My option trades

Kinggyppo

I have to apologize. I have often been told I overanalyze things to death. It is in my nature.

I spent decades in the Western Caribbean Sea as a sea captain. Running through myriad reefs at night, usually avoiding people, based on my skill. It was a time of Central American revolutions and wars, and dealing with gunboats, venal bureaucrats and military run governments. I had to be constantly running WHAT IF scenarios through my mind, often necessary on a ten minute basis and alternate scenarios to survive. The mind was always calculating and you couldn´t turn it off. Most I knew from those days are long dead. I survived, much to my surprise, but the habits of a lifetime of overanalyzing don´t go away. I apologize for that.

I can see this is a good sounding strategy Don. I would expect you would not want to be in, at earnings time. You would have to know when the dividends would be paid out. Probably couldn´t avoid bad news announcements. Before dividend payout, also the stock would run up. All to be taken into account. I like it, it sounds good.
Will do the math over the weekend and see what is possible. I expect the PUTS would be OTM.

The only new thing is the stock price running through the PUTS and being assigned. Does that cost your account anything? What do they do, send you a notice you now hold the stock? I remember that happening to me back in the 1980´s but the discount broker ( very expensive guy ) handled that stuff. Let me see, will try TOS and see what they say about me selling PUTS. ´Worse comes to worse could just buy the shares and the process would then if assigned on a PUT option, just be averaged down.

I probably should do the desktop version of TOS to get the simulator? Though nowadays there are more and more on the web. I got comfortable with web based trading doing paper trades and the changeover, just found my comfort zone by sticking to the tried and true. I lost a few bells and whistles in the process I suppose.

Thankyou for the idea, I am going to look at it over the weekend. I don´t much like your channelling naked options by selling though. Been burned there with Iron Condors.
 
Quote from falconview:

Kinggyppo

I have to apologize. I have often been told I overanalyze things to death. It is in my nature.

I spent decades in the Western Caribbean Sea as a sea captain. Running through myriad reefs at night, usually avoiding people, based on my skill. It was a time of Central American revolutions and wars, and dealing with gunboats, venal bureaucrats and military run governments. I had to be constantly running WHAT IF scenarios through my mind, often necessary on a ten minute basis and alternate scenarios to survive. The mind was always calculating and you couldn´t turn it off. Most I knew from those days are long dead. I survived, much to my surprise, but the habits of a lifetime of overanalyzing don´t go away. I apologize for that.

I can see this is a good sounding strategy Don. I would expect you would not want to be in, at earnings time. You would have to know when the dividends would be paid out. Probably couldn´t avoid bad news announcements. Before dividend payout, also the stock would run up. All to be taken into account. I like it, it sounds good.
Will do the math over the weekend and see what is possible. I expect the PUTS would be OTM.

The only new thing is the stock price running through the PUTS and being assigned. Does that cost your account anything? What do they do, send you a notice you now hold the stock? I remember that happening to me back in the 1980´s but the discount broker ( very expensive guy ) handled that stuff. Let me see, will try TOS and see what they say about me selling PUTS. ´Worse comes to worse could just buy the shares and the process would then if assigned on a PUT option, just be averaged down.

I probably should do the desktop version of TOS to get the simulator? Though nowadays there are more and more on the web. I got comfortable with web based trading doing paper trades and the changeover, just found my comfort zone by sticking to the tried and true. I lost a few bells and whistles in the process I suppose.

Thankyou for the idea, I am going to look at it over the weekend. I don´t much like your channelling naked options by selling though. Been burned there with Iron Condors.
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My father was a Merchant Marine "Master" (Captain) for decades. He, too, traveled the world. He would always bring me things from such far away places, I miss him.

Don

edit: to you point about dividends, earnings etc. Don't worry about it. Rarely do these major stocks cut dividends, yes it happens, but even then it's a rare case. We have "some" risk and "a lot" of reward. That's all you can hope for. Those reefs didn't stop your stewardship of your ship and crew, and some risk shouldn't deter you from trading. I do prefer simple trading of equities, ETF's and levered ETF's to options these days of course, but I am happy to help you CAPTAIN!

Don
 
I´m very curious what kind of strategy can be used to do these earnings reports. We are looking at an overnight trade that is going to move between 2% and 4% for sure. Maybe even 5% or 10%. The only problem it is a flip of the coin thing for me so far.

There must be a way to trade such an overnight move, when you don´t know the direction?
 
Quote from falconview:

I´m very curious what kind of strategy can be used to do these earnings reports. We are looking at an overnight trade that is going to move between 2% and 4% for sure. Maybe even 5% or 10%. The only problem it is a flip of the coin thing for me so far.

