Real-world Leverage/Liquidy for Max Profits

W

Wait4proof

I trade stocks and wish to find a way to maximize my profits... So, I'm learning about options.

A long time ago, mid 90's, I sold covered calls to make some spare money. That's all the option's experience I have. But, I have heard all the stories (rumors) about how a person can make amazing profits with options. You know the stories of 600% profit etc. Well, I'm looking for a way to maximize my stock market insights, meaning, there are times I "know" when a stock or the SP500 is going to make a decent movement, and I wish I could magically buy some options to leverage my money into making me 600%.

Unfortunately, I'm not seeing any real-world ways of doing that, which means, either I'm missing something, or these stories out there really are all rumors.

Anyone care to shed some light on the subject?

How about this...
1) Is there a real-world option strategy that would turn my $5,000 into $30,000 as long as I "know" that a movement was going to happen?
2) What would the limitations be for that strategy with regards to it being real-world (e.g. liquidity, commissions, etc.)?

For me, I'm left scraching my head after looking at MSFT option chains. Somebody please, show me the money.

Thanks everyone.

PS... turning $100 into $200 or even into $600... who cares... that's not money.
 
Wow, my topic got a 1-star rating.
Okay fine, this topic is lame, or whatever word you would like to use.

But... I wish someone would actually help me out, instead of just being negative.

I really, really, really need someone to explain a way for me to maximize my profits using options.
There has got to be a way that I am missing.

On one hand, if my intent is to buy a good delta, my $5000 gets much fewer contracts.
On the other hand, if I buy at-the-money, the contracts are cheap, but that's a lot of contracts, and it seems there's just not enough liquidity.
Or, does liquidity even matter? Meaning, I am a trader, I think buy/sell. Should I be thinking exercising the options instead?

Please, I'm asking for insight from those who do this everyday.

If a person "knows" a $25+ stock will make a $1-$2 movement, what option strategy can turn $5k into $20k-$30k+ in the real-world?
Or, in the same scenario, what profit can be made realistically? Can $5k become $12k, $9k, what?

Once again, please someone, anyone?
Thanks
 
If you really knew what was going to happen, it's actually very easy. For example. GOOG closed last week at $474. The weeklys for the next week 490 strikes were probably quite cheap (just guessing maybe $2-$3?). GOOG went to $520, so they would have closed around $3000 each.

There are many thousands of examples findable just about every week - to see this, just find a stock that made a large move that day and review the ups and downs for calls and puts on the option chains.

Of course, it is very risky to trade options, especially short term ones. That is why the reward is so large if you are correct.

Other examples just from this week would have been V and MA for example.

JJacksET4
 
I'll give a more specific example using MSFT.

The AUG 26 calls are ask at $75 right now. With $5K you could buy 67 calls.

For the 67 calls to be worth 30K, they would each have to go to $448 - This would happen at a minimum if MSFT went to $26+4.48 = $30.48 by Aug expiration. If you "knew" MSFT was going to do that, there you go. Then again, if you truly "know" the future, you should be able to make billions fairly quick.

Also, check out the chain on IDCC - the NTM July call options went up from around 380%-1000% depending on the exact strike. Obviously hard to catch a trade like that, but shows it is possible (those are 1 day movements BTW).

JJacksET4
 
Quote from Look4aSine:

PS... turning $100 into $200 or even into $600... who cares... that's not money.
More...

Do the math and I think you will care. Even with the paltry $100 to $200 returns you will be up to your $30,000 target in no time.

I will post a live two day $100.00 trade this Wednesday July 6, 2011 and show you how easy it is to get 100% return by Friday July 8, 2011. Be sure to check back then. :)
 
Quote from Look4aSine:

I trade stocks and wish to find a way to maximize my profits... So, I'm learning about options.

A long time ago, mid 90's, I sold covered calls to make some spare money. That's all the option's experience I have. But, I have heard all the stories (rumors) about how a person can make amazing profits with options. You know the stories of 600% profit etc. Well, I'm looking for a way to maximize my stock market insights, meaning, there are times I "know" when a stock or the SP500 is going to make a decent movement, and I wish I could magically buy some options to leverage my money into making me 600%.

Unfortunately, I'm not seeing any real-world ways of doing that, which means, either I'm missing something, or these stories out there really are all rumors.

Anyone care to shed some light on the subject?

How about this...
1) Is there a real-world option strategy that would turn my $5,000 into $30,000 as long as I "know" that a movement was going to happen?
2) What would the limitations be for that strategy with regards to it being real-world (e.g. liquidity, commissions, etc.)?

For me, I'm left scraching my head after looking at MSFT option chains. Somebody please, show me the money.

Thanks everyone.

PS... turning $100 into $200 or even into $600... who cares... that's not money.
More...


You pretty much sound like a lot here who are hampered by unrealistic expectations. In the real world of real money trading turning $100 into $200 or $600 is a big deal. The real rock stars in the trading business are those who can consistently *compound* their trading capital over time at a 25% to 35% per annum pace.
 
I'm new to options too. But, they give you leverage with a smaller account, somewhat similar to futures. I want to show you what options can do.


The SPY is 133.92

With a $5,000 account that means you could purchase 37 shares.

A 2% movement would be worth approximately $100 ($99).

A 2% movement over a day or two is quite significant. The profits are not tangible though. But, with options you can do a lot more. I trade at NADEX which is kinda like options-on training wheels. They act like futures which is why I like them. I can size to $30 per point. A 2% move would be around 27 points or $810. I'd probably need to put up $240 to $500 risk capital. That would be up to 4x return on the risk. The significant part is that it allows one to profit from smaller movements.

Here's a good example from ThinkOrSwim. I'm placing some "regular option trades" to learn more about them. I bought the 1300 calls a few days ago. I had $412 at risk. The call is now worth $1500 in just a few days for a 3.6x return on capital at risk.

Options have the following benefits:

Provides for meaningful returns on a small/tiny account.
Limits capital at risk
No pattern day trader rule (confirm please?)
Flexibility

Options have the following downsides:

Complexity (many factors contribute to value)
Expires (wasting asset)
Execution costs, higher spreads

Options and futures are invaluable for the small trader.
 
Quote from Look4aSine:

Is there a real-world option strategy that would turn my $5,000 into $30,000 as long as I "know" that a movement was going to happen?
More...

Why does anyone take the time to respond to these types of threads?

Quote from SkepticTrader:

You pretty much sound like a lot here who are hampered by unrealistic expectations. In the real world of real money trading turning $100 into $200 or $600 is a big deal. The real rock stars in the trading business are those who can consistently *compound* their trading capital over time at a 25% to 35% per annum pace.
More...

Thank you.
 
My "who cares... that's not money" comment refers to liquidity.
I should have been more clear about that.
Meaning, the mouse can escape from the cage that traps the elephant.
So to truly "*compound*" your money, your strategy must also work with bigger numbers.
I'll rephrase my comment, "if a strategy only works with small amounts, who cares".
You see, I'm tired of just paying the bills, I want real progress.

JJacksET4, would I really be able to buy 67 calls without endless partial-fills or having to up the bid?
I'm very interested in this exact question all along. I've done the math. 50-60 contracts seem undoable to me.
Then again I've only dealt with the personality of stocks.

And thanks for the replies everyone.
 
Quote from Look4aSine:

Would I really be able to buy 67 calls without endless partial-fills or having to up the bid?
More...

Use a MARKET order. Why bother with a LIMIT order? Don't be sucked in to the myth that you get ripped off on MARKET orders.

Problem solved. :)
 
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