My option trades
- Thread starter ryanpatrick
- Start date
I´ve been puzzling about being able to SELL some options and buy back after they collapse.
I´ve played with it on paper. Don Bright was always saying SELL. Actually I can see at least one trade a week, in which at the end of a short trend, the inflated premium collapses for 7 or 8 hours.
How to SELL is my problem. Don obviously has a big account and so SELLING for him is okay, he has the margin. But for me a small retail novice I can only SELL if I put on a spread of some type. This doesn´t work out to well.
Say you have a short UP trend and the CALLS become inflated. When the trend stalls, you want to SELL the CALLS. I tried to search for a way to do this, but cannot find anything satisfactory, within my limited knowledge. There is a CREDIT SPREAD, there is a DEBIT SPREAD, there is HORIZONTAL, or CALENDAR SPREAD. All of these require that you also are going to remain LONG CALLS, if you SELL using them, and then in a few hours close the SOLD side out, to buy back cheaper. If you closed the SOLD part of the SPREAD on a buy back, what you are left with is CALLS that are going to lose money as well, because the trend has reversed, and is no longer going that direction anymore.
I´m stumped on this obvious way of making a trade, by selling swollen premium and buying back when it reverses and collapses. You get left with LONG OPTIONS from one side of the spread.
I´ve played with it on paper. Don Bright was always saying SELL. Actually I can see at least one trade a week, in which at the end of a short trend, the inflated premium collapses for 7 or 8 hours.
How to SELL is my problem. Don obviously has a big account and so SELLING for him is okay, he has the margin. But for me a small retail novice I can only SELL if I put on a spread of some type. This doesn´t work out to well.
Say you have a short UP trend and the CALLS become inflated. When the trend stalls, you want to SELL the CALLS. I tried to search for a way to do this, but cannot find anything satisfactory, within my limited knowledge. There is a CREDIT SPREAD, there is a DEBIT SPREAD, there is HORIZONTAL, or CALENDAR SPREAD. All of these require that you also are going to remain LONG CALLS, if you SELL using them, and then in a few hours close the SOLD side out, to buy back cheaper. If you closed the SOLD part of the SPREAD on a buy back, what you are left with is CALLS that are going to lose money as well, because the trend has reversed, and is no longer going that direction anymore.
I´m stumped on this obvious way of making a trade, by selling swollen premium and buying back when it reverses and collapses. You get left with LONG OPTIONS from one side of the spread.
I totally guessed wrong on direction but still made a small profit on my MAY 660/680/700 fly.
This is what happens when you have a "second job."
Still in the monthlies. Surprized by the selloff - I think it rallies back.