My OPTION TRADES..... part 2

Quote from Free Thinker:

There is an easy way to take out another risk factor with minimal,if any, effect on your returns. only sell premium on diversified vehicles like etfs or indexes. specific stock risk is a big factor in put selling and indexes are not going to 0 anytime soon.
the fact that stocks are about 80-90% correlated to the market right now means its hard to add alpha with stock picking so why not eliminate specific stock risk.
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+1


Instead of selling the LRCX puts, sell QQQ puts. The volume/open interest is much higher and the bid/ask spread is a penny or two.
 
Quote from taowave:


<<< You say Dans stocks are trending up and yours are trending down. What does that tell you other than that your stocks are closer to Zero than his are. >>>

If I wait for his stock to drop before investing in it, then it tells me I'm investing at a better price than he is.
I invest in prices, not trends. And I select those prices for specific technical and fundamental reasons. Prices.... not trends.


<<< Do you think his stocks are more volatile? More risky? Do you think stocks close to 252 day highs are more/less volatile than stocks close to 252 day lows? >>>

I think prices that are lower are a better value and less risky than prices that are higher.


<<< Your startegy of getting assigned and selling a subsequent is flawed.bad idea. >>>

That is NOT my strategy.
That is my back up Plan "B", that I "may consider", if stock drops.
A spread trader has no back up plan. He can only close for a loss.


<<< Anything you do can do with a naked put,you can do with a spread.Your logic is way off regarding "spread traders " freaking out if the 11 stock drops to 7.70. >>>

If you have a similar $9 strike for a spread, as I do via my naked put, you will freak out long before the stock drops to $7.70.
Your freak out will begin at your $8 strike. That is where your loss is already at 100%.
Meanwhile, if i sell a $9 covered call with the stock trading at $7.70 I'll still be earning a double digit annualized % return on the subsequent $9 covered call..... unless i select an $8 covered call for a higher probability of recovery and/or neutralization potential.


<<< Stop presenting ridiculous scenarios of massively overleveraging with spreads. >>>

You are unlikely to be excessively over leveraged in the above example, because $9 is a low priced strike. Thus, you can consider a covered call as well.
My discussion of over leveraged spread trades, refers to higher priced strike spreads. The higher your strike, the more excessive your leverage. It's really just basic math.
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Quote from Put_Master:

Quote from taowave:


<<< You say Dans stocks are trending up and yours are trending down. What does that tell you other than that your stocks are closer to Zero than his are. >>>

If I wait for his stock to drop before investing in it, then it tells me I'm investing at a better price than he is.
I invest in prices, not trends. And I select those prices for specific technical and fundamental reasons. Prices.... not trends.


<<< Do you think his stocks are more volatile? More risky? Do you think stocks close to 252 day highs are more/less volatile than stocks close to 252 day lows? >>>

I think prices that are lower are a better value and less risky than prices that are higher.


<<< Your startegy of getting assigned and selling a subsequent is flawed.bad idea. >>>

That is NOT my strategy.
That is my back up Plan "B", that I "may consider", if stock drops.
A spread trader has no back up plan. He can only close for a loss.


<<< Anything you do can do with a naked put,you can do with a spread.Your logic is way off regarding "spread traders " freaking out if the 11 stock drops to 7.70. >>>

If you have a similar $9 strike for a spread, as I do via my naked put, you will freak out long before the stock drops to $7.70.
Your freak out will begin at your $8 strike. That is where your loss is already at 100%.
Meanwhile, if i sell a $9 covered call with the stock trading at $7.70 I'll still be earning a double digit annualized % return on the subsequent $9 covered call..... unless i select an $8 covered call for a higher probability of recovery and/or neutralization potential.


