My Options Play

[iceman1]

Quote from thenewguy:

Whether he was opening a long position or closing a short position he still "bought" them. Just as someone sold them. However, it looked like someone hit a MM's ask. I agree, it does seem likely that someone was closing a position, however.

Thanks,

- The New Guy

EDIT: congrats, nice trade!

with all due respect why are you defending what you said when someone tries to offer you constructive response? It was very clear to me that you posted what you did by way of showing someone might be bullish on APA at this level and was THEREFOR speculating by buying 1300 Nov 70c @ .10-.15! In other words OPENING a new position (long)! That was the import of your post. Non?

IF I am wrong and you were just posting what you did post for no discernible or rational purpose or reason- then please disregard my clarification to you earlier - and good trading :eek:

IcE

 

[thenewguy]

Quote from iceman1:

with all due respect why are you defending what you said when someone tries to offer you constructive response? It was very clear to me that you posted what you did by way of showing someone might be bullish on VLO at this level and was THEREFOR speculating by buying 1300 Nov 70c @ .10-.15! In other words OPENING a new position (long)! That was the import of your post. Non?

IF I am wrong and you were just posting what you did post for no discernible or rational purpose or reason- then please disregard my clarification to you earlier - and good trading :eek:

IcE

I think maybe my post came across to you as something it wasn't. I was merely stating the fact that the trade occurred, so someone bought them. I'm trying to read facts as they are in this stage of my learning process, and get input on what they could mean. I was watching an option trade all day with low volume then someone came in and bought a relatively high amount of contracts on it. Just thought I'd point that out and possibly generate a conversation on the meaning of the trade, if any signifigant meaning could be discerned from that one trade, particularly because the OP of this thread has a position in options of the same underlying.

To my uneducated brain, that's a mildly bullish fact anyway you slice it. If it's someone opening a position, or closing a position they are both operating under the assumption that they aren't going to get a better price in the time frame they are operating from.

I appreciate your input, as I do all constructive critism, but I'm confused about VLO. What am I missing about VLO/APA other them being in the same sector? The options were on APA and you are talking about VLO... again, I'm not trying to be defensive on initiate an argument, just trying to continue the learning process.

Thanks,

- The New Guy

EDIT: Disregard my question about VLO, I see that you have corrected the post above.

 

[iceman1]

Quote from thenewguy:

I think maybe my post came across to you as something it wasn't. I was merely stating the fact that the trade occurred, so someone bought them. I'm trying to read facts as they are in this stage of my learning process, and get input on what they could mean. I was watching an option trade all day with low volume then someone came in and bought a relatively high amount of contracts on it. Just thought I'd point that out and possibly generate a conversation on the meaning of the trade, if any signifigant meaning could be discerned from that one trade, particularly because the OP of this thread has a position in options of the same underlying.

To my uneducated brain, that's a mildly bullish fact anyway you slice it. If it's someone opening a position, or closing a position they are both operating under the assumption that they aren't going to get a better price in the time frame they are operating from.

I appreciate your input, as I do all constructive critism, but I'm confused about VLO. What am I missing about VLO/APA other them being in the same sector? The options were on APA and you are talking about VLO... again, I'm not trying to be defensive on initiate an argument, just trying to continue the learning process.

Thanks,

- The New Guy

its not (totally) out of the question for APA to trade to 70 or prehaps 67.50 -- by next Friday-- it only looks like it is based on recent price action. :eek:eek:

But more than likely it was a closing "buy".

Do a model and tell us where would those .10-.15 calls go should APA pop up to 67.50 by say 'wednesday' next week. Then decide if it was a good specualtion from r/r viewpoint.

 

[thenewguy]

Quote from iceman1:

its not (totally) out of the question for APA to trade to 70 or prehaps 67.50 -- by next Friday-- it only looks like it is based on recent price action. :eek:eek:

But more than likely it was a closing "buy".

Do a model and tell us where would those .10-.15 calls go should APA pop up to 67.50 by say 'wednesday' next week. Then decide if it was a good specualtion from r/r viewpoint.

A homework assignment? You're on... I'll be back with some horribly incorrect figures in a bit...

- The New Guy

 

[thenewguy]

Quote from iceman1:

its not (totally) out of the question for APA to trade to 70 or prehaps 67.50 -- by next Friday-- it only looks like it is based on recent price action. :eek:eek:

But more than likely it was a closing "buy".

Do a model and tell us where would those .10-.15 calls go should APA pop up to 67.50 by say 'wednesday' next week. Then decide if it was a good specualtion from r/r viewpoint.

I got .02... what did you get?

Thanks,

- The New Guy

 

[iceman1]

Quote from thenewguy:

I got .02... what did you get?

Thanks,

- The New Guy

so they don't go up a nickle even?

 

[thenewguy]

Quote from iceman1:

so they don't go up a nickle even?

Not according to the CBOE options calculator and my uneducated guesses.... But I suppose you'd have a very tough time selling them for anything that close to expiration...

Anyway, so your point is (I think, anyway) that it's most likely closing a position because nobody in their right mind should buy those options at this time. So considering that, it probably isn't even a little bit bullish.

Thanks,

- The New Guy

 

[cnms2]

Quote from iceman1:

how do you know "this is a backspread that'll make some money "?

What if the stock trades back above 65 ?

That said I think stock will see 62.50

You misunderstood me: I wrote helped by, and it means if it will be helped by. This is what the 2nd graph shows: it will make money at expiration, if the price is bellow ~$60 or above ~$95.

Quote from cnms2:

This is a backspread that'll make some money helped by further price drop, passing time, IV increase (above ~$62) or decrease (bellow ~$62).

Attachment: image1.gif

 

[iceman1]

Quote from thenewguy:

Anyway, so your point is (I think, anyway) that it's most likely closing a position because nobody in their right mind should buy those options at this time. So considering that, it probably isn't even a little bit bullish.

Thanks,

- The New Guy

no - it "could" be bullish.

I have seen .15 calls go to $2 within 5-7 days - and I'm talking post-bubble days -- but if you look at the prior action on the underlying (i.e. APA) it is "more likely' that this hedge fund or large institutional player was closing his calls.

Maybe he only had 650 short... right? maybe he is now long 650 -

my point was - something that I tell myself everyday for the past many years -

don't assume (too much)!

IcE


p.s. you are correct that in buying them (even if only to close ) at a given level--- he/she is essentially making a call that the position will likely not go further in the desired direction - or at least will not move sufficiently more thereafter (their way) to justify the risk and the outlay of capital to support said position. So in that regard it is a directional play - sort of --

 

[thenewguy]

Quote from iceman1:


my point was - something that I tell myself everyday for the past many years -

don't assume (too much)!

IcE

Yes, that is the part I am trying to iron out. To me, trading is two battles (on the most fundamental level). One, the battle with yourself and your emotions. Two, the battle to interpret everything and extrapolate on it the closest to the truth as you can get. The first part of doing that is to understand everything you see. The second part I'm still working on... This is why I came across as being defensive earlier. I need to be very clear (with myself) about what is happening, and terminology is very important when trying to accurately describing a scenario.

Thanks for your thoughts on this scenario, I appreciate them.

Thanks,

- The New Guy