My option trades

[Nine_Ender]

Quote from Don Bright:

Not at all, simply using time decay to allow the options to go down so that even if we get near one of the strikes, the options will likely still add up to less than we sold them for. As expiry gets nearer, and price were to be within a dollar or so, we would likely still make money.

I understand your rationale, it's the same thing we've heard for decades. Your risk is limited. I say, yes, it's "limited to everything you paid for your options." It's just a numbers game, nothing to get worked up over.

If GE were to get to about 21.75 or so, say with a week to go, the puts are worthless the calls are cheap. If it goes above $22, puts are worthless, calls are at Parity. On the downside, same thing. Calls and puts both deteriorate. No one is talking about free lunch, we just focus on risk reward. And when you buy calls, as each day goes buy, even if the stock moves your way, you can still lose everything you invested.

As I said, I understand and appreciate you liking to take a shot by buying calls instead of underlying, no problem there. When you do have a winner, then you risk early exercise or dividend exercise as well. Then you have the underlying shares and have to fund account to cover those shares anyway.

edit: And, to your point that the market is inefficient, no way. All conversions are priced within a couple of pennies of fair value (time to expiry and current interest rates, there are no "real" overvalued options, maybe high priced, but not "overvalued." )

All the best,

Don

Don, I think we would both be in agreement that some of Ryan's recent purchases are not sound strategy. But for different reasons. You would say sell options exclusively. I would say, ok, buy options, but be far more selective about which ones you buy.
In my strategy, AAPL is far too volatile and has made too big a move for me to know future short term direction. Hence, no way I buy calls or puts in AAPL right now. Yourself, I'm not sure what the "safe" strikes are on AAPL to know if your strategy would consider this stock.

Ryan likely would say screw both of you I'm making lots of money.

In the end, its all talk, we all take our own path and learning curve. I was puzzled immensely when Atticus jumped in and said Ryan's recent AAPL trades were smart. Makes no sense regardless of your religon on these things. You don't put 20% of your account into puts expiring in three days then immediately reverse to the opposite direction. This is where your risk model has broken down and you are preparing the crush your account.
Or get much richer almost by accident if you are extremely lucky.

( Atticus is on ignore because I prefer civil discussions )

 

[Don Bright]

Quote from jeffalvinson:

I have a friend that does all my programming for me. The last trading program he built me was completed in June 2007 and we have traded it from July 2007 to early March 2012.
Since that time the reliability has slowly degraded in performance and as a result of that, he has created a totally new trading program that he sent me last week.
He has back tested the new program starting from September 2011 to March 8, 2012 and then decided to send it to his buddy
Jeff (me) so I can test it further with real trades (isn't that kind of him?, I can be the human Guinea Pig!).

-----------------------------------------------------------------------------------
I have already posted the first trade on page 131 of this thread:
03-15-12 08:58 AM
Also bought SPY April 140 calls at 2.14 this morning.
Looking for 2.68 (+25%), but if it goes the wrong way then
Buy No. 2 at 1.60 and sell all at 2.30.
Stop: 1.45

and then posted the result on page 144 of this thread.
03-19-12 10:05 AM
I managed to close both of these trades today at +25%
above my total debit cost on each.
-----------------------------------------------------------------------------------

If you look at the attached Excel spreadsheet, you will see my
programmer friend's back test of his new system trapped between the yellow bar at the top of the page and all the way down to the second yellow bar below 3/8/2012.

Below the second yellow bar is my actual first trade that I posted
signal date 3/14/2012 (which is actually entered on 3/15/2012 because the signal is created at night after the close).
Signal date 3/19/2012 is the trade I opened today (which I already posted today).


Look everyone, no one (including myself) expects my actual real time trading results to match those back tested results that he recorded from September 1, 2011 to March 8, 2012,
but I just thought it would be fun to periodically keep posting all new trades real time and the spreadsheet and we will see how close we come and what goes right or wrong with the new system along the way.


Jeff

If you wouldn't mind posting the price of the underlying when making these live trades, then it would certainly help educate some on this thread?

Thanks,

Don

 

[jeffalvinson]

Quote from newwurldmn:

51 trades and not a single loser? Seems highly unlikely I would think. You sure there isn't something wrong with your model?

I agree, I am having a hard time swallowing it myself, so I am trading small until "proof of life."

 

[Don Bright]

Quote from Nine_Ender:

Don, I think we would both be in agreement that some of Ryan's recent purchases are not sound strategy. But for different reasons. You would say sell options exclusively. I would say, ok, buy options, but be far more selective about which ones you buy.
In my strategy, AAPL is far too volatile and has made too big a move for me to know future short term direction. Hence, no way I buy calls or puts in AAPL right now. Yourself, I'm not sure what the "safe" strikes are on AAPL to know if your strategy would consider this stock.