<<< Stop presenting ridiculous scenarios of massively overleveraging with spreads. >>>

You are unlikely to be excessively over leveraged in the above example, because $9 is a low priced strike. Thus, you can consider a covered call as well.
My discussion of over leveraged spread trades, refers to higher priced strike spreads. The higher your strike, the more excessive your leverage. It's really just basic math.
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Quote from Free Thinker:
There is an easy way to take out another risk factor with minimal,if any, effect on your returns. only sell premium on diversified vehicles like etfs or indexes. specific stock risk is a big factor in put selling and indexes are not going to 0 anytime soon.
the fact that stocks are about 80-90% correlated to the market right now means its hard to add alpha with stock picking so why not eliminate specific stock risk.
More...
I agree ETF/index type trades reduce some of the risks individuals stocks are exposed to.
But the trade off is an inability to consider buying the investment. Thus, you are at greater risk of a severe or toal loss, if the market drop turns out to be only moderate, and the correction takes place over just a few months. (Depending on "when or if" you closed the trade).
However, I do agree that if an investor is NOT good at selecting specific stocks and prices, and if he has no interest in even considering buying them during corrections,.... then ETF/index type trading is the way to go.
 
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It really is tiresum to hear the same repetitive, self-justifying , crap over and over and over . I have come to think PM is a computer program that is being tested to see how frustrated he can make human beings by ignoring what they say and repeating his position ad-nausiam. If he were at a service counter somebody would murder him.
 
Quote from Put_Master:

I agree ETF/index type trades reduce some of the risks individuals stocks are exposed to.
But the trade off is an inability to consider buying the investment. Thus, you are at greater risk of a severe or toal loss, if the market drop turns out to be only moderate, and the correction takes place over just a few months. (Depending on "when or if" you closed the trade).
However, I do agree that if an investor is NOT good at selecting specific stocks and prices, and if he has no interest in even considering buying them during corrections,.... then ETF/index type trading is the way to go.
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PM, you keep saying that as a Spread Trader in Indexes I am susceptible to a "total loss" ... I am very much protected from a significant or total loss.

Also, just because I trade indexes, I am "NOT good at selecting specific stocks and prices" ... my goals and motivation drive my strategies. I do not want to own stocks ... What I look for is not whether a stock is going either up or down, but whether a basket of stocks will stay within a specified "wide" range.

Staying within this range is why I do not use individual stocks... I do not want news events or earnings releases impacting my position.
 
Quote from webicknell:

<<< PM, you keep saying that as a Spread Trader in Indexes I am susceptible to a "total loss" ... I am very much protected from a significant or total loss. >>>

If the stock, ETF or index drops a mere penny below your stock, index or ETF's lower strike, your loss will be 100% of the cash invested in the trade.
If all your funds are in that trade or variety of those type spread trades, and they all drop to, or a penny below the lower strike, your account value will drop to zero. A total wipe out.

Unlike a stock, you can't buy an index, sell covered calls, collect diviidends and wait for a recovery.
You have no plan "B" choices, other than to close for a potential partial loss, BEFORE your strikes are breached.
The deeper the breach, the deeper your loss, when you finally get around to closing it.
Once the price of your stock, index, or ETF is between your strikes, anticipate losses in the area of 40 - 80%
As it gets closer to your lower strike anticipate losses of 80 - 100%.

Your only protection is,... that assuming all your investment funds are in those spreads, once the price drops either ("to or a penny below") your lower strike,... you can NOT lose more than the entire value of your account.
Once your loss is 100%, you are not at risk of losing anymore.



<<< Also, just because I trade indexes, I am "NOT good at selecting specific stocks and prices" ... my goals and motivation drive my strategies. I do not want to own stocks ... What I look for is not whether a stock is going either up or down, but whether a basket of stocks will stay within a specified "wide" range. >>>

If you are good at selecting stocks or ETF or indexes that remain inside your selected trading ranges, you will do very well trading spreads, IC, ect....
If not, you risk being wiped out if a sudden and severe drop occurs.
Or if a slow, but persistent drop occurs, which you allowed to get too deep inside your spreads.
I'll now pause, while our resident "village idiot" posts his pretty pictures again.
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Quote from Put_Master:

I'll now pause, while our resident "village idiot" posts his pretty pictures again.
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I thought you two were making an effort to be civil toward one another. Sorry to see it didn't work out.

And in the spirit of being civil, if DS knew what a lying idiot forexforex or diaoptions or whatever his handle is this week is, he certainly wouldn't be duplicating his behavior in any way, shape or form.
 
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