Option trading for a newbie
- Thread starter Ben74
- Start date
You're right, volatility does dry up, guess no one else failed to mention that. I checked WLP volatility before I made the trade.
Implied volatility (IV) on my options were 42, and normal IV is about 30. My resources tell me that if WLP trades to $46.50 tomorrow morning, my options should have doubled. In that case, I need WLP to make a 4 point move or about +8.7% gain. Other sources say that WLP has moved -7.3%, +10.1%, and +8.87% after the past 3 earning reports. Odds of WLP moving 8% in either direction is therefore very likely. I'll take my loss if WLP moves the other direction, but I'd love my gains if WLP moves my direction. Odds are with me with UNH (same sector) increasing last week after a good report. Just what my sources say though. Nothing's concrete, and you may be right that this might be a loser.
Ben
WLP had that chance of +8% and it made a +6.5% move. Well not as high as I thought, but I still made a nice trade on WLP. I bought those 20 WLP Feb. 45 calls at $1.10 and just sold out today at $2.05. My gain on this trade is $1,840.
And with that gain, my total gains are now at $10,183.80. Can't complain, and for those critics, can't say I got lucky. I probably made you money had you bought any kind WLP calls yesterday.
As it stands right now with the PCLN calls at $2.55, my account is now at $22,248.85 and a nice level compared to starting with $12,000 again in December.
Ben
And with that gain, my total gains are now at $10,183.80. Can't complain, and for those critics, can't say I got lucky. I probably made you money had you bought any kind WLP calls yesterday.
As it stands right now with the PCLN calls at $2.55, my account is now at $22,248.85 and a nice level compared to starting with $12,000 again in December.
Ben
The only problem I have with your style of trading is that when it comes to playing earnings you are either right or wrong. You have been right and are making money which is great, but when you are wrong.....and you will be, the loss will be large and most likely 80 to 100% of your investment. This makes risk management almost impossible and without it no one can make a living at trading.
Thanks for the lesson. I guess 5-10% per trade is acceptable.
I have taken losses....I loss about ($780) on RIMM, ($1,730) on DNA calls that I closed just days ago, and ($100) on JPM puts too. Like you said though, I've been using about 20% max per trade I think. I tend to stick to about 10 calls/puts unless the price is too high then I move to about 5 calls per trade. Like the WLP calls, I risked about $2000, or 10% of my account. I only expected to lose max $1000 or so.
I did buy 8 QCOM calls at $2.60 this morning for earnings tonight. Now, QCOM supposedly has a higher IV, so I'm scaling back a bit on this trade. Will let you guys know how QCOM does though.
Using this "Old Saying" I just bought a bunch of Feb 31 Puts on QQQQ. Really nice run up before the news release. Rally is looking exhausted.
Looking for an eventual sell off later today or tomorrow, after the Fed releases the Meeting Minutes this afternoon.