My 2013 Option Trades.... part 3

Complete and utter nonsense... and you can't be so stupid to not know it.

Why do you bother maintaining such a phoney persona?

What do you gain??

It's a mystery to me.

No Family? No friends? No job ? No Life??

If you were really interested in trading well you would be asking questions instead of pretending to be the expert you're not.

You are searching for some kind of validation but any validation you get is fake... so why bother???

I wonder if you even have a trading account.
 
Here, where the world is quiet;
Here, where all trouble seems
Dead winds' and spent waves' riot
In doubtful dreams of dreams;
I watch the green field growing
For reaping folk and sowing,
For harvest-time and mowing,
A sleepy world of streams.


I am tired of tears and laughter,
And men that laugh and weep;
Of what may come hereafter
For men that sow to reap:
I am weary of days and hours,
Blown buds of barren flowers,
Desires and dreams and powers
And everything but sleep.

try again next week
:-)
 
Quote from oldnemesis:
<<< You are searching for some kind of validation but any validation you get is fake... so why bother??? >>>


Please validate me.
I just want to be loved.
Is that so bad?
:(
 
Quote from oldnemesis:

More...

PM is legit. Ive followed some of his trades, and seen the lots he's sold.
Im guessing he's working with about a 500,000 dollar account from the quantity and strike price of the puts he sold were.

oh and this is spot on..

Bottom line..... your assumptions are based on the unpredictability of more than 6 months exposure to the market,.... 2 earnings cycles,.... using massive amounts of fantasy leverage,.... an inability to consider buying 90% of your stock(s) , even if they're just slightly below your $17 strike(s),.... you risk a 100% loss of capital if the stock(s) drop 18% below your $17 strike,.... and most of your calculations are ridiculously "generic", thus having little to do with your actual specific stock.
 
Well:

Here are the calculations I originally presented:

Short put:
Sell Jun 17.25 put for a net credit of $60
Yield = 60/1665 = 3.6% in 105 days or 12.5% annualized
Prob = 68%
Expectation = .68(60) - .01(404) - .31(202) = 40.8 - 4.04 - 62.6 = -25.84

Move out and make a spread:
Sell Sept 17 put and buy Sept 14 put for a net credit of $60
Yield = 60/240 = 25% in 196 days or 47% annualized
Prob = 65%
Expectation = .65(60) - .10(240) - .25(120) = 39 - 24 - 30 = -15

Then this is what you call 'spot on':

Bottom line..... your assumptions are based on the unpredictability of more than 6 months exposure to the market,.... 2 earnings cycles,.... using massive amounts of fantasy leverage,.... an inability to consider buying 90% of your stock(s) , even if they're just slightly below your $17 strike(s),.... you risk a 100% loss of capital if the stock(s) drop 18% below your $17 strike,.... and most of your calculations are ridiculously "generic", thus having little to do with your actual specific stock.

Lets look at that:

1. Yes the calculation shows an additional time period ...3 months extra. Which is part of the point. I can make the same premium for a longer time frame and get a much higher annualized yield doing it if I use the equivalent spread. Nothing is free and I never said it was.

2. 'an inability to consider buying 90% of your stocks'
Where does that come from??? We are not talking about a portfolio, we are talking about a SINGLE TRADE. How that trade is incorporated into a portfolio is not at issue. PM is constantly talking about this... but it has nothing to do with the relative merits of two different trades.

YES: If I sell short a put the margin requirements will FORCE me to reserve the full amount required to buy the stock.
NO: If I sell the equivalent spread I am not FORCED to do this and may (for example) invest the required amount elsewhere (e.g. treasuries)where it can be drawn on to buy stock if that eventuality comes to be. The assumption that PM makes is that since we are all too stupid to intelligently manage a portfolio and its cash requirements we are better off using the more restrictive short put so that we force ourselves to have the cash available. Rediculous. It has been discussed a thousand times and PM keeps saying the same stupid thing.

