I learned a VERY important lesson

[Bitstream]

Quote from lojze:

I don't know how - can you explain shortly?

well if the underlyin' drops 20% u ain't gonna take a massive hit, max u gonna lose 90% of the premium and given the price [atm/otm] usually accounts for 4-5% of the common value that's all u got to lose.

 

[billp]

IMHO, the problem with options is that it curtails your profit a fair bit if you are right and you can't exit out with smaller loss than stocks if you are wrong. It does however protect you from horrible gaps. That's why I'm thinking I may have to hedge by buying options if I want to hold stocks overnight. Still toying with that idea though.

CM69,
Sorry for your loss on FLSH. I too learned something valuable. Although I would always check the news and earnings to ensure no unwanted surprises, I would have likely missed FLSH as the news about Sndk acquiring it was much earlier on.

Quote from Bitstream:

buy options, reduces your risk exposure significantly.

 

[Comptalk]

Quote from lojze:

I don't know how - can you explain shortly?

So true. I bought the options for Google (call), AMD (put), Intel (put), Sears (call), and UPS (call). Did well in all but AMD. Options seems to be a safer short terms play than buying the actual stock. Prob. what I will be doing in the future on companies I am not 100% sure about. Good play for earning season as well.

 

[cashmoney69]

As much as I may try staying away from the news and trading just off a TA stand point, I find that the news is such an important part of trading, and shouldn't be ignored.

 

[lindq]

Quote from Bitstream:

well if the underlyin' drops 20% u ain't gonna take a massive hit, max u gonna lose 90% of the premium and given the price [atm/otm] usually accounts for 4-5% of the common value that's all u got to lose.

The CBOE just loves to see this kind of post!

So by your logic you lose 90% of your invested capital in this trade...and that's what? A good thing? Not to mention the spreads and comish you just threw away to enjoy this benefit?

 

[lilduckling]

Quote from cashmoney69:

I find that the news is such an important part of trading, and shouldn't be ignored.

yes.... important in the sense if there is news nearby, run run run run run..... in other words, if you see news, then run away in the opposite direction.

No news is good news.... any news is bad news.

 

[Bitstream]

Quote from lindq:

The CBOE just loves to see this kind of post!

So by your logic you lose 90% of your invested capital in this trade...and that's what? A good thing? Not to mention the spreads and comish you just threw away to enjoy this benefit?

omfg, weight the 2 possible outcomes..u rather risk to lose 20% of your common stock or just the premium u bot that accounts for a fraction of the underlyin' value?

lmao

 

[vlst]

Quote from lilduckling:

yes.... important in the sense if there is news nearby, run run run run run..... in other words, if you see news, then run away in the opposite direction.

No news is good news.... any news is bad news.

absolutely agree.

 

[BCE]

Quote from spreadn00b:

Wouldn't one want to play earnings with some sort of ratio backspread strategy? It seems like buying or shorting a stock around earnings is just pure gambling.

Gambling? Trading? There's risk involved in both and skill too if you have that going for you. Where does trading end and gambling begin? What constitues gambling and what constitutes trading? I don't try to make calls on earnings ahead of time for the most part. But that's just me. Perhaps part of this is I'm too involved to take the time to research individual companies earnings realities.

 

[BCE]

The thing is too, with all the talk here of being careful around earnings, sometimes companies preannounce earninigs misses unexpectedly obviously and if you have a long position you lose. That's what happened to me with EMC. And $10k is chump change for some people here. The market has risks and you should always be aware that bad things could happen that you have no control over - Black Monday, etc. and manage your risks accordingly.