Quote from Put_Master:
Quote from jeffalvinson:
"Now come on now PM, your at least a 9.8!" [/QUOTE
The only legit test of a traders skill is, how his bullish trades do when the market is no longer in bullish mode.
Hence the reason I'm willing to buy 95% of my trades, if the market takes them down. My plan "B" would be to collect dividends and sell covered calls.
Investors can NOT consider doing that, if they invest at overvalued prices,... in financially unstable companies,.... use excessive leverage, ect.
PM,
How was the performance of your current trade methodology
in 2000 to 2003, and 2008 to 2009?
Or do you switch it over from Put Selling in a Bull Market, to
Call Selling in a Bear Market?
Jeff
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My OPTION TRADES..... part 2
- Thread starter Put_Master
- Start date
I really don't recall.Quote from jeffalvinson:
PM,
How was the performance of your current trade methodology
in 2000 to 2003, and 2008 to 2009?
Or do you switch it over from Put Selling in a Bull Market, to
Call Selling in a Bear Market?
Jeff
I can simply say when the VIX is higher I generally have higher % returns.
During 2008 - 2009 I think I lost money, as I was in too many bank, mortgage, insurance, and housing related companies.
They were all top rated quality companies.
But I was not aware the banks were "giving away" loans to people who did not qualify, or have to put any money down as a deposit.
By the time I found out, I was already in too deep.
I closed all my positions for losses.
It was a stressful time.
---------------------------------------------------------------------------Quote from Put_Master:
I really don't recall.
I can simply say when the VIX is higher I generally have higher % returns.
During 2008 - 2009 I think I lost money, as I was in too many bank, mortgage, insurance, and housing related companies.
They were all top rated quality companies.
But I was not aware the banks were "giving away" loans to people who did not qualify, or have to put any money down as a deposit.
By the time I found out, I was already in too deep.
I closed all my positions for losses.
It was a stressful time.
NO DOC LOANS,..LIAR LANS, ...125% LOANS to value etx,etc
Bundles of these mortg. secured investments with phony aaa ratings were bound to fail and bite mort. co's, banks,.. pension funds in the rear
. I know i may sound like a monday morning quarterback
but bubble was written all over these investments the bamks were palming off to investors and pension funds
The price of homes which i was involved in building for over 30 years was unsubstanable. and talk in the industry started 2006.
Some saw this bubble like Paulson who became the counterparty billionaires along with others
The tulips in Holland came to the the US with the same results.
cheers
john:
Quote from Put_Master:
Sold naked puts on $25 CNW for Dec.
Credit $1.05
OTM safety cushion 16%
Annualized % return......... 13%
Very reasonable fundamentals for a $25 price (BE $23.95)
Financially healthy. No problem handling it's level of debt.
Reasonable tech support in the $25 area, per the 5 year chart below.
If it breaks $25, next support at $20.
http://finance.yahoo.com/q/bc?s=CNW&t=5y&l=on&z=l&q=b&c=
What was the IV on the stock and at the strike when you initiated this?
Is the OTM safety wrt BE or wrt the 25 strike? Was the stock at 29.79 when you initiated this?
Do you use an option screener? If yes, which one?
What is the volty of the stocks, viewed as a group/index, on which you have active short put positions? Also what is the range of implied volty of the stocks. My guess would be that your stocks might have an implied volty (at your strike) of around 40% when you initiate your trades?
Quote from tradingjournals:
What was the IV on the stock and at the strike when you initiated this?
Is the OTM safety wrt BE or wrt the 25 strike? Was the stock at 29.79 when you initiated this?
Do you use an option screener? If yes, which one?
I assume you are joking if you expect me to recall exactly where a stock was trading and what it's IV was on that day, when a trade was initiated weeks ago.
I post my trades on the day the trade is initiated, and if you are interested, that would be the time to check it out.
As for your precise price of $29.79,... I round up or down to round numbers, when I state my % returns and otm cushions on my trades.
Or I'll often state ranges, like 15 - 16%.
This is not a math test, where exact numbers are relevant.
I'm just giving traders potentially interested, an idea of the otm safety cushion and % return, making it easier for them to evaluate the trade for consideration.
If someone wants a minimum 20% and my trade is only 14%, they know they don't need to waste their time evaluating the stock and trade for themselves.
As for the IV, I only look at IV sometimes. Not always, as it's not always relevant at that particular moment in time.
WHY?
