increased their float and lowered the volatility. Also, I think many of the traders that were playing them for a while have moved-on. The company doesn't seem to have the growth anymore and at the current stock price of 9.58 and market cap of 587m, I think they might be fully-valued/overvalued. Institutions are selling (per nasdaq.com) and I don't see much of a catalyst to wake them up anytime soon. BWDIK, one good news could send this stock soaring and at 30% shorted, there's enough short-covering to fuel a rally on this stock. We're not investors (or are you :) ) and we just wanna make money either way.

I've never traded TASR, so I don't know much about their potential...

Good luck
 
Quote from Chagi:

These observations are starting to give me a better feel for the impact of volatility on options pricing.
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Tell me about it... I used to day-trade options which is probably the worst thing anyone can do, especially since I had to work and missed out on some opportunities (opening and closing-out postions). But this was during late 2000 early 2001 and there was extreme volatility which made daytrading options "easier". I'd buy in the morning and cashout in the afternoon, or buy late in the afternoon and sell the next morning. I never held for more than 2 days. All I worried about was my total delta for the position as vega pretty much stayed the same or increased in that short timeframe. If I wanted a delta of 1 on my position, I'd buy two ATM calls, or if bearish two ATM puts. My money-management totally sucked back then, too. I'd put in over 50% of my account into a position to get the most delta... I was gambling (same as now :D ) but at least now I'm trying to do it better.

Anyway, to get to my point.... Back then, all I worried about was my position-delta, but today I woke up and saw GOOG was down about 1.5 points and my GOOG Aug 330 calls were .90 x 1.0 which didn't seem right coz I knew my delta was pretty low as these are way OTM. I thought to myself that GOOG will come back and when it hits about even for the day, I'll look at the greeks on www.ivolatility.com option calculator. At around 9AM they were see-sawing between +.20 - .20 and I quickly plugged-in the stockprice tried to see what amount of volatility would give me the current quote. It appeared that IV had gone down to 30.5 from around 32 last night. At this time, even when the stock ended + .24 for the day, the current quote on the options are .90 x 1.0 (down 33% from my entry point yesterday) and it appears to me that it's because IV has dropped by 2.4% to 29.6%. Still, I knew going into this that this will be a very volatile position.

To sum it up, a snapshot of the greeks tonight appears that I need for GOOG to go up +.85 per day to combat the Theta (time decay), but only if IV stays the same. It's a great exercise to refamiliarize myself about options and I'm glad this is a small position coz it looks like it's gonna cost me a few hundreds by Thursday/Friday. If GOOG tanks, I might just get stuck and will hold through the weekend or expire worthless. Fun stuff, these options are... :)

Peace.
 
Weird...

Just saw on the message board that someone bought (or sold) a 1000-contract strangle/straddle (don't know the term now but one side is OTM and the other side is ITM) Aug 15 strike on VPHM.

I looked at the options chain all the way to Jan 08 and don't see anything else that might make it some kind of a spread-position.

If someone initiated this position to buy: It looks to be a bearish position... Even with good earnings announcement next Wednesday, I don't see how those calls could make any money or even come close to offsetting the cost of the puts. Calls appeared to have cost .45 and the puts cost 3.45

If someone initiated this position to sell: It's a bullish position... Provided the earnings are good and VPHM will not go much higher than 15

If someone initiated this position to buy one side and sell the other side, then it's insider information :D

Or, maybe the guy is long 100,000 shares and initiated this position to sell: which looks to me like 2 covered- calls position. Gutsy, but not necessarily a bad position. Because of where the prices executed, this guy better hope that earnings announcment is good or there's a lot of downside to pay.

Or maybe the guy is short 100,000 shares and initiated this position to buy. Vey bearish position and I think there's safer/less-costly way to do this. I think.

:confused: <--- totally confused... I'll most likely close the position (unless I see more info/news) by Monday of next week even if I don't hit my price-target of 13/share on VPHM. I'm not about to hold through earnings even without all these stuff going on.

My position: VPHM Aug 10 calls (qty=15) bought for 1.5 each but cost-basis is ~.8. Current quote 2.05 x 2.25
 
I can see perhaps a LEAP with a 330 call, but a Aug call? Not enough time to do much (vol or direction). Plus theta is high so close to the exp date. Not to mention, as I stated earlier, the 1.35 ask was way higher than the .88 theoretical value.
 
