High volatility

[ChrisM]

Quote from just21:

try smartsearchxl at www.poweropt.com it is a database of option prices that can be defined anyway you like. They have a free trial

Thx. Looks interesting. Do you use them by any chance ?

 

[trdrmac]

Chris,

yeah 5k open interest is not too bad if it is not one or two blocks.
And if the same 100 or so contracts is trading each day next week. It may be interesting to sell both the june 5 call and put and hedge with the 7.5 call and 2.5 put. I think this is called a butterfly or a pegasus or something like that. Looks like that would create a credit of about $100 for each done.

But as for the notion per the site of using this stock for a covered call, the chart is not great, and the stock is up big since the march lows. So I suspect if momentum fades by next month you may be holding a $3 stock with a 10 cent call for the forward month.

 

[Trajan]

Quote from trdrmac:



i stay away from the smaller stocks in general, poor liquidity, especially in the options is one of the bigger reasons.

I have charted some of the stuff on CC when volatility gets high, but most of the charts are pretty scary to try and grab a 10% premium. You may have 20 or so stocks when the vix pops, right now though it is slim picking.

Although it may be interesting to look at the calls on stuff like LU, NT and a few of the other fallen angels. But for my money sticking with options on the Qs and other etfs is a lot more cost effective.

You will find that smaller stocks have the most edge. I only wish I had the capital, like Nitro, to constantly scan 100,000 symbols and then hold the resulting positions.

 

[trdrmac]

Everyone wishes they had Nitro's cash, in fact at one time it probably was their cash and Nitro took it from them in the markets. LOL

Trajan,

Have you ever done any sort of testing of this?
For instance, there are about 25 give or take small companies (low share price) that are optionable that I track. NT, LU, JDSU, etc that were once Darlings. The option premiums are around 6-10%, is it worth buying and selling covered calls, vs say waiting for a good buy signal and buying and flipping the underlying?

 

[Trajan]

Quote from trdrmac:

Everyone wishes they had Nitro's cash, in fact at one time it probably was their cash and Nitro took it from them in the markets. LOL

Trajan,

Have you ever done any sort of testing of this?
For instance, there are about 25 give or take small companies (low share price) that are optionable that I track. NT, LU, JDSU, etc that were once Darlings. The option premiums are around 6-10%, is it worth buying and selling covered calls, vs say waiting for a good buy signal and buying and flipping the underlying?

You mean, you can find edge on stocks trading for a couple of bucks?

Either way you are long and, at that point, I would consider any short itm put to be long stock. The difference being better entry price and a cap on profit. The way to decide is to think about how likely it is for the stock to move through the strike.

 

[trdrmac]

Quote from Trajan:

You mean, you can find edge on stocks trading for a couple of bucks?

I have just toyed from time to time with the idea, have not really done enough testing to say it has a positive expectancy as far as options go. Now at times the smaller issues do have exaggerated moves that make treating them like a call worthwhile.

The idea of selling puts is a good one, seems to produce a fairly consistent income. Although last year was a bit of a bummer.

 

[ChrisM]

Quote from Trajan:

You will find that smaller stocks have the most edge.

Trajan,

Excuse my q: have you tried it with real money ?

 

[ChrisM]

Quote from trdrmac:

Quote from Trajan:

You mean, you can find edge on stocks trading for a couple of bucks?

I have just toyed from time to time with the idea, have not really done enough testing to say it has a positive expectancy as far as options go. Now at times the smaller issues do have exaggerated moves that make treating them like a call worthwhile.

The idea of selling puts is a good one, seems to produce a fairly consistent income. Although last year was a bit of a bummer.

Trajan,

I`ve done a lot of testing regarding this.
It`s all about predicting volatility, however it seems to be easier to predict future volatility than guessing whether sth goes up or down

 

[Trajan]

Quote from ChrisM:




Trajan,

Excuse my q: have you tried it with real money ?

I have traded a couple of small stocks as a MM but don't now. The edge is much bigger which is compensation for the fact it may be the last time you trade an option in that stock until expiration.

 

[Trajan]

Quote from trdrmac:

Quote from Trajan:

You mean, you can find edge on stocks trading for a couple of bucks?

I have just toyed from time to time with the idea, have not really done enough testing to say it has a positive expectancy as far as options go. Now at times the smaller issues do have exaggerated moves that make treating them like a call worthwhile.

The idea of selling puts is a good one, seems to produce a fairly consistent income. Although last year was a bit of a bummer.

covered write is selling puts and I agree they have exxagerated moves. Still, buying calls doesn't seem like a great to be long these.