There must be a way to trade such an overnight move, when you don´t know the direction?
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The obvious answer is to buy, yes buy, near term at the money straddle. But, as you say, this is just a coin toss, not a way to make money from trading. Why try to bet on outcomes you have no way of knowing High risk, low reward plays? Good to understand this type of thing from an academic point of view, but not from a financial point of view. IMO.

All the best, Captain.

Don
 
Don

I ran the dividend stocks gambit. It´s a crap shoot like everything else.

Took ten high paying dividend stocks.

Looked for the two year low. That didn´t work out, no premiums there.

You HAVE to sell one strike OTM to get anything, which makes it a crap shoot.

Only two stocks out of ten, had anything at all in premiums. I wanted .50 cents or better. Best I could find was these two stocks LMT and UPS at around 30 cents.

In a credit spread, you are going to need 15 cents for expenses, which leaves you with .15 cents if you can expire. Otherwise if you had to close it early, you would incur another .15 cents expenses and make nothing.

Another working correlation was the SLOW STOCHASTIC. When it was merging for a turn around, trend change, you could get the premium of .30 cents. Othewise you get nothing. I was using first month, one month expiration time frame.

I might try playing with that some more. It may be possible of picking such a Blue Chip dividend stock, at a trend reversal turning point, as shown by the SLOW STOCHASTIC, and going to a two week time frame for placing the bet. Have a look at that idea later.
 
Just did a quick look.

If you selected your entry for a credit spread, Iron condor, or whatever whens the 1 year monthly was turning by the SLOW STOCHASTIC and then ran the 3 month weekly chart doing the same thing, or found a better oscillator to tell you price was turning, then downsized to the 1 month daily chart ( for last two weeks to expiry ) again to get the turning point, you would have a reasonably high expectation of making a good entry. With whatever high premium, these stocks tend to show ( about .35 to 30 cents ) 1 strike OTM.

1 strike OTM would make me nervous though.
 
Don

I ran the dividend stocks gambit. It´s a crap shoot like everything else.

Took ten high paying dividend stocks.

Looked for the two year low. That didn´t work out, no premiums there.

You HAVE to sell one strike OTM to get anything, which makes it a crap shoot.

Only two stocks out of ten, had anything at all in premiums. I wanted .50 cents or better. Best I could find was these two stocks LMT and UPS at around 30 cents.

In a credit spread, you are going to need 15 cents for expenses, which leaves you with .15 cents if you can expire. Otherwise if you had to close it early, you would incur another .15 cents expenses and make nothing.

Another working correlation was the SLOW STOCHASTIC. When it was merging for a turn around, trend change, you could get the premium of .30 cents. Othewise you get nothing. I was using first month, one month expiration time frame.

I might try playing with that some more. It may be possible of picking such a Blue Chip dividend stock, at a trend reversal turning point, as shown by the SLOW STOCHASTIC, and going to a two week time frame for placing the bet. Have a look at that idea later.
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First time posting here, but I've been following this thread for a while now. I'm pretty new to options.

I've been using the technique Don describes for a little while now with GE. Arguably, it's not a blue chip any more, since it took such a beating in '08 and, after some questionable financial decisions, butchered its dividend. It is also rather debt-heavy at the moment.

However, it was one of the kings of the dividend-payers for 75+ years, and many folks think it is likely to start increasing payout rates back toward their old levels. I think it's still a good company worth acquiring shares, and it's still extremely liquid with .01 options spreads. But there is also still enough nervousness surrounding it to keep premiums up when lots of others have gone stale, as you describe.

I've been selling ATM puts, since they have the most time value to waste. The last one was the March monthly @ $19, which just expired worthless last Friday. I sold it at .60 on Feb 13.

If GE had closed at under $19 on expiration last Friday, I would have been put the shares. Essentially, I would have paid $18.40 per ($19 strike minus my .60 premium... I'm not including commissions, here, to keep it simple.)

If GE had been under $18.40, I likely would have tried to roll down. I would have bought back the $19 strike (with most of its time value gone and only intrinsic left) and then sold the ATM put for April, instead.

This isn't really a spread strategy, you're just selling single, naked, cash-secured puts on a stock that you wouldn't mind owning at a fair price. You aren't going to do 550% or anything, but, to take that last put as an example, I got .60 for the $19 I had securing it, or 3.158% over the 39 days I had it open. If you could keep that going for a year without having to roll, it works out to around 29.5% annually.
 
Quote from falconview:

Just did a quick look.

If you selected your entry for a credit spread, Iron condor, or whatever whens the 1 year monthly was turning by the SLOW STOCHASTIC and then ran the 3 month weekly chart doing the same thing, or found a better oscillator to tell you price was turning, then downsized to the 1 month daily chart ( for last two weeks to expiry ) again to get the turning point, you would have a reasonably high expectation of making a good entry. With whatever high premium, these stocks tend to show ( about .35 to 30 cents ) 1 strike OTM.

