How legit is options selling?

Is option selling legit

  • Total voters
    19
  • Poll closed .
TheBigShort said:
I am pretty sure I have mentioned this a few times. The best way to learn how to trade options in my opinion is to read as much as you can from what @Kevin Schmit, @sle and @atticus/destriero @riskarb have written. They all have a good sense of humor as well which makes reading their posts more enjoyable than a text book. Most people will not read after a few pages because understanding their lingo has a steep learning curve. You also cant learn about pricing without understanding at least 1st or second year college algebra/calculus/stats. So maybe that can be an area for you to work on
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And you are not too bad yourself. :thumbsup:

Yes, I am taking a course in computer programming.

As a side note, I am buying more longer dated CELG calls, seemed cheap compared to terminal valuation and compared to BMY? Do you have any opinions?
 
ironchef said:
And you are not too bad yourself. :thumbsup:

Yes, I am taking a course in computer programming.

As a side note, I am buying more longer dated CELG calls, seemed cheap compared to terminal valuation and compared to BMY? Do you have any opinions?
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LOL thanks, but alot of my knowledge is thanks to the guys mentioned.
I am not a merger specialist, you might want to get @newwurldmn opinion on that (I think he has done a fair bit of these). I am out of my position. It does seem cheap but don't forget it's tied to BMY price so you have alot of market risk.
 
ironchef said:
Another view on CELG/BMY by none other than John Paulson:

https://finance.yahoo.com/news/apos...150253867.html?_fsig=DxZOCgPH._Zl66NYAMkROQ--
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Thanks for that link. I was wondering what was causing this big arbitrage. I already own a large position in CELG and was thinking of collaring by shorting BMY, while also selling CELG puts in my IRA to get the bonus 20% added to that when it converted. BMY has a 3.5% dividend too, so don't want that on the margin side. Don't forget, there's also a $9 bonus if one of its calves passes it's cowhood test so potentially $59 +BMY.
 
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Cisco34 said:
Thanks for that link. I was wondering what was causing this big arbitrage. I already own a large position in CELG and was thinking of collaring by shorting BMY, while also selling CELG puts in my IRA to get the bonus 20% added to that when it converted. BMY has a 3.5% dividend too, so don't want that on the margin side. Don't forget, there's also a $9 bonus if one of its calves passes it's cowhood test so potentially $59 +BMY.
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You can help me out here:

I am not as sophisticated as you and TheBigShort, so I am just looking at individual valuations of CELG and BMY. I have a long term holding on BMY (dividend play) and took positions in CELG underlying and calls after reading TheBigShort's analysis.

I am really puzzled by how/what the market valued CELG and CELG options. Does that mean they doubt the merger's chances?

I did some fundamental analysis of CELG when TheBidShort posted his analysis and thought CELG was way undervalued @ $60+ (discounted cashflow accounting for patent cliff of Revlimid and comparing to peers' PE). Even at the current price of $87+-, I think it is still undervalued? What do the professionals know that I don't??? :banghead:
 
ironchef said:
You can help me out here:

I am not as sophisticated as you and TheBigShort, so I am just looking at individual valuations of CELG and BMY. I have a long term holding on BMY (dividend play) and took positions in CELG underlying and calls after reading TheBigShort's analysis.

I am really puzzled by how/what the market valued CELG and CELG options. Does that mean they doubt the merger's chances?

I did some fundamental analysis of CELG when TheBidShort posted his analysis and thought CELG was way undervalued @ $60+ (discounted cashflow accounting for patent cliff of Revlimid and comparing to peers' PE). Even at the current price of $87+-, I think it is still undervalued? What do the professionals know that I don't??? :banghead:
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Don't sell yourself short because I think you summarized it perfectly. Some guy on CNBC said to take the money and run for CELG at 87 because he thinks another big pharm will bid on BMY to invalidate BMY's bid on CELG. That makes little sense to me. If big pharms want to block the acquisition, that means they think CELG is undervalued and wants to add their cash flow and pipeline. And, if someone really will bid on BMY to block their acquisition, that will only increase BMY's value too. Both have "value" based PE ratios, especially CELG. My proposal to sell BMY was only to hedge (since I own CELG) with a collar. The collar is a perfect play right now because upside is somewhat capped beyond the arbitrage value.
 
Cisco34 said:
Don't sell yourself short because I think you summarized it perfectly. Some guy on CNBC said to take the money and run for CELG at 87 because he thinks another big pharm will bid on BMY to invalidate BMY's bid on CELG. That makes little sense to me. If big pharms want to block the acquisition, that means they think CELG is undervalued and wants to add their cash flow and pipeline. And, if someone really will bid on BMY to block their acquisition, that will only increase BMY's value too. Both have "value" based PE ratios, especially CELG. My proposal to sell BMY was only to hedge (since I own CELG) with a collar. The collar is a perfect play right now because upside is somewhat capped beyond the arbitrage value.
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Thank you for your comment.

Instead of a collar, I just keep adding to my CELG positions. My reasoning:

1. If the deal goes through, CELG will be worth ~$110, if not it will still be worth more than the ~$65 of my positions and perhaps ~$100, in a couple of years?

I am thinking maybe BMY is also undervalued at the current price, whether the deal goes through or not?
 
Option selling is very risky but it can be profitable if you know how to do it well. I'd advice you to consider trading spreads, you can try writing a covered call, which involves a long position in stock and a short position in option. The long position on stock will covers the payoff on the short call that might arise during a sharp rise in stock price.
 
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