My Options Play
- Thread starter Multioption
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Sorry that I don't get it.
The call premium was $.35*4,000=$1,400. This buys you insurance (synthetically call=stock+put), and you can't lose more than the $2.2 payed on the call.
Also, if the underlying goes down in price the call goes down slower as it goes toward ATM.
Anyway Multioption's time horizon was about a week, as stated.
Hello:
Couple of comments.
First, you folks don't seem to be paying attention to the important issues. Its like you read the posts but didnt take time to really look at the charts. Also no one seems to be interested in asking the "right" questions. What are they? Well, instead of asking the guy to give you his criteria for selection (duh), you might want to ask whether he "weights" his indicators, or whether he uses any third party resources (like Ivolatility.com, for instance).
Finally, if a person were interested in making a living at this business, he or she would be looking at quotes, not only EOD but intraday (perhaps using the CBOE site). Experienced traders keep close track of changes in interest, and the buy/sell ratio at exchanges. If you spend time watching the changes, eventually you learn to see which series are being squeezed, which are being moved by smart money, and which are series are on the pros radar.
Its kind of like you arent really serious about the game, which is why Multi can stand in long enough to make money, while other folks buy in small and get flushed out with a loss.
I realize that much of this is experience and you cant buy that, but I have to tell you (those of you who are complaining that "its gambling), you arent seeing the whole picture.
My best advice, those of you who are here for the entertainment, Hey dont change a thing. Those who want to learn something, get out your notebooks, start asking the right questions, start taking notes and doing some research. There are plenty of resources out there for students of the options game. You need to get off your asses and find the answers.
Good luck,
Steve
Edit:
By the way, there are two parts to this game. One is learning to pickem. The other is learning to holdem. So far most of you dont seem to have either skill happening. To paraphrase Clint Eastwood "A man's gotta know his limitations". Watch and learn, and dont throw your money away trying to piggyback trades.
Couple of comments.
First, you folks don't seem to be paying attention to the important issues. Its like you read the posts but didnt take time to really look at the charts. Also no one seems to be interested in asking the "right" questions. What are they? Well, instead of asking the guy to give you his criteria for selection (duh), you might want to ask whether he "weights" his indicators, or whether he uses any third party resources (like Ivolatility.com, for instance).
Finally, if a person were interested in making a living at this business, he or she would be looking at quotes, not only EOD but intraday (perhaps using the CBOE site). Experienced traders keep close track of changes in interest, and the buy/sell ratio at exchanges. If you spend time watching the changes, eventually you learn to see which series are being squeezed, which are being moved by smart money, and which are series are on the pros radar.
Its kind of like you arent really serious about the game, which is why Multi can stand in long enough to make money, while other folks buy in small and get flushed out with a loss.
I realize that much of this is experience and you cant buy that, but I have to tell you (those of you who are complaining that "its gambling), you arent seeing the whole picture.
My best advice, those of you who are here for the entertainment, Hey dont change a thing. Those who want to learn something, get out your notebooks, start asking the right questions, start taking notes and doing some research. There are plenty of resources out there for students of the options game. You need to get off your asses and find the answers.
Good luck,
Steve
Edit:
By the way, there are two parts to this game. One is learning to pickem. The other is learning to holdem. So far most of you dont seem to have either skill happening. To paraphrase Clint Eastwood "A man's gotta know his limitations". Watch and learn, and dont throw your money away trying to piggyback trades.
you're kidding right? what options pro would ever look at "buy/sell" ratios (whatever that is)? even if anyone ever did look at trade volume for some reason, if you had checked PEET options, multi was pretty much the whole party on the days he traded. how would you read those tea leaves?
I'm not "complaining" about what IS de facto gambling. Gamblers are what makes trading profitable for me. I hope to be taking the other side of the trade. Typical gamblers buy or sell based on directional hunches and they don't really care what they pay for the action (i.e. they know nothing about the true odds).
I've said it at least twice, "whatever works, works." if multi succeeds with these types of trades, he is truly one of the very, very few gifted folks that can pick direction and he double leverages that ability with derivatives and big bets. every once in a while someone busts the bank at a casino too. that doesn't change the fact that the winner was gambling.
there are 1000's of folks who've turned small stakes into small fortunes by trading. most of them give it all back and then some because they don't understand how options work and they don't manage risk very well.
i know this sounds like sour grapes to some but i truly wish multi the best in his/her endeavor. my comments all along though have been directed toward the real risks of this kind of trading and trying to balance what may look to some like an easy paint-by-number approach to riches.