1 strike OTM would make me nervous though.
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You're looking for someone to hand you an edge. You have to get price and/or vol correct. Buy a neutral fly in a deferred month if you think vol will fall. Buy a bull vertical (sell a bear) if you think price will rise. Buy a down and out calendar if you think price will drop (index).

You're looking for the best spread/combo in practice, but you've got it backwards. You need to forecast price and/or volatility. You would be the first guy successfully using stochastics, so stop that shit.

I would kick back and enjoy the beach unless you've got heirs. The vast majority of new option traders blow-out (90%). It's not something to entertain at 75yo. Most MMers can't make the transition off the floor.

You're really not picking it up from this thread. You could've had Natenberg's book in your hands by this time but instead you're contacting a friend at the LoC?

And last, I think you have a serious comprehension problem. I believe you're glossing over what we're telling you.
 
Quote from phibbus:

First time posting here, but I've been following this thread for a while now. I'm pretty new to options.

I've been using the technique Don describes for a little while now with GE. Arguably, it's not a blue chip any more, since it took such a beating in '08 and, after some questionable financial decisions, butchered its dividend. It is also rather debt-heavy at the moment.

However, it was one of the kings of the dividend-payers for 75+ years, and many folks think it is likely to start increasing payout rates back toward their old levels. I think it's still a good company worth acquiring shares, and it's still extremely liquid with .01 options spreads. But there is also still enough nervousness surrounding it to keep premiums up when lots of others have gone stale, as you describe.

I've been selling ATM puts, since they have the most time value to waste. The last one was the March monthly @ $19, which just expired worthless last Friday. I sold it at .60 on Feb 13.

If GE had closed at under $19 on expiration last Friday, I would have been put the shares. Essentially, I would have paid $18.40 per ($19 strike minus my .60 premium... I'm not including commissions, here, to keep it simple.)

If GE had been under $18.40, I likely would have tried to roll down. I would have bought back the $19 strike (with most of its time value gone and only intrinsic left) and then sold the ATM put for April, instead.

This isn't really a spread strategy, you're just selling single, naked, cash-secured puts on a stock that you wouldn't mind owning at a fair price. You aren't going to do 550% or anything, but, to take that last put as an example, I got .60 for the $19 I had securing it, or 3.158% over the 39 days I had it open. If you could keep that going for a year without having to roll, it works out to around 29.5% annually.
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I am also very new at options... this is actually my first month trading live.
As most beginners, I had intended to by blue chips that pay good dividends and write Covered Calls. Did that on some KO stock I already owned. After reading a bid, including this thread, I started writing Naked Puts on those stocks I would like to own... If I get them with an assigned option, great, if it expires worthless, better.
Also have a couple Spreads in play, one on the RUT and one on IWM.
Did buy some stocks and wrote some ITM calls with the understanding the shares would get called away... Again, I am fine with that... No commissions for the first 2 months, so I can play a bit.
I am still trying to determine how I find those good Spread trades...

Thanks for this thread, I have learned a lot.
 
Phibbus

That was a good explanation of what you and Don are trying to do.

Atticus - maybe you remember the old Laurel and Hardy movies?

I´m the idiot guy in the pair. Forget now what the comedians called it. Or was it Jerry Lewis and his partner? ( the singer )

Amazon.com don´t ship books outside the country. At least not to here. Even if I mail them a cheque, which would take 2 or 3 weeks to arrive at Amazon, airmail. Your thinking North American industrialized living conveniences. How are the grandkids, you must love your weekends? ( grin ) Round trip for me to order something from the USA is about 4 to 6 weeks, by airmail. Special delivery airmail. I ordered a small box of stuff from China two years ago, and finally got it, about 14 months later.

I do have heirs, but they already have for the most part got theirs already, set up in TRUSTS. All my kids are millionaires at least in assets now, if not cash flow. Work for themselves.

I was kind of hoping two years ago to start an Educational Trust for kids in this third world country, offering Scholarships and Grants. I wrote up the TRUST and never registered it. I was planning to start it with $25,000 seed capital. But that dream is sort of fading away here two years later, as I thought I would see how much more I could stick in the TRUST before I kicked the bucket. Looks like I will never make any decent money at this? Though it is educational and I am having fun. My wife insisted I keep my learning phase small financially. Which in hindsight seems to have been a wise decision. :D So far, I think I´ve got my moneys worth in education and entertainment, as in hobby. Not what I planned, but then there you are. No excuses. The price so far has been worth it.
 
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