For Directional traders
- Thread starter palawan
- Start date
Quote from palawan:
done. 8 more contracts @ .5 each
15 contracts, total risk capital a little over $2K
..... Good Trading (not mine)
well, there goes the high-risk play for a while... no more risky plays until the lost capital has been recovered from other plays (if it happens at all). this is gonna put a dent.
current quote .20 x .30
Peace.
Well, I'm not about to say "I told you so", and neither am I a seasoned investor/trader, but I will say that I have made the mistake of adding to a losing position more than once, and I don't think that it has ever worked out well in the long-term.
At this point I've decided to never make that mistake again, in fact, I'll even go so far as to start codifying some trading rules:
- Never add to a losing position
- Only take trades with high probability set-ups
- Always perform some fundamental research prior to entering a longer-term position trade
- Always try to trade companies that I am very familiar with
- If two charts look interesting for a trade, trade the stock of the company that is (more) profitable (if possible)
These rules are not exactly unique (some are pretty much cliches), but I can offer a perfect example of the last rule.
Last night I did a scan for basic long potential (I don't have a margin account, so I can't short or trade options....yet), and came up with three companies with promising chart patterns, one of which was already on my watchlist.
Of these, one was a speculative uranium play, one was some sort of speculative biotech play, and the third (from my watchlist) was CV Tech (CVQ.V, traded on Canadian venture exchange). As you might guess, the first two aren't profitable, and are highly speculative, which I view as a significant risk when trading a longer term position. CV Tech is profitable (they make a pretty popular product called ColdFX, not yet readily available in the US), they have high growth, growing cash, etc.
So, I essentially came up with the last rule on my list on the fly last night, where I thought about it for a minute and decided that it would be best to put my money where the profitability was.
At this point I've decided to never make that mistake again, in fact, I'll even go so far as to start codifying some trading rules:
- Never add to a losing position
- Only take trades with high probability set-ups
- Always perform some fundamental research prior to entering a longer-term position trade
- Always try to trade companies that I am very familiar with
- If two charts look interesting for a trade, trade the stock of the company that is (more) profitable (if possible)
These rules are not exactly unique (some are pretty much cliches), but I can offer a perfect example of the last rule.
Last night I did a scan for basic long potential (I don't have a margin account, so I can't short or trade options....yet), and came up with three companies with promising chart patterns, one of which was already on my watchlist.
Of these, one was a speculative uranium play, one was some sort of speculative biotech play, and the third (from my watchlist) was CV Tech (CVQ.V, traded on Canadian venture exchange). As you might guess, the first two aren't profitable, and are highly speculative, which I view as a significant risk when trading a longer term position. CV Tech is profitable (they make a pretty popular product called ColdFX, not yet readily available in the US), they have high growth, growing cash, etc.
So, I essentially came up with the last rule on my list on the fly last night, where I thought about it for a minute and decided that it would be best to put my money where the profitability was.
Thanks, Chagi. Appreciate your inputs.
there were only a few times that adding to a losing position have worked for me. maybe 2 or 3 and definitely less than 5. but looking back yesterday, i'd do it again. because of experience, i knew that for many reasons, adding to a losing position is not good. throwing good money after bad, etc....
however, the bulk of the loss was because i was wrong in the initial idea. my "trading pattern" for options expiration didn't work this time around. i was sitting there, and there was new rason to add to the position because i thought i saw a support level.
this support turned out to be a good one and by more than doubling the position, i could have cashed-out, still at a loss, for $1200 when CME rallied briefly and real-time quote was .8 x .9. my loss would have been $800, but greed was the prevailing emotion and i thought a couple more points and i could easily recover all losses and possibly a little profit.
CME was down less than 2 points and change then and with the markets staying strong (up for the day), i felt cme was on the way to positive. i was actually right on the idea to add, but i lacked the knowledge or psychic abilities
to know when to cash out.adding to a position is sometimes the right thing to do. successful traders do it all the time. as long as the original idea is still valid and/or new information is available.
with options, the additional contracts have more leverage. remember that the original 7 contracts cost me ~$1645 but the other 8 only cost me $400. Now let's say instead of 8, i had bought 30 (for .5 each) to roughly match the original investment... if i wasn't as greedy and actually cashed out when bid was @ .8 (yea, right
), i would have been about break-even. 37 contracts multiplied by .8 equals $2960was the decision to more than double the position for less than 1/4 the cost positive EV? for me it was and that's why i'd do it again...
