My option trades

I agree with you there will be an upmove of some small sort. Bottom fishing is a good way to accumulate this I would expect.

On your candlesticks. Yes, my own system, predicts an upmove. I´m simply trading the weekly bar.

I´m just waiting for it to actually happen. I show more downside, a little bit. Doesn´t have to be much, as TIME in bars and the average of those bars, could give me a lower bottom, without actually seeing the price go much lower.

You are not going to be wrong, I believe. For me, I´m going to wait for any breakout before making an entry.
 
04-02-12 02:42 PM

Been reading trying to find an explanation of the long buttefly.

It seems to be the lower is a credit spread and the higher is a debit spread. Can you confirm this for me please?

Two sold options are ATM.

___________________________________

I´m kind of hoping some long butterfly trader would clarify this question?

I have this picture in my mind, as to WHEN the trade should be entered and how to react afterwards. But this picture to solidfy, needs to know if the bottom part of the long butterfly is a credit spread and the top part ( in calls ) a debt spread. I would then be able to elaborate and kick around what I´m thinking with the experts on here. As an amateur I just don´t know.
 
Quote from falconview:

Jeff

I kind of thought of averaging down, in bottom fishing, accumulation so to speak. Even of doubling up each time.

But I finally decided to wait for a breakout and then just pile it on.

In the QQQ I am not expecting a rise of more than .30 to .50 cents for this week. That would only be 12% to 20% gross return.

Maybe the SPY returns more than the QQQ? That would be interesting to know, for rougly the same move. They tend to parallel.
More...


Falcon,

Many years ago when I was looking for an alternate index or etf
to replace the OEX index, I tested both the SPY and QQQ etf's.
I found that the SPY highly outperforms the QQQ.
Think about this:
The Nasdaq has to move 45 points for the QQQ to move 1 point.
The SPX only has to move 10 points for the SPY to move 1 point.
So which etf (SPY or QQQ) is going is going to have a greater gain in the options if both indexes (SPX & Nasdaq) move 10 points?

Hint: Usually 10 points of SPX movement gives me .50 to .60
option gain, depending on days left to expiration and if I am ATM or ITM when I bought the options.
.50 gain on a 2.00 option is +25%.
.60 gain on a 2.00 option is +30%.
My Buy No. 2 profits are +40% to +57% above the entry price
(depending on signal type) and sometimes even Buy 1 is +40% to +57% above the entry (depending on signal type).
Years ago when I did SPY vs QQQ testing, I found those profits
impossible to "regularly" achieve using QQQ options (but they did happen on occasion).

Jeff
 
Quote from falconview:

04-02-12 02:42 PM

Been reading trying to find an explanation of the long buttefly.

It seems to be the lower is a credit spread and the higher is a debit spread. Can you confirm this for me please?

Two sold options are ATM.
More...


Butterfly's are buying a bull call spread and selling a bull call spread. It doesn't have to be ATM but those are always cheapest due to the ATM having the most vol premium (vega? I don't know the greeks, not really interested at this point)

The goal is for the bull call you bought to expire at full value and the one you sold to expire worthless. Lets say you bought a 95/100 for $4 and sold a 100/105 for $2. That would mean you paid $2 ($4-$2) for the 95/100/105 butterfly.

*Using simplified calculations*
If the stock is at $95 at expiration you lose the $2 cost. 95/100 spread and 100/105 are worthless.
If the stock is at $97 at expiration you break even: 95/100 spread is worth $2 and 100/105 is worthless. Netting $2, same as cost.
If the stock is $100 you make max profit: 95/100 spread is worth $5, 100/105 is worthless. Profit is $5 minus the $2 cost, or $3 (150%).
If the stock is at $103 you're back to break even on the other side. 95/100 spread is worth full $5, but you must buy back the 100/105 for $3, net is $2, same as cost.
If the stock is at $105 at expiration you lose the $2 cost. 95/100 is worth $5 (paid $4, worth $5 for $1 gain), 100/105 is worth $5 (sold for $2, must buy back $5 for a $3 loss)

There are many options for closing it out once it starts to break out of your profit range ($97-$103)
 
Quote from jeffalvinson:
04-02-12 06:59 AM
Buy 1 of SPY April 140 calls filled at 2.00, sell at 2.60 (+30%) or
if tanks before rising then
Buy 2 of SPY April 140 calls at 1.50, sell all at 2.10
Stop: 1.20
More...



