My Options Play
- Thread starter Multioption
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A picture tells me more than numbers, so I prefer it. I wrote a few Visual Basic routines that import data and draw graphs, because they give me more flexibility than any off the shelf package. They are probably as fast as the software you're using to pull your information.
Those graphs were meant to show that the relatively low margin might mislead some traders into not understanding the magnitude of the risk they take when selling naked GOOG Jan 07 520 calls.
I like neither the far out-the-money options, nor the LEAPS, but I'm sure they work fine for many others.
Those graphs were meant to show that the relatively low margin might mislead some traders into not understanding the magnitude of the risk they take when selling naked GOOG Jan 07 520 calls.
I like neither the far out-the-money options, nor the LEAPS, but I'm sure they work fine for many others.
Are you ready for your TXN puts to quadruple in value were they to pre-report a missed quarter? People shouldn't sell dimes and preach the risks of short premium. It's disingenuous at best, blatantly retarded at worst.
One thing that I would definitely do is that I will post my loss if anything goes against me and you would know. My ideal case is TXN to go to 29. If that happens, I owe you a good lunch and I mean it. I am in NH. I can also keep that lunch valid for 6 months. Today was a good day for me. TXN and XLNX were down. I did not trade. My 21 positions are cooking in my slow cooker. I will also post my gain in December. November's gain was 21.5% and that was exceptional. If I get 12% in December, I would be more than happy. I also wish luck to everyone.
My point was that if you preach me not to sell PUT and Call because it is dangerous,you should not do the same with GOOG. The second point that I think I have a hard time to explain is that nickel and dime does not matter, percentage gain matters. If you think that the average gain of 8% a month is bad, well .....I should say it tastes soooooo good.
One thing that I would definitely do is that I will post my loss if anything goes against me and you would know. My ideal case is TXN to go to 29. If that happens, I owe you a good lunch and I mean it. I am in NH. I can also keep that lunch valid for 6 months. Today was a good day for me. TXN and XLNX were down. I did not trade. My 21 positions are cooking in my slow cooker. I will also post my gain in December. November's gain was 21.5% and that was exceptional. If I get 12% in December, I would be more than happy. I also wish luck to everyone.
My point was that if you preach me not to sell PUT and Call because it is dangerous,you should not do the same with GOOG. The second point that I think I have a hard time to explain is that nickel and dime does not matter, percentage gain matters. If you think that the average gain of 8% a month is bad, well .....I should say it tastes soooooo good.
I just did a quick model of GOOG. If it went to 485 tomorrow that call would go to 82.50. A loss of over 4k per contract. I would have to say this is one of the more stupid trades I have ever seen posted on ET in the 3 years I have been posting here.
Of course maybe that is because I think GOOG is going to 600 by the end of 2nd qtr next year but who knows. There are much better ways to short this stock then selling a Jan 2007 520 call. I'm speechless here.
Mav, I don't know what vol-line you're using, but the Jan07 450call is valued at 60 on the sheets at the prevailing 40 vol-line. Yeah, vols would rise on a 75-handle gap in the shares, no doubt. $30 to $82 on a 75 point rise in the shares at 15 delta and small gamma; not in this Universe. As you know, they won't even touch 50d until they go atm. That's quite a vol-rise you're predicting! 
The OP sold the call > $40. It's not a perfect analog to price against the current 450c at 60.00, but within a couple handles of where the 520c would be under your assumptions at static vol. The distro at 520 would price that puppy another 3 points higher at 40-vol, to illustrate. So you figure 5-7 handles added for distro and vol allowance. It's all MOOT as buying Dec calls tomorrow into a 75-gap would be the trade -- let me know when you can precog the lottery numbers as well.
You and cnms should be long all the OI in gamma if you're expecting that kind of rally. I wouldn't sell an 07 call regardless of delta, but he earned pretty well being short vol into this decline of 15 points.
The OP sold the call > $40. It's not a perfect analog to price against the current 450c at 60.00, but within a couple handles of where the 520c would be under your assumptions at static vol. The distro at 520 would price that puppy another 3 points higher at 40-vol, to illustrate. So you figure 5-7 handles added for distro and vol allowance. It's all MOOT as buying Dec calls tomorrow into a 75-gap would be the trade -- let me know when you can precog the lottery numbers as well.
You and cnms should be long all the OI in gamma if you're expecting that kind of rally. I wouldn't sell an 07 call regardless of delta, but he earned pretty well being short vol into this decline of 15 points.
I used a 43 vol line. It's foolish to think the vol would not jump back to those levels if we got a 60 to 70 pt explosion in a week or over a few weeks. You can't use today's vols because they have been crushing the vol the last week. That 82.50 price is very accurate at a 43 vol line. This call is 13 months out! I also have a sharp call skew factored into the modeling which would certainly exist if we got that kind of move. Anyway, bad trade no matter how you look at it. The guy is short 5 deltas for a mountain of risk!
Yeah it earned nicely the last week, but bro, you know better, vol got body slammed this week. This does not sound like a one week trade. Those gains are all on paper as the vol would almost certainly go higher. The gains are meaningless. The only gains he can lock are from deltas and he is short a big whopping 5 of them!
Come to think of it, I should have modeled a 50 vol on those calls. Oh well.
Not my intention to be derogatory. % return, but at what price? Risk-reward shouldn't take a backseat to absolute return.
I agree with you here one million percent !!!!.
I don't think that I ignore risk in my trades. I know that there is no free lunch. Since I am a chicken !!,I prefer to take lower risk and get lower reward but a low reward that has a higher probability. Say a stock is at 32.5. I sell naked PUT for 27.5 and get 15 cents and you sell naked PUT for 32.5 and get $1.5. The chance that I get the whole 15 cents is higher that you end up getting nothing. If the stock goes to 29, your position will lose money but not mine. If it goes to $34, definitely you will get more because you took a higher risk and if it goes to $20, both of us are smoked. So simple.
I agree with you here one million percent !!!!.
I don't think that I ignore risk in my trades. I know that there is no free lunch. Since I am a chicken !!,I prefer to take lower risk and get lower reward but a low reward that has a higher probability. Say a stock is at 32.5. I sell naked PUT for 27.5 and get 15 cents and you sell naked PUT for 32.5 and get $1.5. The chance that I get the whole 15 cents is higher that you end up getting nothing. If the stock goes to 29, your position will lose money but not mine. If it goes to $34, definitely you will get more because you took a higher risk and if it goes to $20, both of us are smoked. So simple.
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