Hello:
When I am kidding, you will know it.
Certainly you have a right to your opinions and I support your right to exercise them.
Finally, in order to be on the "right side" of a trade, you need to have some basis for knowing (or at least making a good guess) which side is the "right side".
Based on the comments and the lack of "informed" questions, it seems clear that most folks who have posted simply dont have enough experience or background to to know which end is up..
Some of the information that I refer to can be had by discussing the subject with local traders who are in the business. There are a few here at ET and you could find others by approaching one or more of the first tier brokers and making friends. Other aspects of the business can be learned, a little at a time by reading (an example is "The Business of Options by Marty O'Connell").
Good luck,
Steve
When I am kidding, you will know it.
Certainly you have a right to your opinions and I support your right to exercise them.
Finally, in order to be on the "right side" of a trade, you need to have some basis for knowing (or at least making a good guess) which side is the "right side".
Based on the comments and the lack of "informed" questions, it seems clear that most folks who have posted simply dont have enough experience or background to to know which end is up..
Some of the information that I refer to can be had by discussing the subject with local traders who are in the business. There are a few here at ET and you could find others by approaching one or more of the first tier brokers and making friends. Other aspects of the business can be learned, a little at a time by reading (an example is "The Business of Options by Marty O'Connell").
Good luck,
Steve
Look at it this way:
Peet 2.20 * 40 * 100 = $8,800 when the underlying was at $32 and 9 days till expiration.
Peet theoretical call price 1 day to expiration with the stock at $32 = $2, for a loss of (.2*40*100) 800.
Stock at $32 * 4000 9 days til expiration = same as one day til expiration at $32; no loss
Now what if the stock goes to $30.15?
The day before expiration you are not going to find a buyer for your call, so loss = $8,800
On the stock side we're looking at a ((32*4000) - (30.15 *4000)) loss of $7,400, plus the added bonus of the option to hold it indefinately.
So, if the stock stays the same until expiration, you lose $800 more with the options, if it drops to your stop (assuming you don't take your stop) you lose $1400 more with the options.
- The New Guy
imho this trade had very little to do with options. The core of this trade is that he has a directional pick of a stock that he feels very confident in. So confident, in fact, that he's willing to leverage it to the tits, and he feels that he can overcome the inherent negative expectancy in initiating an option trade.
secondly, knowing if he "weights" his indicators isn't going to do much good if you don't know what indicator it is, now is it?
You're joking about the intraday quotes, right? In my office here I have almost 100Mb of bandwidth in quotes... EOD!!! LOLOLOL.
Besides which (and don't get me wrong, I'm on board with Multi, and want to see him succeed) putting on a naked long position that is 1/4 of your account size is gambling and high risk. He even states it on his post where he initiated the trade! As it turns out, it is more like %2.... (from the two accounts that I know of).
- The New Guy
EDIT: Also, I bought in small and held it for the time frame. Just like him I'm using money I'm willing to lose, because I understand that there is a great deal of risk involved. I'm here to gamble with a guy who's making some bold claims, but I'm sure as heck not going to put any "real" money on it. Gambling here also keeps me from gambling with my other trades...
I see what you mean.
Different people look at the same thing and draw different conclusions. Multioption's approach appeals to me because of the lower margin requirement and smaller slippage and commissions (than stock+put), better reward / risk ratio (than vertical spread), better downside protection (than naked stock), less price downside and volatility risk (than further expiration). For these I have to pay something, as you correctly explained. Probably I wouldn't have picked PEET because it is so thinly traded.
I suspect Multioption planned to close his position after about a week anyway. As it happened, although last week the market was down and PEET gapped immediately after opening the position, the technical signal proved correct, just its magnitude was smaller and the reward / risk only 1/1.7.
To make $100k from $20k in less than 3 months Multioption had to take a higher risk: 6.8k/20k=34%. But as $20k is not all his account, maybe less than 1%, it's ok.
Let's be patient and see how the next trades unfold. I'm here to learn , confirm or correct my thoughts, and a little excitement (will he reach the $100k goal?).
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