NO: If my spread is violated I will NOT lose the amount of the entire spread. MY broker(I have asked) would SELL THE STOCK I WAS PUT FOR THE GOING RATE AS SOON AS I AM PUT...as long as I make that a parameter on my account.

Besides that... you are (outside of a disaster) not put at random times. If you are going to be put you are put at expiration and any option trader knows to get his house in order on the Friday before expiration.

What about a disaster? Well.... in a disaster would you rather have a naked short put or the hedged position of a spread?

No contest.

' your calculations are ridiculously "generic", thus having little to do with your actual specific stock.'

Generic? The calculations are based on the statistics of the behavior of THIS stock and are not at all 'generic'

'2 earnings cycles'

YES the alternate IS based on two earnings cycle, but so are the stats. i.e. the stats are drawn from the previous equivalent time period.

SO what makes us think that the future will be different from the past???

The most important issue is that this stock is in a long term decline:

http://finance.yahoo.com/q/bc?s=IPI&t=2y&l=on&z=l&q=l&c=

and PM has no rationale to suggest that that decline will not continue... other than technical support points:

http://finance.yahoo.com/q/bc?s=IPI&t=5y&l=on&z=l&q=b&c=

I happen to think this is an idiotic trade. And I presented my reasons. PM can't stand that and goes ballistic... this time and every time. He's nuts besides being stupid.
 
<<< 1. Yes the calculation shows an additional time period ...3 months extra. Which is part of the point. I can make the same premium for a longer time frame and get a much higher annualized yield doing it if I use the equivalent spread. >>>

You are NOT making more money via the equvalent "name" (spread). You are making more money via the additional margin leverage ability of the name (spread).
If you take away the additional margin leverage risk of the spread, you take away all the potential additional yield you are bragging about.
A spread is merely an alternative method to use more leverage risk, than is possible with a naked put. Period.
And to use for volatile stocks whose contract runs through an earning cycle.




<<< 2. 'an inability to consider buying 90% of your stocks'
Where does that come from??? We are not talking about a portfolio, we are talking about a SINGLE TRADE. How that trade is incorporated into a portfolio is not at issue. >>>

If you want to engage in an honest and sincere discussion, there needs to be "context". And that context is the "real world". Not your own fantasy world.
In the real world, you are NOT making only one trade. You are turning your cash portfolio into a portfolio of stocks.
In addition, based on your own comments you are NOT setting aside 2/3 of your cash in cash, while only using 1/3 of your cash for your trade requirements. If you are then say so!

We have all seen your spread trades with strikes averaging $30 - $70.
Lets take an average price of $50.
Lets assume your portfolio of 20 - 40 stocks has an average strike of $50. Lets also assume the generic you has a $100,000 account via your cash and credits, to make it simple. (But you can use any account value you desire.)
Lets assume your stock(s) drop a mere 4% to $48. Thus your $100,000 account has now dropped to $96,000.
If you want to buy even 10% of your stocks, you are already on margin, and that assumes a mere 4% drop from $50 to $48.
That is how I came up with my 90% figure.




<<< YES: If I sell short a put the margin requirements will FORCE me to reserve the full amount required to buy the stock.
NO: If I sell the equivalent spread I am not FORCED to do this and may (for example) invest the required amount elsewhere (e.g. treasuries)where it can be drawn on to buy stock if that eventuality comes to be. >>>

Unless you are trading in a cash secured account, you are NOT required to set aside the full amount to sell a short put.
You can use leverage in the area of about 3:1,... as compared to the average of 10:1 via spreads. (Although you are able to go 50:1 or 100:1 via spreads if you desire).

As for your statement of investing your unrequired spread cash in treasuries, which pay nothing,... you need to either admit that is what you do, or admit you don't do it.
Which is it???
If you do it, then take whatever average annualized % return you say you earn per trade, and subtract 2/3 of it, to estimate your true annualized return at year end.
If your average trade earns 9%, your portfolio will have gained about 3% by year end.