Quote from union1411:

I can see perhaps a LEAP with a 330 call, but a Aug call? Not enough time to do much (vol or direction). Plus theta is high so close to the exp date. Not to mention, as I stated earlier, the 1.35 ask was way higher than the .88 theoretical value.
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yea, i agree... this was too much of a gamble play and was just wanting to see if goog was gonna do wild gyrations this week. didn't happen.

theta is high, no doubt, but it's lower than vega. when i started the position on monday, i think theta was around .08 and delta was around .09 and vega was around .12 as i said in a previous post, i needed for goog to go up by around .85 (which it can do in less than 5 minutes) to pay for the daily cost of theta. theta for 7 contracts was costing me around $50/ day. what i didn't know was that theta was the wrong greek i should have been concerned about. vega was at .12 was gonna cost me $84 per 1% drop in IV. when i started the position, IV was around 32%. it looks like right now it's at 27.9% forget Theta, Ms. IVy Vega was costlier to date :D

risk capital of $945 for 4 days of play to have goog do what it normally does (wild price gyrations) is not bad...so i'm down $420 (no comm.) for 2 days.... hey, i'm having fun and getting some nice lessons on the greeks' behaviour :) i still have 2 days left and just remember, i could lose more :D

Peace.
 
Quote from palawan:

TASR split several times which increased their float and lowered the volatility. Also, I think many of the traders that were playing them for a while have moved-on. The company doesn't seem to have the growth anymore and at the current stock price of 9.58 and market cap of 587m, I think they might be fully-valued/overvalued. Institutions are selling (per nasdaq.com) and I don't see much of a catalyst to wake them up anytime soon. BWDIK, one good news could send this stock soaring and at 30% shorted, there's enough short-covering to fuel a rally on this stock. We're not investors (or are you :) ) and we just wanna make money either way.

I've never traded TASR, so I don't know much about their potential...

Good luck
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I agree, as things stands, I would view TASR as more likely to go down than up at the moment, they have dropped the ball for a couple of quarters now. I think that TASR is something that a person would primarily play with long rang out of the money calls, because one would assume that they will turn things around (they haven't started losing money yet). Specifically I think that the 12.5 long-term calls might be worthwhile in terms of risk/reward relationship.

Two reasons for this are that the float is still not tooooo large and that the President of the company is a pumper if I've ever seen one (hehe).
 
Quote from Chagi:

.... Specifically I think that the 12.5 long-term calls might be worthwhile in terms of risk/reward relationship.

Two reasons for this are that the float is still not tooooo large and that the President of the company is a pumper if I've ever seen one (hehe).
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heheh. it's quite nice if you got the support of company management to pump up the share price. actually, between tasr and nvda for possible long term calls, i'd pick nvda as more probable to hit. nvda is not cheap at 4.6B market cap, but it's a solid company. the march 32.5 calls are reasonably priced.

i think of nvda's business (their strength is in graphics) as being in a "commodity" business which accounts for their low margins. it's a very competitive industry, although nvda is a leader in that field. still, a news announcing a deal to exclusively manufacture the graphics platform for the next nintendo (or something of equal significance in nature) could easily send the stock over $40/share.

i wish you the best in whichever position you decide on...
 
Quote from palawan:

heheh. it's quite nice if you got the support of company management to pump up the share price. actually, between tasr and nvda for possible long term calls, i'd pick nvda as more probable to hit. nvda is not cheap at 4.6B market cap, but it's a solid company. the march 32.5 calls are reasonably priced.

i think of nvda's business (their strength is in graphics) as being in a "commodity" business which accounts for their low margins. it's a very competitive industry, although nvda is a leader in that field. still, a news announcing a deal to exclusively manufacture the graphics platform for the next nintendo (or something of equal significance in nature) could easily send the stock over $40/share.

i wish you the best in whichever position you decide on...
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My suggestion regarding NVDA would be to avoid taking a long position for the moment, the current quarter tends to be a weak one for them seasonally. If you take a look back over the past couple of years, there have tended to be fairly significant drops in early August, usually due to profit warnings.

Probably best to sit back and monitor it until about mid-August, then take advantage of any weakness if it overcorrects downwards. I think that the safest way to play this possibility would probably be purchasing Sept '05 puts with strike of $25 and/or $22.50?
 
Option traders, aaaaarghhh!!
Its like the backtesting gamma/neutral bell curve optimisation bizarro world nightmare from hell, here.
Just throwing this out there, but with a halfways decent charting method, surely trading actual cme products, rather than the share (despite its performance) on a "directional" basis would have produced better results, throughout?
You were talking about basic, call or put ideas, overall, unless im mistaken, (option specialists, flame away, someone might learn something_hopefully me) .
Basic buy, (call or put)plain directional strategies get a bum rap in my opinion, and i say this on the basis of outrageously complex option strategies here.
Not everyone is clever enough to identify a condor, a butterfly, or whatever ridiculous names these things have, and take advantage of these opportunities.
Diversify, off of signals provided by youre weekly futures chart, and ignore any options beyond basic buying puts or calls. Just my opinion.
Specialists, flame away!!!!!!!







:)
 
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