My OPTION TRADES..... part 2

Put_Master · Aug 28, 2012

Quote from cdcaveman:
<<< ....the straight selling of puts doesn't really get me going either. Even when buy write strategies work out it really is more about your ability to pick stocks and predict the future... which as history shows not a lot of people are good at >>>

Buy/write and selling puts is more about predicting bottoms and potential for recovery.
Predicting the future is more about guessing if a stock will move, and in what direction, and by how much, and how soon will it occur, and so on.....
You don't need to concern yourself much with the issues above, when doing buy/write or selling puts.
It's really more about predicting bottoms than movement and timing.

And if you were 10% otm at the start of a buy/write or put sell, you can make the same dollar and % money, if it drops 10% below your strike, per the same unit of time.
In fact, you may be able to make even more if the VIX (IV) is higher.

Every strategy is about predicting the future to some degree.
But seems a lot easier to predict bottoms, (give or take 10 - 15%), than guessing if a stock will move, and in what direction, and by how much, and how soon will it occur, and so on.....
But as you said, it really does help to pick the right stock.

diaoptions · Aug 28, 2012

Options101: A Credit Spread is much less riskier than a Naked Put.

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diaoptions has spoken

taowave · Aug 28, 2012

If you are arguing/comparing shorting 8 APPL Sept 665 puts vs 70 Sept 660/640 put spreads,I think delta is very much the point.

Again,I ask you and PM would you rather be short 1 naked 665 put in AAPL or 2.5 660/640 Put spreads?

Quote from atticus:

I didn't make an argument for (delta) equivalence as it's not the point. My point is that arbitrary SEC limitations (help to) keep the public from blowing up. Do you honestly believe that the public retailer is looking at their delta position when writing credit spreads? They're using spreads to maximize the $credit. It's to protect them from their own stupidity and I personally don't think the public should be allowed to sell puts unless secured.

And asshat, who suggested "trading" the naked put? I was specific in my point that more traders have blown out in spreads than buy-writes (synth naked put) due solely to RegT. I don't do buy-writes and I don't write credit spreads.

Put_Master · Aug 28, 2012

Quote from taowave:

If you are arguing/comparing shorting 8 APPL Sept 665 puts vs 70 Sept 660/640 put spreads,I think delta is very much the point.
Again,I ask you and PM would you rather be short 1 naked 665 put in AAPL or 2.5 660/640 Put spreads?

You are asking me to decide between 2 strategies on a stock I don't trade, and at a price I would not trade. That's not going to happen, as i am very picky about the stocks and price i trade in. But nice try.

atticus · Aug 28, 2012

Quote from taowave:

If you are arguing/comparing shorting 8 APPL Sept 665 puts vs 70 Sept 660/640 put spreads,I think delta is very much the point.

Again,I ask you and PM would you rather be short 1 naked 665 put in AAPL or 2.5 660/640 Put spreads?

In terms of microstructure it's a slam dunk. As a day trade the 665P every time. T/V are greater, better fill and cheaper to execute. But purely hypothetical as I don't do buy-writes. You question makes me question if you've got any experience in vol at all.

Don't ask a question you don't know the answer (to).

taowave · Aug 28, 2012

Thats weak

Quote from Put_Master:

You are asking me to decide between 2 strategies on a stock I don't trade, and at a price I would not trade. That's not going to happen, as i am very picky about the stocks and price i trade in. But nice try.

diaoptions · Aug 28, 2012

Quote from taowave:

Again,I ask you and PM would you rather be short 1 naked 665 put in AAPL or 2.5 660/640 Put spreads?

AAPL @ $674.80

Position One:
Sell Sept2012 665 Put @ $12.50
Credit = $1,250.00

Position Two:
Sell 3 Sept2012 660 Puts @ $10.55 x 3 = $31.65
Buy 3 Sept2012 640 Puts @ $5.35 x 3 = $16.05
Credit = $1,560.00
Max Risk = $4,440.00

The spread looks much better. There is no price point of AAPL were the naked put does better than the spread.

Put_Master · Aug 29, 2012

While this still remains a stock and strike i would never invest in, my question for you 2 gentlemen, (who live in fantasy land, where stocks don't drop) is,....
Suppose the stock suddenly drops to $639. (Not really a big % drop).
Which stock do you want to be in?
Write down the new current account values.
For those just joining us, per ATTICUS, this is an account worth $100,000.

Put_Master · Aug 29, 2012

I'm going to be very curious to see which stock our 2 credit spread bulls wish to be in, when they have to invest outside of "Fantasy Land".
In Fantasy Land one does not need to consider risk/reward, or chance of a stock dropping, or potential adverse risk to account value, and so on....
In Fantasy Land, it's only about comparing rewards, prior to making an investment.
It sure seems like a swell place to live. I hear they even have talking unicorns that can fly.

diaoptions · Aug 29, 2012

Quote from diaoptions:

AAPL @ $674.80

Position One:
Sell Sept2012 665 Put @ $12.50
Credit = $1,250.00

Position Two:
Sell 3 Sept2012 660 Puts @ $10.55 x 3 = $31.65
Buy 3 Sept2012 640 Puts @ $5.35 x 3 = $16.05
Credit = $1,560.00
Max Risk = $4,440.00

The spread looks much better. There is no price point of AAPL were the naked put does better than the spread.

+1