JP's options journal

J

jamespond

Hi there,

The idea of this thread is to test my options system.

In a nutshell: If I like what a stock is doing, I will start looking at the options of that stock. The only positions possible will be long calls & puts. No fancy options strategies and no volatility plays.
So basically it's directional long/short stock trading with some extra leverage.

Usually positions will be initiated at the start of the session. Positions will be held for a couple of day to a couple of weeks. (no intraday trading)
No stop loss will be set. Positions will be a small % of the account and it could mean they expire worthless.

Don't expect a trade everyday.

JP
 
jamespond said:
In a nutshell: If I like what a stock is doing, I will start looking at the options of that stock. The only positions possible will be long calls & puts. No fancy options strategies and no volatility plays.
More...

I like it. Simple and straightforward. What is your process for choosing the strike and time to expiration?
 
Robert Morse said:
I like it. Simple and straightforward. What is your process for choosing the strike and time to expiration?
More...

I will set a target that I expect price (stock) to reach as a minimum. Then I will pick a strike price between that target and the current price. So in case of a long I will buy a call (slightly) OTM and expect to sell it again ITM.
Expiration is 1,5 to 2 months away. If it doesn't move the way I expect it to after a couple of weeks, the trade is probably bogus.
So with Exxon I expect 75 to be reachable within a couple of weeks timeframe.

The number of calls doesn't really matter as I don't plan to post the whole account only the trades. Allocation per position is about 5% of the account but that is still subject to change.

I know tomorrow are the earnings. It's not part of the plan but just a coincidence in this case.
It makes it riskier, hope the reward is better too.
But thx for the heads up :)

JP
 
You did OK today because of action near the close but

1. Buying options on the open often encounters a reversal. Also the bid/ask spread does not settle for awhile and is relatively large on the open.
2. You are paying a small volatility premium since tomorrow is earnings.

If things go well the above does not matter but nonetheless you need to consider.

If I was long I would be expecting Exxon to hit $75 in a matter of days not weeks.

There is a remarkable amount of open interest for the March 15 calls. Clueless as to why.
 
Ayn Rand said:
...

1. Buying options on the open often encounters a reversal. Also the bid/ask spread does not settle for awhile and is relatively large on the open.
...
More...

Yes, I agree on the bid/ask spread. I try to wait 5 or 10 min. after the open. But on the other hand ideally I would like to enter as close to previous' day closing price as possible (in the XOM case at least)

JP
 
jamespond said:
XOM - long 75 Mar'15 CALL @0.69 (stock price was ~72,28 at when I bought it at the open)
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I sold half of the position @1,16. (stock price was ~74,82)

Tomorrow is ex-dividend for XOM. Some extra downforce is to be expected. Although I stay confident on it for the coming weeks.
Also, indexes seem vulnerable today with DJ / S&P making a doji after their very strong run up last 1,5 month.
 
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