Option trading for a newbie
- Thread starter Ben74
- Start date
Ben:
Good Journal, and congrats for the wins. I have a question and a suggestion/idea. I will pose the question here, but the idea I prefer to share in a private message. Let me know if I can PM you. As for the question: have you considered doing what you do with OTM butterflies. They cost on commissions, but they are cheap in price. For the same capital you should be able to buy more and make more per win.
Good Journal, and congrats for the wins. I have a question and a suggestion/idea. I will pose the question here, but the idea I prefer to share in a private message. Let me know if I can PM you. As for the question: have you considered doing what you do with OTM butterflies. They cost on commissions, but they are cheap in price. For the same capital you should be able to buy more and make more per win.
Ben, it was very wise of you to take some profits when presented before earnings, because you never know what can happen. I watched FSLR after hours yesterday and first they announced record earnings and the price went to 144, then suddenly they started talking 2009 guidance and poof, below 120!
I saw both of those after hours. Very nice! Yes, FLR was the example I gave from last summer of gaining $4/share after hours, then dropping hard from the open all day.
What I've done when trading options under volatile "emotion-driven" conditions (news or earnings) is have a 1-min chart up at the open and use it to guide an exit with maximum profits in case there's a sudden reversal. I have an example of this posted in my journal with a 1-min chart of the action when I traded AAPL calls in early September: http://www.elitetrader.com/vb/showthread.php?s=&threadid=132626&perpage=6&pagenumber=14
Ben,
I will follow up on the PM. With regard to butterflies, they will protect you from a volatility crush. They involve three options. You sell the middle strike, and buy the two next to it. You can do them with puts or calls, it does not matter. Execute them as two spreads, as you will have a lower commission.
Run some numbers and you will notice that the price of a butterfly is low. Maximum profit is when stock ends right at the middle strike.
Best to you
Alright, I sold FLR calls earlier at $2.75. As for FLS I just sold minutes or so ago at $5.80. My gains on FLR was $970.10, and my gain on FLS was $2,130.10.
My overall gains are now at $23,561.75 and my account is now at $35,561.75. Whoa, I'm sitting here and I almost can't believe the money I've made on these trades. It's one of those heart pounding very fast moment.
Ben
My overall gains are now at $23,561.75 and my account is now at $35,561.75. Whoa, I'm sitting here and I almost can't believe the money I've made on these trades. It's one of those heart pounding very fast moment.
Ben