My OPTION TRADES..... part 2
- Thread starter Put_Master
- Start date
NUS at 32.50. Where are those jan 30 puts trading now? $2.00 or more? In only two days, the buyers of those puts may have made 500%. A huge number if annualized! So the implied volty was high for a real reason. The market does not discuss with someone it just hits where it hurts the most: the wallet!
I wish well to those who shorted the puts. As to those who bought the puts they deserve their gains.
I wish well to those who shorted the puts. As to those who bought the puts they deserve their gains.
Obviously the timing of my NUS trade was in error.
However, I noticed you did NOT talk about it being an error at the time I shared the trade.
Nor did you discuss the idea of buying the puts instead of selling them, at the time.
It was only AFTER the stock dropped, that you came out with your brilliant analysis.
Obviously the IV was high for a reason.
Hence the reason I mentioned issues with the "sector" when I posted the trade.
DUH.
Hence the reason I was able to initiate a trade 24 - 25% otm and still earn a potential 14% return.
DUH.
Hence the reason I selected a strike of $30, and not a higher strike for an even higher % return.
DUH.
Meanwhile, based on your stated price of $32.50... I still have an otm safety cushion of about 9%, based on my BE price of $29.65.
And if it's put to me 4 weeks from now, I will once again be taking advantage of that elevated IV, when I sell covered calls.
I'm sure we will both be watching the stock closely in the weeks to
BTW.... did you buy the puts???
If not, you can still buy them today, since you obviously feel the stock will continue to drop.
I feel if someone shares a trade, and a reader questions the trade, or a particular aspect of it,... a response is deserved.
If one is not willing to discuss, defend, or apologize for the trade, they should not be sharing it to begin with.
Not to be another armchair qback, but a 4-5x loss of credit is a year's worth of trading at your average hold, or worse. If you don't like the vert then you should not be taking the naked sale.
I take a lot of exotic bets at 3:1 risk. A poor ratio, but a hit rate well in excess and a potential 33% return on debit. None of these vanilla bets have a R/R that can approach that. You need to define the risk as a function of the initial credit, not that you can absorb the delta1 risk indefinitely if put the stock.
I take a lot of exotic bets at 3:1 risk. A poor ratio, but a hit rate well in excess and a potential 33% return on debit. None of these vanilla bets have a R/R that can approach that. You need to define the risk as a function of the initial credit, not that you can absorb the delta1 risk indefinitely if put the stock.
I'm not piling on, either. I enjoy reading about your trades and your research process. Stuff happens as the phrase goes, and we've all had trades quickly go down the toilet.
So based on what you know today, what's next?
- cut your losses and get out completely?
- ride it out with an expectation that stock px will stabilize/recover a bit and IV will calm down?
- buy back the losing put and sell a lower strike to capture the high IV?
- sell some calls, thus creating a strangle?
So based on what you know today, what's next?
- cut your losses and get out completely?
- ride it out with an expectation that stock px will stabilize/recover a bit and IV will calm down?
- buy back the losing put and sell a lower strike to capture the high IV?
- sell some calls, thus creating a strangle?
A few replies:
Thanks to both of you for your constructive criticism/suggestions.
NUS, like all my stocks, had been dropping for months prior to the day I initiated the trade, as well as on the day the trade was initiated. All my trades are initiated in that manner.
The stock was trading in the 60's earlier in the year.
One can assume the news was good as it rose into the 40's, 50's and 60's.
I don't invest in stocks on good news, as that generally means buying high.
I prefer to invest during times of difficulty, as that means investing at lower prices.... but that means the companies must be financially stable, reasonably valued, and tech supported.
While my timing of NUS was in error, my selection of a $30 strike for support, is thus far holding.
Given that I've seen no recent news or financial updates that would reflect a changing of that analysis, I see no reason to close the trade at this moment in time.
As I stated when I posted the trade, the "sector" is being hit. Mostly due to HLF.
But NUS is a more financially healthy and reasonable valued company than HLF, via several metrics.
