My option trades

New System spit out a put trade for today.
I do not see "any possibility" the entry will be filled:
SPY APRIL 141 Puts
Buy 1: 1.75 / Sell= 2.30 but if tanks before profiting then
Buy 2: 1:35 / Sell= 1.90 (sell all)
Stop: 1.20 All

R/R: 1/1
Profit: .55 + .15 = +.70
Loss: -.55 + -.15 = -.70
 
Okaaay!

I confused myself a bit here, as I apparently did not make enough notes to jog my memory. Running too many ideas at one time.

Not being familiar with trading options on stocks, I sort of wanted to try it first. So paper trading follows from a short list taken from the Blue Chip OEX list. 100 stocks.

I looked for my favorite pattern Paper traded Friday and recorded prices.

For the most part I traded FIRST MONTH, April. Normally I do not do that, as I´m scared of THETA loss. Or I traded second month, May.

BAC May 10 CALL@.39 cents/ .62 cents this morning.
COF April 57.5 Call @.73 cents/ .92 cents this morning Wed.
GE May 20 CALL @83 cents/.74 cents this a.m.
JPM May 45 CALL $1.67/ $1.83 this a.m.
NSC April 70 CALL $1.65/ .45 cents this morning
TYC April 55 Call .74/ .43 cents this morning
USB April 32 CALL .57 / .50 cents this morning
WFC April 34 CALL .96 / $1.11

I learned several things from this experiment. My pattern works, on stocks. But I would have to watch the stocks, as the losses here occurred unexpectedly. So I would have to be prepared to exit. I might run this for a couple more days?

I am though feeling good about increasing my number of trades per week, by jumping into stocks.

I also think I prefer second month ( 60 day ) trades. Maybe 3 rd month even? Skip FIRST MONTH options. Nothing to be gained by it, and THETA decay raises it´s ugly head.
 
Don

I appreciate your help and focus on SELLING options. I imagine you are trading with a million bucks or over? This allows you the freedom to SELL as you wish.

With a $7000 account right now or so. I don´t have that freedom you have.

SELLING NAKED is unlimited RISK. Hardly practical in my mind for a small retail trader trying to learn the ropes.

So I tried to find a way to SELL otherwise. The only thing I came up with was the CREDIT SPREAD. I may be wrong here, I forget. I cannot afford unlimited risk. Not going to happen.

So, here we are diddling with different kinds of spreads and learn them, trying to figure out how to SELL and control the RISK. So far, not satisfactory results.

I do appreciate your contributions and focus on SELLING options. I even agree with you. If I had even a $100,000 in the account it might be practical. It does not however make me comfortable to SELL NAKED with my few bucks.
 
Quote from falconview:

Don and Atticus

Ha! Ha! Ha! With friends and mentors like you guys, it´s better than using the old paint can on a rope in the morning and dousing yourself a shower over the head, with cold water from the shallow island well. About the same feeling. :D

I just looked at Tuesday Earnings report paper trades. This being Wednesday morning. JEF lost a smidgen. 5 cents.

OMN shocked the devil out of me. Must have been after the CLOSE report or something. Shot up from $1.05 to $1.90 this morning on the OPEN. There is method in Ryan´s madness after all.

Will have to cogitate on that a bit. Its telling me something, but don´t know how to handle it.

No earning for Wednesday
_____________________________

Okay on that BEAR CALL trade being directional down. I´m just trying to make sense of it. Or to use it. Let me see, put my failing memory cap on, think we were talking about SELLING a strangle or straddle? The buying of the CALLS would have locked in the profit maybe? Turning it into a Bear Spread. Whatever you sold it for originally would be locked in? You are still directional. If the direction continued you would WHAT? The PUTS would be losing value? Aaargh! I can´t think too much about that. My brains start smoking.
_____________________________

Been thinking about the LONG STRADDLE/STRANGLE.

I like that trade. it doesn´t pay very much, and it takes far too long invested. But if you buy 3 rd month options, 90 days, you are looking for eventual movement and volatility. I know from experience it will eventually pay off something. Time decay doesn´t seem to bother it, in the short term, say two weeks.

So my thought is, HOW COULD YOU ZIP UP THE RETURNS? What kind of bells and whistles on it, could you use? It is a worry free trade normally. I was looking it up, you could Sell the profitable side. Buy back and renew the STRADDLE/STRANGLE, sold side, with a limit order 10 cents cheaper to get you back to where you started, taking care of the bid/ask and commissions costs. There must be other options, now we are discussing various spread creations to throw in the mix here. Since you were long, you could do a wide credit spread, or something else???
Suggestions anyone?
More...

Wait for a signal and then choose the trade. You're attempting to settle on some magical position that does not exist in practice, let alone in theory. You want to be long vol and long theta, so the only possibility is a long calendar. I am fairly certain that you will bleed to death in a long straddle methodology. You'd receive some palliative care in a gamma-scalp, but you don't have enough cash to hedge with the underlying.

XYZ is an ABC-index constituent. XYZ is trading $105 at a vol of 30% and a beta of 1.07. You think ABC index is going to fall. You buy the following calendar:

XYZ MAY 100P at 6.75 long
XYZ APR 100P at 4.25 short

Debit of 2.50, short delta to $100 (fwd is $105.10). If you assume static vol/skew then the May put will be trading at 4.25 at April expiration, assuming that XYZ remains at $105. The $1.75 profit is an expression of the long decay.

If XYZ drops to par you have the potential for a double. There is some home-run potential if the vol rallies as well, as the calendar is long vega.