When a stock is currently trading at one level of L-T tech support, and the strike I desire is available at another lower area of L-T tech support, and the credit offered falls within my desired 13 - 20% range annualized, and it meets my fundamental criteria,... then it's time to initiate the trade regardless of what the IV is.
Particularly since 95% of my stocks are currently trending down, and also have been trending down for a while. Therefore, by the time I initiate my naked put trades, it's IV is probably NOT going to improve much over the S-T.
Therefore, with theta always ticking away, and with the "technical structure" currently set where i like it, and an acceptable credit being offered,... there is no rationale to "wait and hope" for a slightly better IV relative to it's historic norm.
I don't use an option sceeener.
I use a technical stock screener that I set up. That being, I get alerted when a stock has dropped to a technical price I'm interested in. When the alert goes off, is when I get busy, as I then do a detailed fundamental and technical analysis, to evaluate for a potential trade.
Quote from Put_Master:
As for the IV, I only look at IV sometimes. Not always, as it's not always relevant at that particular moment in time.
WHY?
When a stock is currently trading at one level of L-T tech support, and the strike I desire is available at another lower area of L-T tech support, and the credit offered falls within my desired 13 - 20% range annualized, and it meets my fundamental criteria,... then it's time to initiate the trade regardless of what the IV is.
The purpose of the questions/posts are different from what you may have understood. It is not a math test/etc.
Let me now comment on your above quoted piece, as it may be useful to explain that the numbers maybe useful. The fact that you impose a credit range (assuming a given OTM safety say of 16%, an expiration period, and no carry for simplicity, ) is equivalent to imposing a range on implied volty.
You seem not to care (or think you do not care) about volatility explicitly, but you do care about it in your credits, as premium and volty are "synonymous" in option pricing since all other variables are set.
For example, if I go back to the August quoted trade, given that I knew you had 4 months (In August) before expiration (in December), the volty at your strike should be around 40% to arrive at the premium you posted.
When I looked at the price from a volty point of view, I felt that your stock was falling/has fallen before your trade, and that such behavior would be typically to your stocks, which you confirmed in your previous posts.
Quote from tradingjournals:
The purpose of the questions/posts are different from what you may have understood. It is not a math test/etc.
Let me now comment on your above quoted piece, as it may be useful to explain that the numbers maybe useful. The fact that you impose a credit range (assuming a given OTM safety say of 16%, an expiration period, and no carry for simplicity, ) is equivalent to imposing a range on implied volty.
You seem not to care (or think you do not care) about volatility explicitly, but you do care about it in your credits, as premium and volty are "synonymous" in option pricing since all other variables are set.
For example, if I go back to the August quoted trade, given that I knew you had 4 months (In August) before expiration (in December), the volty at your strike should be around 40% to arrive at the premium you posted.
When I looked at the price from a volty point of view, I felt that your stock was falling/has fallen before your trade, and that such behavior would be typically to your stocks, which you confirmed in your previous posts.
Correct. It isn't that I don't care about a stocks volitility. I think about the stocks vol every time I follow a dropping stock, select a credit, and eventually place an order.
It's that I don't care about the vol actual % number, or it's number as it compares to its historic past.
I don't care about that one little bit.
I mention that because, over the years I've been told my trades were poor trades, because the vol was currently so low, relative to its past.
My response was always, that my focus is on the "current and the future".
That focussing on the past vol lacks "context".
That unless you know the "context" of WHY the vol traded higher in the past, then it's irrelevant as a comparative benchmark.
My point was, that the vol is already factored into the credit, relative to where the stock is currently trading, where it was trading, what it's trend was/is, relative to current news, pending earnings, ect.... all relative to the time and strike I desire.
Thus, if all the things I look at... technically, fundamentally, otm cushion, % return, ect... all line up when, where, and how I like it,... then it's time to initiate the trade, regardless of what the current IV % is.
And particularly regardless of it's current number vs it's historic past.
I know plenty of traders who will NOT intiate a trade if the current IV is too low relative to it's past.
They think I'm nuts and I think they are nuts.
They don't even realize, they are actually waiting for the most risky moment before they initiate a trade.
Yes, they earn a higher credit, but they also earn a "lower probability" of their trade being successful.
My focus is more on the "blend" of various "criteria" coming together at the most optimum time.
The end result is,... a "higher probability" of my trades being successful.
Do I care about IV.... yes.
Do I care what the actual % is at the time I initiate a trade.... no.
I believe we are talking about two different volties: You seem to be addressing the realized volty, and I was discussing the implied volty (the one priced in the options)?