My Options Play

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Quote from Cluseau:

Oil has put in a ST base pattern with this recent churning. I think it will firm up in Dec. Why not buy the 105's for $2.05 ? VLO can easily trade back into $115 with higher crude and refined products pricing. I will point out the recent selling by executives in other oil related stocks i.e. APA.
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well-- I already missed the damn 100c when they were 3.10- had recent GTC order in two accounts to buy 20 @ 2.75-

missed it-- only traded back to 3 offer - I think

and OF COURSE whenever we miss a trade-- by getting too cute--or too "cheap" ---

---- it trades back up to 5.4 ((i.e. +2.40 - Dec 100c)

Ice
:cool:
 
Quote from cnms2:

Probably somebody bets that this runup will be interrupted by a pullback, so I think it was initiated as a bear call spread.
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but they are risking 1.50 to make $1-

why would a big player take that approach? Of course that asssumes just because someone runs a fund or sits at an institutional desk that they actually know what the H they are doing! At least that is the assumption we all make when we see a large trade(s)-- i.e. it is the "smart" money ! But is It?

OR -- is it --- THIS time?

ICe
:cool:
 
Quote from iceman1:
but they are risking 1.50 to make $1-

why would a big player take that approach? Of course that assumes just because someone runs a fund or sits at an institutional desk that they actually know what the H they are doing! At least that is the assumption we all make when we see a large trade(s)-- i.e. it is the "smart" money ! But is It?

OR -- is it --- THIS time?

ICe
:cool:
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I think their maximum risk is $1 and maximum reward is $1.5 (the credit). All this is just an assumption, but their trading plan might consider a smaller stop-loss, and they might close their position if profitable sooner than the expiration.

BBY is at one year high IV of about 45%; one year low IV was about 25%. Also, this is a positive theta position, and we are ahead of a one day and a half holiday and a weekend.

So this is a good odds play both directionally and IV wise.
 

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Iceman1 wrote:

bro---

one day -- not too far away--- you are going to take all that risk inherent in selling FIFTEEN naked puts for a mere 25 CENTS--- and you are going to get hammered by the Black Swan.

Mark my words

what is the reward in selling NAKED anything for 25 cents unless your account is 1/2M or more.... and even then why not find better opportunities? How much do you make if all 15 puts expire worthless?

AND your cavalier attitude that it is "free" money guarantees you will get blind-sided for a HUGE loss one day.


bonne chance

Thank you very much for critically reviewing my trades. I really appreciate it. I know that all of us might get reckless sometimes mostly because of recent winning trades. I agree with some parts of your post but not all of them are right. They are not wrong either. They are just not 100% true.
That coming "day" that you were talking in your response has actually happened to me and if it happens again,it won't be new to me. XLNX was at 28 two months ago and I sold PUT and CALL for 27.5 and got 1.5 totally per pair and suddenly XLNX dropped to 22. So I doubled my PUT contracts from 27.5 to 25 and shot it to Jan 2006 and now I am winning on that position again.
You said I am just getting a quarter on my trade and it is not worth risking it. It is not a quarter. It will be 14x25=$350. Not that much but it is 6.8% profit in 3 weeks if they expire. Do you still believe 6.8% is not that much in 3 weeks? It is about 110% a year.If you can do it continuously.
Now you may ask why I only sell options and don't buy anything. The response is so simple. You might lose all your money if buy an option but if you sell, you will get assigned and you will have a chance to sell or buy the shares in the future. Selling options need more margin than buying so you can not go full gas with your account. All things said, we all take risk. When I said it is free money, I meant it seems it is free money and I know that shit happens. I meant it seems risk is low. I have some rules in my trades. I am not that reckless. I know that I should not trade on GOOG as its size is bigger than my account. I just watch it and use it as an eye candy. I also don't trade shit.otc that is 2 cent over the counter !!!
I sold DELL's PUT for 27.5 last month because I was thinking if it keeps going down and drops to 27.5, I would love to buy it at 27.5.
XLNX is a strong company with no debt. I would love to have it at 25. Instead of buying it at the current price and having unlimited profit, I limit my profit and risk by selling naked PUT 25.

FYI: I sold 2 more naked call ADI 40 Dec @40
You see I am gradually building my portfolio. I don't jump into a position in one day.
 
Quote from hajimow:

Iceman1 wrote:

bro---

one day -- not too far away--- you are going to take all that risk inherent in selling FIFTEEN naked puts for a mere 25 CENTS--- and you are going to get hammered by the Black Swan.

Mark my words

what is the reward in selling NAKED anything for 25 cents unless your account is 1/2M or more.... and even then why not find better opportunities? How much do you make if all 15 puts expire worthless?