Hence I'm going to give my $30 strike an opportunity to be tested. If it is tested, I'll re-evaluate at that time, whether to consider closing the trade down, or sell a covered call at an even lower strike than $30.
If i were investing in an over valued, over debted, mismanaged company, I would have already gotten out closer to $35.
But given that this is a sector drop, mostly due to HLF, and not a company specific drop, I'm going to give my $30 strike a chance to hold support.
Afterall, there is a reason I selected $30, and not a higher strike.
Some may be viewing the trade simply from the perspective of how much the trade has thus far deteriorated.
But suppose I had instead initiated the same trade today, with the same credit, strike and exp day?
Would it still seem so unreasonable, given it's current 10% otm safety cushion and $29 - $30 tech support?
http://finance.yahoo.com/q/bc?s=NUS&t=5y&l=on&z=l&q=b&c=
Thanks to both of you for your constructive criticism/suggestions.
NUS, like all my stocks, had been dropping for months prior to the day I initiated the trade, as well as on the day the trade was initiated. All my trades are initiated in that manner.
The stock was trading in the 60's earlier in the year.
One can assume the news was good as it rose into the 40's, 50's and 60's.
I don't invest in stocks on good news, as that generally means buying high.
I prefer to invest during times of difficulty, as that means investing at lower prices.... but that means the companies must be financially stable, reasonably valued, and tech supported.
While my timing of NUS was in error, my selection of a $30 strike for support, is thus far holding.
Given that I've seen no recent news or financial updates that would reflect a changing of that analysis, I see no reason to close the trade at this moment in time.
As I stated when I posted the trade, the "sector" is being hit. Mostly due to HLF.
But NUS is a more financially healthy and reasonable valued company than HLF, via several metrics.
Hence I'm going to give my $30 strike an opportunity to be tested. If it is tested, I'll re-evaluate at that time, whether to consider closing the trade down, or sell a covered call at an even lower strike than $30.
If i were investing in an over valued, over debted, mismanaged company, I would have already gotten out closer to $35.
But given that this is a sector drop, mostly due to HLF, and not a company specific drop, I'm going to give my $30 strike a chance to hold support.
Afterall, there is a reason I selected $30, and not a higher strike.
Some may be viewing the trade simply from the perspective of how much the trade has thus far deteriorated.
But suppose I had instead initiated the same trade today, with the same credit, strike and exp day?
Would it still seem so unreasonable, given it's current 10% otm safety cushion and $29 - $30 tech support?
http://finance.yahoo.com/q/bc?s=NUS&t=5y&l=on&z=l&q=b&c=
How to quantify " its current 10% safety cushion" in absolute measures and numbers?
I initiated 22 naked put trades for Dec.
With the exception of the Dec $41 NTES , (which I hope to "neutralize", by closing it's now current Jan $37 naked call for $4),... all the remaining 22 Dec trades were either closed early for a profit or expired friday at a profit.
If i close the initial $41 naked put, (and now current $37 naked call), for $4, I will have lost "time and commissions" on a trade gone bad.
If I close it for less than $4, the trade will become profitable.
I'm hoping for an assist from theta and a price decline, to lower the Jan call credit to $4 or less,... while hoping to avoid a potential price rise and/or spike in IV, which will work against me.
My focus now turns to my current active Jan naked puts, and the future Jan and Feb put trades I hope to initiate in the coming days and weeks.
With the exception of the Dec $41 NTES , (which I hope to "neutralize", by closing it's now current Jan $37 naked call for $4),... all the remaining 22 Dec trades were either closed early for a profit or expired friday at a profit.
If i close the initial $41 naked put, (and now current $37 naked call), for $4, I will have lost "time and commissions" on a trade gone bad.
If I close it for less than $4, the trade will become profitable.
I'm hoping for an assist from theta and a price decline, to lower the Jan call credit to $4 or less,... while hoping to avoid a potential price rise and/or spike in IV, which will work against me.
My focus now turns to my current active Jan naked puts, and the future Jan and Feb put trades I hope to initiate in the coming days and weeks.