Quick Please help me on my first options trade

Quote from dac8555:

I agree 100% with richard, but a calendar is not the most simple strategy there is.

I also agree that simply becuse your investment is low, that deosnt mean that it is low risk. A low risk trade has a good risk rewrd ratio...your R/R is lousy with the 45s. you would be better off buying a nice dinner and paper trading.
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I think the definition of r/r (reward to risk) is as follows: max potential reward ($4500 per contract if stock goes to zero)divided by max risk (4500/75=90000%), i.e a very large number. Iow the r/r is superb and is, by your own definition, a low risk trade. The probability of it occuring, of course, is a different thing altogether. I think you are confusing risk with probability. His max risk of $75 is thus quite small.
Best
daddy's boy
 
Quote from chewbacca:

I bought another 2 puts, debating whether to make it and even 5.

Question: XLE doesn't not have to go below 45 in december for me to make money on this right? Lets say in October, XLE breaks below 50. What would the price of these options be.

Also its pretty obvious I'm the only idiot buying these puts, there's just no volume on this contract.
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u are waaay too far out of the money; as some1 pointed out already theta pressure will overshadow any delta gains, even if xle trade below 50 u aint gonna make much if anythin'...this is sort of like a lottery ticket for ya in case the stock take a serious tumble in the next week...otherwise kiss 'goodbuy' to u 75bucks.
 
Quote from daddy'sboy:

I think the definition of r/r (reward to risk) is as follows: max potential reward ($4500 per contract if stock goes to zero)divided by max risk (4500/75=90000%), i.e a very large number. Iow the r/r is superb and is, by your own definition, a low risk trade. The probability of it occurring, of course, is a different thing altogether. I think you are confusing risk with probability. His max risk of $75 is thus quite small.
Best
daddy's boy
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your right DB I think I used the term R/R incorrectly. I actually never base my trade on R/R using your interpretation but on probability of profit. In options trading I just don't like multiple small loses for a chance of one big win. I know other's say well you are making many small win's but one big loss wipes you out. My reply is money management, position management and trading management makes that one big loss unlikely.
 
Quote from RichardRimes:

:D:D I'm sorry but thats the most common newby mistake....your RISK of losing ALL your $75 I would say is MAXIMUM....

My strategy and its only one of many....IF I were to go out to Dec...I'd buy Dec 55's for 2.3 and sell sept 55 for 1.10 creating a calendar with a pretty good R/R and keep selling the 55's OCT & NOV....

my initial cost may be a little higher than yours but I'll have a much higher probability of making money on the trade than your straight put.
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If you are really bearish on XLE,i would not be buying a moderately bearish time spread which will get you long on the way down.

If you feel the need to offset the premium on your Dec puts,sell .5 of the Sep options....

I understand what you are trying to do,but why would you trade a calender if you want to be short.I you are ultimately dead right,you will be wrong in your bet.As the XLE gets hammered you are synthetically long the the SEp/DEC call spread and will probably lose half of your intial debit...
 
Quote from daddy'sboy:

I think the definition of r/r (reward to risk) is as follows: max potential reward ($4500 per contract if stock goes to zero)divided by max risk (4500/75=90000%), i.e a very large number. Iow the r/r is superb and is, by your own definition, a low risk trade. The probability of it occuring, of course, is a different thing altogether. I think you are confusing risk with probability. His max risk of $75 is thus quite small.
Best
daddy's boy
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you are right...i did imply probability. good catch.

i bought some XLE sept 60 puts by the way...didnt do the spread.
 
Quote from RichardRimes:

you could/should have gotten in for 1.20...but hey whats a nickel. I'm only reasonably sure I won't lose money:p did I say we will MAKE money?

edit...if you want I'll follow it in the calendar journal to keep track of it. Remember calendars are NOT short term plays. They take patience.
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I had a limit order in for 1.20 for about 1/2 hour but it didn't get filled, so I changed it to 1.25. Funny, TOS was listing it at 1.00 but I think they might base it on last trades instead of current bid/ask.

Sure, if you want to make the effort to follow it in the journal section I would appreciate it. Thanks.

BTW, I also have a couple of call calendars going in OIH.
 
Quote from taowave:

If you are really bearish on XLE,i would not be buying a moderately bearish time spread which will get you long on the way down.

If you feel the need to offset the premium on your Dec puts,sell .5 of the Sep options....

I understand what you are trying to do,but why would you trade a calender if you want to be short.I you are ultimately dead right,you will be wrong in your bet.As the XLE gets hammered you are synthetically long the the SEp/DEC call spread and will probably lose half of your intial debit...
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I'm only moderately bearish......actually perhaps even neutral. May be OP is very bearish therefor the WOTM put?
 
Quote from RichardRimes:

I'm only moderately bearish......actually perhaps even neutral. May be OP is very bearish therefor the WOTM put?
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Oh,that explains your position!!!!

I was a bit confused as the original poster bought the 77% of spot put.hes clearly VERRRRRY bearish,so a calender wouldnt work too well for him
 
I just sold the XLE Dec 45 puts,
they ain't no way she's goin' to 45 by Dec.............:D j/k.


$1 increments on the options?
hmmm...

So what is it?
This is what I get;
XLE SELECT SECTOR SPDR TR SBI INT-ENERGY

So it's a spider?
 
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