<<< The assumption that PM makes is that since we are all too stupid to intelligently manage a portfolio and its cash requirements we are better off using the more restrictive short put so that we force ourselves to have the cash available. >>>

Yet another ridiculous and silly statement.
#1.... You are NOT forced to have all cash available to sell naked puts.
#2.... It's NOT that spread traders are too stupid to manage the margin requirements of a spread portfolio.
It's that you are almost stupid if you don't use excessive margin leverage via a spread strategy.
As I mentioned above, if you are NOT using leverage, then take whatever your average % return per trade is, and assume your year end % return will be 1/3 of that average.
If you were averaging 20%, assume your portfolio will have earned about 7% for the year.
Hence, using a strategy of credit spreads, almost forces traders to be on excessive leverage.




<<< What about a disaster? Well.... in a disaster would you rather have a naked short put or the hedged position of a spread? >>>

If i wanted to close my trade, I'd want to be in a spread.... unless the stock had already dropped to my protective strike. Then it's too late to close the trade.
If I was in a reasonably priced, financially healthy, quality company, simply brought down by a bad market, I'd want to be in a naked put. I'd buy the stock, sell covered calls, collect dividends, and manage it's eventual recovery.
The only time I actually recommend a spread over a naked put is, if i am investing in a particularly volatile stock, and the contract is trading through it's earning cycle. Hence the reason I initiated a spread on my NFLX put... thans to CD_caveman bringing it to my attention.





<<< Generic? The calculations are based on the statistics of the behavior of THIS stock and are not at all 'generic' >>>

Your calculations are "generic", because if you take any stock with similar criteria, and plug it into the same generic calculator, you will get the same exact results.
Doesn't even matter if it's a $30, $40, or $50 stock.
If it's the same % otm, the same IV, ect.... the result will be the same.
Doesn't even matter if one stock has super amazing tech support and the other has none.
 
PM

We've gotten to a point where I can't follow what you are talking about. If you have any anticonvulsive drugs available you should take them now.

:-)

You seem to want solid terms for incorporating the high yield spreads I am always talking about into an overall portfolio.

OK

In simplest terms lets take a portfolio where I have 1/3 of my account earning the 47% annualized I have shown above and 2/3 invested in treasuries for protection which are currently getting 2.7%.

http://finance.yahoo.com/q?s=tlt&ql=1

That means that my weighted yield for the portfolio as a whole will be:

(1/3)(.47) +(2/3)(.027) = .1565 + .018 = 17.45%

and is completely protected by having enough money in treasuries to cover being put all my short puts.

Do I actually do this....no.

What I do do is invest 2/3 in treasury spreads which are actually safer than the treasuries themselves and earn about 10%.

Then:

Yield = (1/3)(.47) + (2/3)(.10) = .1565 + .0667 = 22.32%

Which is very close to what I am earning right now.

This is all done in a cash account since, as I have said many times, I don't use a margined account because it can get you into too much trouble. I guess I COULD say that the 'leverage' provided by the spreads is enough for me... but I would not use those terms.

:-)

OOPS: I just realized that I do have one margined account where I do some of this but it is only about 10% of my total trading dollars. So I lied.

BTW: My value assignment to "super amazing tech support " is ZERO.

:-)
 
"Don't know why you are always so angry and insulting."

Whatchu mean??? Insulting?? I'll insult you you %^$#&

:-)

That's funny. I was just watching a farce/mob movie where they make fun of those crazy Sicilian mobsters and their penchant to kill people...especially anybody who insults them.

I AM Sicilian (my mother was from Palermo) and I grew up in an italian neighborhood in Philadelphia.

Where I lived, if anybody insulted you you better put him in the hospital at least or you lose your social standing (so to speak).


Living such a life forges a certain 'edge' to your personality. Actually when I worked myself out of the 'dago ghetto' and put myself through college I worried that my edgy personality would be a disadvantage in business.

Quite the opposite!!

It turns out that most businesses run on a set of ethics that makes the mafia look like a bunch of saints.

Besides my mom taught me the malocchio.

http://www.girosole.com/italy-travel-info/art-malocchio-evil-eye.html
 
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