Question on directional trades

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whenim64

Hey guys, I have been trading for some time now but have just begun to trade options. My last few positions were spreads where I found myself being accurate on direction and yet ended up with a loss.

One was a Natural gas long position. I entered with a ratio spread where I bought two ATM calls and one OTM put. Natural gas ended up moving up as I had anticipated but only showed me a profit for about a day. This week it opened up and I was down on all three options.

I'd love to hear your thoughts on how I can trade options with a directional bias?
 
Another same instance occurred just two days ago with the following position:

bought options on BLUE stock
22.5 Call
25 PUT
when market price was 23.25
expires on July 18th


right now the position is flat on the Call and down on the Put. I don't see why the move from 23.25 to current 25.18 did not add any value to the call. :confused:
 
whenim64 said:
Hey guys, I have been trading for some time now but have just begun to trade options. My last few positions were spreads where I found myself being accurate on direction and yet ended up with a loss.

One was a Natural gas long position. I entered with a ratio spread where I bought two ATM calls and one OTM put. Natural gas ended up moving up as I had anticipated but only showed me a profit for about a day. This week it opened up and I was down on all three options.

I'd love to hear your thoughts on how I can trade options with a directional bias?
More...

Google "Implied Volatility"
 
whenim64 said:
right now the position is flat on the Call and down on the Put. I don't see why the move from 23.25 to current 25.18 did not add any value to the call. :confused:
More...

The theoretical value of the call probably did go up, although vega could have bit you. It also could be a case where your broker is just reporting the bid as the value and you're not seeing the (hidden) increase if it happened.
 
If you want to pick a direction why not a vertical? Buy a call and sell a call further out (or puts). There are all types of combinations that you can match up with your outlook on the stock.
 
Dolemite said:
If you want to pick a direction why not a vertical? Buy a call and sell a call further out (or puts). There are all types of combinations that you can match up with your outlook on the stock.
More...

I was about to say the same thing. Or better yet sell otm on the front and buy further out to squeeze some of that theta especially as slow as things have been.
 
whenim64 said:
Another same instance occurred just two days ago with the following position:

bought options on BLUE stock
22.5 Call
25 PUT
when market price was 23.25
expires on July 18th


right now the position is flat on the Call and down on the Put. I don't see why the move from 23.25 to current 25.18 did not add any value to the call. :confused:
More...

Yikes! You really are green. Does your platform offer a position simulator? If you want to learn options tos is like options for dummies and on their position analysis tool you can change every factor to get a feel for how all inputs work for and against you. If you just want to trade directionally just buy and sell the underlying unless you think that move is happening soon and volatility is gonna pop along with it.

My suggestion would be to master a strategy and find what will work with it versus trying to apply a tackle box full of strategies to your favorite things to trade.
If you like scouring and researching trades more than the actual trading you will love options.
Good luck
 
Dolemite said:
If you want to pick a direction why not a vertical? Buy a call and sell a call further out (or puts). There are all types of combinations that you can match up with your outlook on the stock.
More...

Verticals/debit spreads are useless. The short option isn't worth the premium you receive.

Check it out sometime - compare a debit spread position to a similar long only position and track the performance of both. In terms of risk AND return the long position will be better 90% of the time.



:)
 
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