My Options Play

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I suggest to sign up with Yahoo! OptionClub Group and ask questions there.
Quote from thenewguy:

good work, it looks great!

I just bought Hoadley's last night for $57USD.... it is PACKED with features... Now if I only knew what they all meant??

Thanks,

- The New Guy
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Sold 1 naked CALL for GOOG 520 Jan07 @ 40.70


I will cover it back @ around $470 if it goes against me.

This is my 1st option trade, I welcome any comment and criticism.



Peppy
 
Quote from Peppy:

Sold 1 naked CALL for GOOG 520 Jan07 @ 40.70


I will cover it back @ around $470 if it goes against me.

This is my 1st option trade, I welcome any comment and criticism.



Peppy
More...


Nice trade, good vol-short. I'd rather sell atm and avoid selling curvature, but it will do well into a 10-20 point decline.
 
riskarb, there are two posts in here where you recommend selling straddles, the most recent your summary of straddle vs strangle today, are you intending to reply to this post from hajimow? Not disagreeing with your position suggest or siding with selling puts for a nickel, just curious if you could expound on advocating these sells, as the most ideal situation is the stock price being at 32.5 at expiration, which most likely would not happen. What's your exit strategy on the mentioned case 1 below? Thanks, this is my first post after just joining, traded for four years but primarily equity trading with some directional options (exclusive of one another), so your insight is very appreciated.

Quote from hajimow:

Which trade you would take? Look at the following two cases and their possible profits or losses and let me know which one you would pick as your trade. I will put the average of bid and ask as the premium and will ignore commission.

Case 1: Sell Call and PUT TXN 32.5 for Jan.
You will get $1.50 for Call and $1.35 for PUT. Total of $2.85. Margin needed will be 20% x 32.5 x 100=$650 per contract.
We assume that TXN is at 32.5 now.

Case 2: Sell Call 35 and Put 27.5 both for Jan.
You will get $0.575 for Call and $0.175 for Put . Total of $0.75
Margin needed will be (20% x 32.5- 2.5) x 100=$400 per contract.

Some more info. Six month chart of TXN shows low of about 27.2 and max of 34.

Max gain in case one is 285/650 x 100=44% which is almost impossible. If it closes at 34,your profit would be 135/650 x 100=20% and if it closes at 27.2, your loss will be -245/650 x100= -38%

Max gain in case two is 75/400 x100=19% which is quite possible. If it closes at 34, you will still get 19% profit and if it closes at 27.2, your gain would be 45/400= 11%. You will only lose if it goes over 35.75 or below 26.75.

Untrained eyes will hate Case 2 as you are dealing with nickle and dime but $2.85 looks attractive in Case 1. I would definitely go with Case 2. (nickel and dime case)
If one of the days before option expiry date shit happens and stock goes up or down like $10, in both cases you are smoked. In that case, putting money under pillow would be the best choice.
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Quote from Peppy:

Sold 1 naked CALL for GOOG 520 Jan07 @ 40.70


I will cover it back @ around $470 if it goes against me.

This is my 1st option trade, I welcome any comment and criticism.



Peppy
More...
Wow! How much margin or funds does one need to cover that trade in order for it to go through?
 
At optionsXpress: $4,177.
  • Quote from Peppy:
    Sold 1 naked CALL for GOOG 520 Jan07 @ 40.70
    I will cover it back @ around $470 if it goes against me.
    This is my 1st option trade, I welcome any comment and criticism.
    Peppy

    Quote from Rob on Business:
    Wow! How much margin or funds does one need to cover that trade in order for it to go through?
 

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Quote from cnms2:

At optionsXpress: $4,177.
  • Quote from Peppy:
    Sold 1 naked CALL for GOOG 520 Jan07 @ 40.70
    I will cover it back @ around $470 if it goes against me.
    This is my 1st option trade, I welcome any comment and criticism.
    Peppy

    Quote from Rob on Business:
    Wow! How much margin or funds does one need to cover that trade in order for it to go through?
More...


cnms2, do you have the ability to historically backtest a options strategy?
 
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