Good Trading (not me
)mini-update 8/18/2005:
put a call-position on VPHM:
Feb 06 VPHM 17.5 calls - wow! it's so rare that maybe it only happened to me once before... i got filled at the bid. i was trying to nickel and dime it and put a bid in the middle of the spread, but when i finally change the order, my order went thru.
got filled @ 1.90 each.
no longer bearish on the markets for now... $ is not weak anymore (against the euro and J yen). oil is not at the high (that can change) and the market seems to be ok. stable.
huge institutinal buying on VPHM (per nasdaq.com). nice free cashflow for its market-cap size.
Peace.
put a call-position on VPHM:
Feb 06 VPHM 17.5 calls - wow! it's so rare that maybe it only happened to me once before... i got filled at the bid. i was trying to nickel and dime it and put a bid in the middle of the spread, but when i finally change the order, my order went thru.
got filled @ 1.90 each.
no longer bearish on the markets for now... $ is not weak anymore (against the euro and J yen). oil is not at the high (that can change) and the market seems to be ok. stable.
huge institutinal buying on VPHM (per nasdaq.com). nice free cashflow for its market-cap size.
Peace.
I got in today on 10 contracts the Feb 15s at 2.75. Then, because I'm a cheap bastard and do not believe this will close much over 15 tomorrow, I sold 5 contracts of the Aug 15s against them for .40, which was the peak of the day, apparently. If I'm right, the short sale reduces my cost basis on the long calls to 2.55 If I'm wrong, and the thing goes to Mars tomorrow, well...there's a cost to everything, isn't there? Palawan, what was your basis for choosing the 17.5s?
Not trying to be a backseat trader (hehe), but I'm curious about a couple of things regarding NFLX.
My first question is - why December calls specifically?
I'm currently showing:
Dec 22.5 - $1.95
Jan 22.5 - $2.10
Mar 22.5 - $2.45
The Jan call offers 25% longer time to be right for a 7.69% higher premium (compared to Dec call), and the March call offers 75% longer time to be right for a 25.64% higher premium. I understand the concept of Theta decay, but wouldn't the January call be a more attractive choice than the Dec call in this situation? Just that it gives you a significantly longer time to be correct for a fairly small increase in premium over the Dec calls. Personally I would think that I would lean towards the March premium in fact...
I guess my other issue with NFLX is that neither the chart nor the fundamentals particularly wow me. P/E is high, PEG ratio is high. I won't go so far as too say that I think it looks highly likely to go down at this point, but I think that I would probably flip a coin between up and down movement.
Please don't take this post negatively, I'm mostly curious about how you go about picking your options months when you're looking at longer term plays.
nice entries (on both the Feb and the Aug)! congrats.
i trade the underlying directionally and use the options for leverage. the slightly otm's still have enough delta when combined as a whole position.
the price - i'm only willing to put a risk-capital of no more than $3K per position. preferably under $2K... i'd like to think i'm right on the direction, but in case i'm not, that's all i'm gonna lose.
when it goes my way really fast, the more otm's give higher leverage (by being able to buy more).
markets are about to open in 20 minutes, but there are a lot of aug 10's and 12.5's that are in the money. could push the stock when delta-hedging (something i heard and don't know the mechanics) kicks in and gets going pushing higher. could finish above 15 today?
Good Luck.
actually, i didn't know that there was that little difference
i mentioned in my previous post that i only like to risk less than $3K per position and the lower the better. when i had the position before, it only cost me 2035, so i was happy and plusthere was no difference in my mind between dec and jan. ????? it's because the earnings were gonna be released on oct 25 and jan 25 which will be after the expiration date. in my estimate, those were the dates. i could be wrong.
there's a lot of luck in this game... it looks like NFLX is getting hit in pre-market and i'm certainly lucky i didn't enter the position yesterday. i haven't looked at the news and this could be a good day to enter a NFLX on lower strikes and Jan.