________________________________________________

Buy No. 1 April 140 calls bought at 2.00 this morning sold
for 2.60 +30% (see updated excel results).
This new system is totally amazing to me! "I am actually shaking a little from these last 6 consecutive winning trades."
(Remember the 6 trades below the yellow line on the results page is where I started the actual trades.)

Falcon,
Notice that approximately a 11 point swing in the SPX
(down -3 to up +8) created a .60 move in the April 140 calls.

Now go check what QQQ options would have gave you with the same swing.


Jeff
 

Attachments

Quote from scottandmo:

Butterfly's are buying a bull call spread and selling a bull call spread. It doesn't have to be ATM but those are always cheapest due to the ATM's you'd be selling having the most vol premium (vega? I don't know the greeks, not really interested at this point)

The goal is for the bull call you bought to expire at full value and the one you sold to expire worthless. Lets say you bought a 95/100 for $4 and sold a 100/105 for $2. That would mean you paid $2 ($4-$2) for the 95/100/105 butterfly.

*Using simplified calculations*
If the stock is at $95 at expiration you lose the $2 cost. 95/100 spread and 100/105 are worthless.
If the stock is at $97 at expiration you break even: 95/100 spread is worth $2 and 100/105 is worthless. Netting $2, same as cost.
If the stock is $100 you make max profit: 95/100 spread is worth $5, 100/105 is worthless. Profit is $5 minus the $2 cost, or $3 (150%).
If the stock is at $103 you're back to break even on the other side. 95/100 spread is worth full $5, but you must buy back the 100/105 for $3, net is $2, same as cost.
If the stock is at $105 at expiration you lose the $2 cost. 95/100 is worth $5 (paid $4, worth $5 for $1 gain), 100/105 is worth $5 (sold for $2, must buy back $5 for a $3 loss)

There are many options for closing it out once it starts to break out of your profit range ($97-$103)
More...
 
Scott and Mo

Am going to have to chew on that one a bit. Get back to you.

Jeff

Congratulations on your upgraded trading system. Will take another look at SPY over this week. Glad to see you made your money.
I still do not have an entry yet.

I was aware that SPY swing wider than the QQQ. Forget why I did not trade it. I think I was afraid of losing too much, while learning? But will look at it again, probably for next week.
 
Just ran SPY

Then I noticed a $2 option whereas I trade 3 rd month and that was expensive.s ( $5 ) After going back to this message of yours, realized you were trading front month, which is more active immediately.

Also looked at my system and could trade the SPY presumably in front month. The problem is I cannot do a day trade, so was wondering about that. In checking your EXCEL I noticed you only had 1 day trade, so that made me feel better.

I haven´t done EXCEL for 25 years. Tried it the other day to do my bets, and make a graph and made a mess of it. Will have to re-learn it again, I suppose? Want an end of week, equity graph. I have one on paper, but not on the internet.

It does look possible I could trade the SPY though. Might give it a try, though this week is reserved for the QQQ. Which has already risen .25 cents while you made .60 cents in the SPY. I still don´t have a real signal in the QQQ yet.
 
Quote from falconview:

Just ran SPY

Then I noticed a $2 option whereas I trade 3 rd month and that was expensive.s ( $5 ) After going back to this message of yours, realized you were trading front month, which is more active immediately.

Also looked at my system and could trade the SPY presumably in front month. The problem is I cannot do a day trade, so was wondering about that. In checking your EXCEL I noticed you only had 1 day trade, so that made me feel better.

I haven´t done EXCEL for 25 years. Tried it the other day to do my bets, and make a graph and made a mess of it. Will have to re-learn it again, I suppose? Want an end of week, equity graph. I have one on paper, but not on the internet.

It does look possible I could trade the SPY though. Might give it a try, though this week is reserved for the QQQ. Which has already risen .25 cents while you made .60 cents in the SPY. I still don´t have a real signal in the QQQ yet.
More...

not sure why you need excel. I mean it's nice to know. All those graphs can be generated from your software. But I havent used Excel for trading other than to upload specific watchlists to TOS and that's something you really don't need to learn. It'll come with time...
 
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