It's got to be difficult to learn this business at 75yo. The maths are not difficult, but it's abstract and simply takes experience to know what to do when, and why. I can tell you w/o hesitation that a long straddle, or any permutation thereof, is NOT the way to go.
 
Quote from falconview:

Don

I appreciate your help and focus on SELLING options. I imagine you are trading with a million bucks or over? This allows you the freedom to SELL as you wish.

With a $7000 account right now or so. I don´t have that freedom you have.

SELLING NAKED is unlimited RISK. Hardly practical in my mind for a small retail trader trying to learn the ropes.

So I tried to find a way to SELL otherwise. The only thing I came up with was the CREDIT SPREAD. I may be wrong here, I forget. I cannot afford unlimited risk. Not going to happen.

So, here we are diddling with different kinds of spreads and learn them, trying to figure out how to SELL and control the RISK. So far, not satisfactory results.

I do appreciate your contributions and focus on SELLING options. I even agree with you. If I had even a $100,000 in the account it might be practical. It does not however make me comfortable to SELL NAKED with my few bucks.
More...

That's the great thing about options, very scalable.

21.00 GE120421C00021000 0.18 0.00 0.18 0.19

22.00 GE120421C00022000 0.05 0.01 0.05 0.06

Pick a call above for April expiry.

18.00 GE120421P00018000 0.06 0.00 0.05 0.06 6

19.00 GE120421P00019000 0.14 0.01 0.13 0.14

Pick a put from above as well.

You can sell one each, call and put. You decide, just paper trade if you like. But, as an example. Sell the $21 call for 18 cents, and the $19 put for 14 cents. That totals 32 cents coming in, and they will be worth less, maybe not "worthless" in the next 3.5 weeks.

Or be even safer, and do the $22 call and the $18 put, only 11 cents, but a full dollar each way of "safety."



Check your simulator or platform to see how much $$ one of these would tie up.I can't imagine much. But I haven't traded retail, well, ever. Let me know.

Note, disclaimer: This is not intended as trading advice, nor a trading suggestion, and is a personal training tool from Don Bright, nothing to do with Bright Trading or any of it's affiliates.

Don
 
Don

Your a nice man. You have been kind and generous with your TIME, ADVICE and knowledge. I see on the internet you offer training commercially. I do appreciate these freebies you have been handing out here.

Having done a lot of teaching in various trades myself, as Atticus just mentioned. The guy with the experience over a long time, doesn´t really think about what he is doing. It is instinctive and intuitive. Learned by osmosis.

I have often cursed myself as some trainee has made a mistake in wooden boat building and spoiled a piece of exotic wood worth $500. Hey! It´s not his wood right? By using a measuring tape and cutting on a pencil line, instead of taking off a little bit at a time. CUT and FIT we called it. Measuring, or theory will cost you almost every time. How do you teach a trainee to cut and fit, without costing money and it´s not in the training manual, or books. You can plane it off, but you can´t put it back afterward. The piece of expensive wood is ruined.

So yes, I do understand you guys Don and Atticus are operating on automatic. Me, I´m the trainee and I have to plod along in slow motion and think it out for a while. Even then I´m going to get it wrong, until I absorb the mistakes and my subconscious rationalizes and stores the information.
Anyway thankyou for the help.
 
Quote from atticus:

I can tell you w/o hesitation that a long straddle, or any permutation thereof, is NOT the way to go.
More...

in what situations does it work? i would assume that a straddle/strangle would be better suited for short term plays.....?
if ABC is at 50, would a 49 x 51 be more profitable than a 47 x 53?
put x call

thanks
 
Atticus

Right long volatility and short theta. Or some Greek or other :mad:

Okay, I´ll take your word for it. Straddles are out. I had kind of thought of STRANGLES. I like ITM $4 premiums. You get a fast move in the price that way, and take off a .70 cents profit or so, each time the STRANGLE makes it. Then re-enter, or re-establish the STRANGLE, with a limit order set to recoup your bid-ask cost and commissions. At the current profit taking index value. Which is about .10 cents a contract.
I am not even considering going to expiration or close to it. Just working the market action. Let me ponder a bit on the CALENDAR? How is that better? We are not trying to get THETA, we are trying to scalp .70 cents on premium and index movement.
At least that is this amateurs thought.
 
Quote from falconview:

Don

Your a nice man. You have been kind and generous with your TIME, ADVICE and knowledge. I see on the internet you offer training commercially. I do appreciate these freebies you have been handing out here.

Having done a lot of teaching in various trades myself, as Atticus just mentioned. The guy with the experience over a long time, doesn´t really think about what he is doing. It is instinctive and intuitive. Learned by osmosis.

I have often cursed myself as some trainee has made a mistake in wooden boat building and spoiled a piece of exotic wood worth $500. Hey! It´s not his wood right? By using a measuring tape and cutting on a pencil line, instead of taking off a little bit at a time. CUT and FIT we called it. Measuring, or theory will cost you almost every time. How do you teach a trainee to cut and fit, without costing money and it´s not in the training manual, or books. You can plane it off, but you can´t put it back afterward. The piece of expensive wood is ruined.

So yes, I do understand you guys Don and Atticus are operating on automatic. Me, I´m the trainee and I have to plod along in slow motion and think it out for a while. Even then I´m going to get it wrong, until I absorb the mistakes and my subconscious rationalizes and stores the information.
Anyway thankyou for the help.
More...

Were you able to figure out how much margin it would be to do either one of those GE strangles?

Anyone?

Don
 
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