@optionsinvestor I know you have had a great run in this journal but I am having a difficult time understanding your logic on your trades. Could you explain the basis of your strategy in a short 1 or 2 sentences thanks.
My trades
- Thread starter optionsinvestor
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I think those FIVE Jun 8 $105.00 calls and TSLA Jun 8 $330.00 calls are too close to expiration. The biggest time decay occurs in the last 2 weeks of any options. In the NVDA Jun 15 2018 $250.00 call trade I placed, I got into the trade 05/24/18 at $6.96. 06/05/18 was worth $16.00. That was 10 days remaining and the option premium went down the very next day. Botched this trade and ended up losing monies when I exited 05/29/18 prematurely. The nearer to the expiration date, the faster the time decay! You have shared with us your trades and I just wanted to share my insight in the hopes it would help your trading. When you get to about 10 days or even less to expiration, the option premiums lose value pretty quickly. I would suggest allowing a couple of weeks extra to allow you to exit with decent profits.
Sample size too small. Like venture investing, you need a large enough population to test out the extension of your trading methodology.
From my observation your method should work in "home run" situation.
Thanks, I am looking at it differently now that you mentioned it that way. I was initially looking to grab very short term options priced under 1.50, preferrably under $1 and trying to catch a quick momentum run in the stock to ride the wave higher. Just looking back at the TSLA trade, I'm going to adjust the expiration from a couple days to about 1 week. Looks like I missed the momentum run by just 1 day. TSLA popped up to $333 this morning. I was looking at the weekly 350 calls, and they closed out at 0.75 on Friday and traded as high as 2.42 this morning. That's the kind of move I wanted to test out.
In 2 sentences: buy high and sell higher. Adapt to the market.
That's what I've been using over and over. I'm not looking for some big reversals, instead I look for break outs from a base. As for adapting to the market, if my research says the stock should fall, but it continues to rally, then I'll use that momentum to buy high and sell higher.
I think a good example came from my NFLX trades earlier in the year. I bought NFLX calls on the market's rally in January leading up to NFLX's earning report. Just ahead of the report, I thought NFLX should reverse a little and give some back. I was wrong, NFLX was already at overbought levels, but it gaped higher right after the earning report. Instead of watching NFLX run, I bought NFLX options at an even higher price when the shares were at $255. I know most would think I was insane buying it that high, but I believe in irrational momentum rallies. NFLX continued from $255 for another 4 days up to a high of $285. On my account this series of NFLX trades looked like this: +2600 on the initial NFLX rally from 1/5-1/16. Took a loss of -760 buying a NFLX put spread ahead of earnings. Finally, bought NFLX 260 calls from 1/24-1/29 for +2700.
I know, most traders don't dare buy at record levels to try and sell higher, but I'm one of those that do it.
What deltas do you usually buy? And do you buy when the breakout happens or do you buy in anticipation of the breakout?
Yea, I wanted to feel how the options played out on the day of expiration. I've added the DOCU and THO jun 15 calls to feel how these options play out in 1 week given their recent events (earning reports). I want to see how these momentum runs affect the OTM options, because I usually by atm or itm options and haven't really tested these low deltas in a long time.
It's mainly ATM/OTM options. If I go out of the money options, I try to stay within 2-3% of the underlying stock price. I usually wait for a breakout in high volume if I don't know the stock's pattern well. Otherwise, I'll jump ahead from time to time if I know the underlying stock well. Ex. my current positions in NVDA and SQ were technically bought before what I would consider a clear break out. For SQ, I bought those SQ 55 calls when the shares were between $57.5-$58, just under its $58.40 high. I considered NVDA's break out point at $260, but I bought the options when the shares were still in the $255 range. Again, I only bought early because I'm used to their patterns, and can understand when they are setting up for some kind of breakout move.
For every other stock that I don't track, I prefer to wait for the break out along with volume confirmation. I have a list of about 50-80 stocks that I track and know their movements personally. I don't stray too far from this list, although I'll add and delete from it. My advice is to stay with liquid stocks. They move more fluidly and can't be pushed around by 1-2 large investors.
Awesome thread. Also what options date to expiration di you like? Are you more into the weeklies or...?
OI, In the last few months, everytime the SP500 has 5 to 7 bullish candles up and then an inverted hammer (changing of the guard), it ends up pulling back a little before the next run up.
I don't know what to think about oil. Any thoughts OI?
I don't know what to think about oil. Any thoughts OI?