New options trader needs help.

S

sebastionay

I have traded equities for more than three years and forex for around 9 months.

I understand that with options you can write an uncovered put so that you have the right to short a stock without owning it.

I expect another wave downwards with the banks in the next few weeks, Would writing uncovered put options give me a better opportunity to capitalize on the way down?

If not what would the best option or other derivative be?

Just to clarify I want to know what the best tool would be to profit from falling bank shares.

Regards Seb.
 
Quote from sebastionay:

I have traded equities for more than three years and forex for around 9 months.

I understand that with options you can write an uncovered put so that you have the right to short a stock without owning it.

I expect another wave downwards with the banks in the next few weeks, Would writing uncovered put options give me a better opportunity to capitalize on the way down?

If not what would the best option or other derivative be?

Just to clarify I want to know what the best tool would be to profit from falling bank shares.

Regards Seb.
More...


You have it all wrong. I mean 100%

1) Write = sell

2) When you sell a put it does not matter whether it is covered or uncovered. But covered means you are short 100 shares of stock for each put sold.

3) When you write a put, you have NO rights. Only option owners have rights.

4) If you want the right to short stock, you must BUY puts.

5) Anyone can sell stock short without owning it, so that statement is out of context

6) If you anticipate a wave down, you do NOT want to write puts. You may want to buy them or adopt a different bearish strategy.

7) Repeat you do not want to write 9sell) puts

8) To profit from falling stocks (bank or otherwise) sell the shares short or buy puts. An alternative is to buy put spreads, but profits are limited when you make that choice.

9) Please be careful. Someone has you totally confused.

Mark,
http://blog.mdwoptions.com
 
Quote from sebastionay:
I expect another wave downwards with the banks in the next few weeks, Would writing uncovered put options give me a better opportunity to capitalize on the way down?
More...

When writing (Selling) Puts you accept the obligation to buy at the strike price.
That is the opposite of what you may want in a falling market.

If you expect a drop in the market, carry negitive Deltas.
Hold (Buy) Puts, or create synthetic puts.
Then you will also have to be right on the time frame.
Consider spread trading.

Carl
 
Quote from dagnyt:

You have it all wrong. I mean 100%

1) Write = sell

2) When you sell a put it does not matter whether it is covered or uncovered. But covered means you are short 100 shares of stock for each put sold.

3) When you write a put, you have NO rights. Only option owners have rights.

4) If you want the right to short stock, you must BUY puts.

5) Anyone can sell stock short without owning it, so that statement is out of context

6) If you anticipate a wave down, you do NOT want to write puts. You may want to buy them or adopt a different bearish strategy.

7) Repeat you do not want to write 9sell) puts

8) To profit from falling stocks (bank or otherwise) sell the shares short or buy puts. An alternative is to buy put spreads, but profits are limited when you make that choice.

9) Please be careful. Someone has you totally confused.

Mark,
http://blog.mdwoptions.com
More...

Thanks for clearing it up for me I just don't know enough about options yet.

So I would want to buy puts instead.

What kind of leverage can I get with options?

From what I have read so far it seems that around 26% of options traders are profitable and I expect that a lot of the profitable ones have bearish inclinations.

In forex around 97% of the traders loose money according to a friend of mine that's a FX broker.

So how can I apply the most leverage into these bear market moves with options?

What brokerage will offer me the best deal for a deposit of around $1000 (UK resident)

Are there any good journals from people on this forum about shorting stock with options?

I'm aware that I can use spread betting for this type of thing but I would assume that options aren't as 'bucketshop' in their nature would that be right?
 
Quote from psytrade:

Were you sniffing gasoline for 3 years while trading options too?
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Don't know who that's aimed at, I haven't traded options yet hence the title 'new options trader'
 
I wonder how many so called options traders were caught with their pants around their ankles writing puts on GS the last two weeks.....

"Honey I had a good week, all the puts I wrote are about to expire worthless, I'm taking friday off and not looking at the screen until monday".... :D

I have a very good suggestion: stick to long puts and calls until you understand how this works.

Selling any option can work very well, but can also get you into tons and tons of trouble, and I think yesterday was a stellar example of that...

The issue with selling naked is that you're capping your upside and your downside is virtually unlimited - I bet there are many who took 5-6-1000% losses last week...and found a VERY QUICK WAY OUT OF THE BUSINESS..... :eek:

Now there are multiple strategies that call for selling options along with being long multiple strikes or stock, and those are nowhere near as risky, but typically require more capital and more experience....

Read a few books and stay away from writing/selling.....hope we at least prevent you from blowing up because of that...

:D
 
Quote from sebastionay:

Thanks for clearing it up for me I just don't know enough about options yet.

So I would want to buy puts instead.

What kind of leverage can I get with options?

From what I have read so far it seems that around 26% of options traders are profitable and I expect that a lot of the profitable ones have bearish inclinations.

In forex around 97% of the traders loose money according to a friend of mine that's a FX broker.

So how can I apply the most leverage into these bear market moves with options?

What brokerage will offer me the best deal for a deposit of around $1000 (UK resident)

Are there any good journals from people on this forum about shorting stock with options?

I'm aware that I can use spread betting for this type of thing but I would assume that options aren't as 'bucketshop' in their nature would that be right?
More...


I don't know which UK brokerage has the best deal - but selecting a broker is very important - you want to minimize costs and optimize fair routing and fills.

I would urge you to get a book on options ASAP because the subject is quite complex. At least get a basic understanding about the risks involved.

For example, with long option trades, you could be right and still lose money due to a number of reasons.

Spreads and/or combos as used in with options refers to buying and/or selling different strikes and/or expirations. Many of us use simple vertical spreads - such as a bear put spread. You may also use calls to create bearish positions.
 
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