Ryan likely would say screw both of you I'm making lots of money.

In the end, its all talk, we all take our own path and learning curve. I was puzzled immensely when Atticus jumped in and said Ryan's recent AAPL trades were smart. Makes no sense regardless of your religon on these things. You don't put 20% of your account into puts expiring in three days then immediately reverse to the opposite direction. This is where your risk model has broken down and you are preparing the crush your account.
Or get much richer almost by accident if you are extremely lucky.

( Atticus is on ignore because I prefer civil discussions )

(near the close, this has to be quick, excuse me for that).

I think he (ryan? maybe jeff, not atticus) was the one who planning to make 25cents on a put spread that is $150 deep ITM on aapl. 440/445 or something. That may be conservative, but no different than a $4 or $6 wide strangle in GE, check pricing of both, vol etc.

My basic point is that it's better to have time decay work for you instead of against you. My friends from the floor, Blair Hull and John Olegues (look them up at some point) - would always chant, yes actually chant 'options are meant to be sold' - and, as I said, you can buy to cover, after days or weeks go by, without losing money most of the time.

When buying a call or put, and the stock move 99% your way, you can still lose everything you paid for it.

I know Mr. Atticus tends to get a bit "un" civil at times, as does Mr. Maverick, but they know their stuff. I prefer civil conversations as well.

All the best, I hope you make a lot of money.

Don

 

[jeffalvinson]

Quote from Don Bright:

If you wouldn't mind posting the price of the underlying when making these live trades, then it would certainly help educate some on this thread?

Thanks,

Don

Certainly Don.

 

[atticus]

Quote from newwurldmn:

51 trades and not a single loser? Seems highly unlikely I would think. You sure there isn't something wrong with your model?

Either the R/R is 10:1 or it's fantasy.

 

[falconview]

Don and Atticus

I get some of it anyway. The range for the market is between Calls and PUT strikes sold. Close the strangle before it goes through, or you are in trouble?

Just got back on the air. I lost my wi fi signal again. Been trouble shooting. Found out it was my wi fi plug in gadget that goes in the Usb port. Apparently the salt water sea air here on the beach, weakens the signal. Pulled it out and replugged it into a different port and I´m back up again. Place down the beach said theirs was working, so I knew it had to be me.

I had closed my 3 contracts this morning at a -$105 loss. Now I´m back on the internet, I see my trade is back to where I bought it. Yikes! Isn´t that the way with these things.

I use two types of charting programs, Big Charts and Freestockcharts.com. Seems my Big Charts gives more accurate reading of the data, than Freestockcharts. Make note to myself to use that one for trading. The other is prettier and I´ve got many more homemade indicators.

On margin. My monitor in TOS says 0.00 for margin and about $7300 in cash. Guess when I try selling a strangle, will see if I get rejected or not.

Is adjusting a strangle that is being broached a good idea? If so, how? It looks to me I should make a sold strangle wider, two strikes OTM on each side. Is that a good idea? Give an index space to move.

I´m probably going to jump back in this regular straight buy trade, but tomorrow. Big Charts says not to do it today.

Hmnn! That SOLD strangle lost money. Sold for .42 cents and bought back at .53 cents. The CALL side went through the sold strike a bit. Seems to me I would have to be wider on the strikes?
WEEKLY QQQ sell 67 Calls @.23 cents
sell 66 PUTS for .19 cents

Not enough time to collect enough TIME DECAY. ( THETA )
NO FREE LUNCH!

That JEFF strangle sold, still ahead .10 cents.

Okay I´m getting the feel of this selling strangles business. Don´t know if I have any margin to qualify, but will find out eventually.

 

[atticus]

Don is recommending straddles (IMO) due to the simplicity and the regT margin will limit your size. You're trading too large if your daily theta is >1%.

Be a net seller of premium. Keep theta <1% of net liq.

 

[ForexForex]

Quote from Don Bright:
My basic point is that it's better to have time decay work for you instead of against you.

But in the context of this thread credit spreads or selling calls and puts isn't an option, you don't get the returns ryanpatrick has gotten during the last three months, or to get to $20,000 by years end through option time decay. You have to be a buyer, not a seller.


The guy at the other end of ryanpatrick's trades is at a huge loss. Time decay didn't help him.

 

[ryanpatrick]

how much higher can AAPL go? Had to sell those puts again and bought 3 aapl mar 23 2012 605 calls at 4.50 just to see how far it can run up again this week. Jeez, is taking a few hundred each time too.