My Options Play

uninvited_guest · Nov 5, 2005

Quote from hajimow:

My trades : sold 10 naked PUT for DELL 27.5 Nov. for 0.15

* Credit $150, less commission.
* DELL's earnings this Thursday.
* DELL's 1 year chart doesn't look good.
* DELL's sales in Asia might be slow because Asians don't buy much stuff of the internet with credit cards.

That's a lot of risk for less than $150.00.

Multioption · Nov 5, 2005

Quote from hajimow:

Buy PUT 40 Nov and sell Call 42.5 Nov and get 5 cents for each contract that will pay for the commission. I just guess that HD might go below $40 after their earning announcement that will be before Nov. option expiry date.

I agree with your other recommedations but disagree on HD! It is dangerous buying Nov 40 Put and selling Nov 42.50 Call, but you might be right provided you have some insiders' information.

iceman1 · Nov 6, 2005

Quote from uninvited_guest:

* Credit $150, less commission.
* DELL's earnings this Thursday.
* DELL's 1 year chart doesn't look good.
* DELL's sales in Asia might be slow because Asians don't buy much stuff of the internet with credit cards.

That's a lot of risk for less than $150.00.

LMAO

what does the above post have to do with his trade? what you said is equally applicable to holding stock long or buying stock this week -- except he has a substantial cushion -- only I agree the reward isn't worth the risk. But what does Aisa have to do with a November options trade ??

in fact I think selling the Nov 30p or even Dec 32.50p is a better trade -- IF you want to sell naked put premium on Dell at all - since I think it is highly probable that DELL fills the gap from 10/31/05 -- and what better time to do this than after earnings -- which have already been issued as a "warning" -- and nearing expiry?! Check the open interest on the Nov 30/32.50p and 30 calls.

or... do a bull (time) spread but ratio short puts to long i.e. 1.25/1 = whatever fits your risk tolerance on this 'blue' chip tech stock that is down from 42 in June 2005 and had the highest volume of the past 4 years - last Monday. Can we really believe this volume was further distribution-- or more likely accumulation/capitulation? The 29 level is the approximate measured move (i.e. objective) out of an (apparent) DT from Dec '04/July '05 FWIW.

Just one trader's opinion -- obviously it 'could' go still lower -- for sure!

Ice

uninvited_guest · Nov 6, 2005

Quote from iceman1:

LMAO

what does the above post have to do with his trade? what you said is equally applicable to holding stock long or buying stock this week -- except he has a substantial cushion -- only I agree the reward isn't worth the risk. But what does Aisa have to do with an November options trade ??

in fact I think selling the Nov 30p or even Dec 32.50p is a better trade -- IF you want to sell naked put premium on Dell at all - since I think it is highly probable that DELL fills the gap from 10/31/05 -- and what better time to do this than after earnings -- which have already been issued as a "warning" -- and nearing expiry?! Check the open interest on the Nov 30/32.50p and 30 calls

or... do a bull (time) spread but ratio short puts to long i.e. 1.25/1 = whatever fits your risk tolerance on this 'blue' chip tech stock that is down from 42 in June 2005 and had the highest volume of the past 4 years - last Monday. Can we really believe this volume was further distribution-- or more likely accumulation/capitulation? The 29 level is the approximate measured move (i.e. objective) out of an (apparent) DT from Dec '04/July '05 FWIW.

Just one trader's opinion -- obviously it could go still lower -- for sure !

Ice

Having 1000 DELL shares put to you at $27.50 each after earnings is not worth the < $150.00.

hajimow · Nov 6, 2005

To multioption:

I have no insider info but I feel that HD stores are not that crowded and I feel people don't have that much money anymore to spend on their house and HD is not a tech stock that could fly and might under pressure after their numbers and if you become short at $42.5, you are not that in trouble.

To Iceman:

You are right.I just got $140 for 27.5 PUT options for DELL but I did not want to risk that much. I could even sell Call 32.5 to make a spread but I am scared it might go to $33-$34 after their earnings. I just wanted to get gas money without having the risk of getting assigned. I have enough risky positions in my account and I wanted to add some flavor to it with $140. I traded the DELL stock too.I bought at $29.30 and sold at $29.45. I knew that it will hit $29.70 but I did not want to risk more.
I am putting $350 for every DELL 27.5 PUT contract and I am getting $14 in 3 weeks.
Percentage gain in 3 weeks : 14/350=4%
That is about %70 a year. Not bad considering lower risk.

hajimow · Nov 6, 2005

To Iceman:

I agree that PUT 30 or 32.5 for December are better play.But my plate is full for December and my plan was to free up my money in November with getting low profit and low risk. I believe that high anticipation of PC sales in holidays will drive the stock up to $37 territory

To uninvited_guest:

I agree with you too that $140 is not that much money and you can get that money in 10 minutes trading GOOG but if shit does not happen ,I don't expect DELL go lower and actually their outlook was low but not that bad at all and it was already priced in. If I see that I am getting assigned, I will shoot the options to the next month.

uninvited_guest · Nov 6, 2005

Quote from hajimow:

I am putting $350 for every DELL 27.5 PUT contract and I am getting $14 in 3 weeks.
Percentage gain in 3 weeks : 14/350=4%
That is about %70 a year. Not bad considering lower risk.

What are you doing with the $350.00? I don't understand the term "putting $350 for every DELL 27.5 PUT contract and I am getting $14 in 3 weeks"

Is that buying or selling $350.00 worth of DELL stock for every put contract you sell?

hajimow · Nov 6, 2005

What are you doing with the $350.00? I don't understand the term "putting $350 for every DELL 27.5 PUT contract and I am getting $14 in 3 weeks"

Is that buying or selling $350.00 worth of DELL stock for every put contract you sell?

I meant $350 of my cash is used (locked) to sell one naked PUT 27.5 option. I just wanted to calculate the profit in 3 weeks for $3500 money that I am using for that trade.
20%x29.5- (29.5-27.5) ~=3.5
One contract =100 x 3.5=350

iceman1 · Nov 7, 2005

Quote from cnms2:

Iceman1 you're a man of few words

Let me see if I get you right:

TRI at $41.31: you like it but not enough to get in now, but on a ~5% retracement to 38-39 (maybe 40) you'll enter long

DNA at $93.51: this is a "winding" forecast
-short term you expect it to slightly drop so you'd enter short at 94-95 (after 1% up)
-intermediate term you expect it to bump up, and you'll buy the Dec100 calls; probably during the short term pull back
-long term you expect DNA to retrace back to today's prices; so you'll buy the Mar 90 or 95 puts, probably on the bump up.

Interesting ... So precise

cnms2

you think DNA has further downside or is today's action a meaningless blip lower...?

cnms2 · Nov 7, 2005

Quote from iceman1:

cnms2

you think DNA has further downside or is today's action a meaningless blip lower...?

DNA $92.59, down $-1.36 or -1.45%. My quick take: long term uptrend, but now looks like accumulation with support about $80; resistance $95. Short term: similar but a little less positive, because it is overbought, shows some bearish divergences, it is over extended above the 22 ema; some support at $88 (50 sma) and $86. I would take profits here, and if technicals remain the same I'd be looking to re-enter at short term support with a tight stop loss, which if taken to re-re-enter in low $80s.

What do you think? Keeping the same forecast from last week?