AND your cavalier attitude that it is "free" money guarantees you will get blind-sided for a HUGE loss one day.


bonne chance

Thank you very much for critically reviewing my trades. I really appreciate it. I know that all of us might get reckless sometimes mostly because of recent winning trades. I agree with some parts of your post but not all of them are right. They are not wrong either. They are just not 100% true.
That coming "day" that you were talking in your response has actually happened to me and if it happens again,it won't be new to me. XLNX was at 28 two months ago and I sold PUT and CALL for 27.5 and got 1.5 totally per pair and suddenly XLNX dropped to 22. So I doubled my PUT contracts from 27.5 to 25 and shot it to Jan 2006 and now I am winning on that position again.
You said I am just getting a quarter on my trade and it is not worth risking it. It is not a quarter. It will be 14x25=$350. Not that much but it is 6.8% profit in 3 weeks if they expire. Do you still believe 6.8% is not that much in 3 weeks? It is about 110% a year.If you can do it continuously.
Now you may ask why I only sell options and don't buy anything. The response is so simple. You might lose all your money if buy an option but if you sell, you will get assigned and you will have a chance to sell or buy the shares in the future. Selling options need more margin than buying so you can not go full gas with your account. All things said, we all take risk. When I said it is free money, I meant it seems it is free money and I know that shit happens. I meant it seems risk is low. I have some rules in my trades. I am not that reckless. I know that I should not trade on GOOG as its size is bigger than my account. I just watch it and use it as an eye candy. I also don't trade shit.otc that is 2 cent over the counter !!!
I sold DELL's PUT for 27.5 last month because I was thinking if it keeps going down and drops to 27.5, I would love to buy it at 27.5.
XLNX is a strong company with no debt. I would love to have it at 25. Instead of buying it at the current price and having unlimited profit, I limit my profit and risk by selling naked PUT 25.

FYI: I sold 2 more naked call ADI 40 Dec @40
You see I am gradually building my portfolio. I don't jump into a position in one day.
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You seem to understand that I was being constructive and helpful despite the "tone" in which I seemingly expressed my comments -- in order to avoid you having to sufer such an event.

I (too) have experienced being hammered back in the 90s by selling puts and thinking I was "bullet-proof" ! Sure- one can always take delivery of the underlying if they are liquid enough - but often the road back to profitability is a long one - and ties up capital.

Witness MERQE- a stock that I have sold options on all year!! All year! But luckily - I was not short puts when it gapped down recently -

also- I do agreee with you- and think selling options is great and can indeed make some a nice annualized return-- but one must be mindful EACH DAY- of the potential land mines inherent in so doing - AND that they not sell more than they can swallow !

regards,

Ice
:cool:
 
My trading strategy says:
Sell n naked Call BBY 53.38 Dec @0.6
Sell n naked Put BBY 40 Dec @0.1
Money received: 0.7 - 0.015 commission ~=68 cent or $68 per contract.
Margin needed = 0.2x50-3.38 ~=6.7 per share
Note: 50 is almost the current price.
Margin for one contract =670

Profit 68/670 =10% in 3 weeks.
Is there any risk? of course
Is it less than buying or selling the shares at the market? yes.
FYI: Most probably I will not do this trade because I am super loaded with other stuff.:(
 
Quote from cnms2:

I think their maximum risk is $1 and maximum reward is $1.5 (the credit). All this is just an assumption, but their trading plan might consider a smaller stop-loss, and they might close their position if profitable sooner than the expiration.

BBY is at one year high IV of about 45%; one year low IV was about 25%. Also, this is a positive theta position, and we are ahead of a one day and a half holiday and a weekend.

So this is a good odds play both directionally and IV wise.
More...

good analysis --

I am now short 50c -- will consider selling 47.50c-- also long some January otm puts -

RIght now my concern is that BBY comes out with a great earnings report and guidance- and the stock gaps to a new yearly high. Of course the earnings as I recall is --after-- Dec epxiration.

Another scenario is that BBY trades (i.e. manipulated) as high as 52.50-53 by into 12/16/05 - allowing for a great short if earnings are not outstanding.

At this moment I am looking for BBY to trade higher - even though I am short the front calls (actually the 50 calendar- Jan/Dec)
 
Iceman1 you are an asset to the group. I love to be criticized. Being praised will not make a trader a sophisticated trader. I agree with you that when you lose, the path to get back becomes tough. I sell options on the stocks that I love. Some stocks have very very attractive premiums and their business is fishy. Like the ones that pay 70% dividend. I don't trade those. I don't trade GOOG as I said before. There are too many moo moo crowds on it. I can not tolerate $40 price fluctuation on that because of an analyst's comment. I am also trying to avoid Oil stocks but I might get into them soon. I am mostly concentrating on a couple of stocks that I know them and use their products.
 
Quote from hajimow:

My trading strategy says:
Sell n naked Call BBY 53.38 Dec @0.6
Sell n naked Put BBY 40 Dec @0.1
Money received: 0.7 - 0.015 commission ~=68 cent or $68 per contract.
Margin needed = 0.2x50-3.38 ~=6.7 per share
Note: 50 is almost the current price.
Margin for one contract =670

Profit 68/670 =10% in 3 weeks.
Is there any risk? of course
Is it less than buying or selling the shares at the market? yes.
FYI: Most probably I will not do this trade because I am super loaded with other stuff.:(
More...
Many traders don't sell options for less than $0.50. Bellow this level your expectancy is dramatically lowered by your costs (slippage and commissions).

Do you practice money management to control your risk?
 
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