S/R Emini Journal

romik · Aug 17, 2006

Quote from volente_00:

Yes we could go higher but I will be there to short it. OE still says we fall from here as the big boys are done moving the market and establishing finals positions til after expiration. I am on my 3 rd short trade already from 1298 area , not much to brag about, a point here, 1.5 there. Still waiting for the break and treading water.

If you are convinced that the market is at its top here, wouldn't it be more beneficial to buy some puts, I am not too certain still how it's done, maybe Gary can clarify, or you might already know this anyway. I am in a positional/swing short here and I am thinking, why don't I simply buy puts, instead of holding futures contracts.

Let's have an example here: I currently hold 7 contracts short at an average of ~1285, so assuming ES retreats to 1265 and I clear 20 points, the profit would be $7,000. At the moment I am down ~$5,000.

Q is: - Assuming my maximum risk would be $10,000 on this trade, could I have limited my exposure by buying put options. Any ideas?

volente_00 · Aug 17, 2006

I don't trade options anymore. 90% of all of them written expire worthless.

volente_00 · Aug 17, 2006

Covered half of my short at 1296.75

volente_00 · Aug 17, 2006

Quote from romik:

Q is: - Assuming my maximum risk would be $10,000 on this trade, could I have limited my exposure by buying put options. Any ideas?

Yes but you have to pay for time premium.

stevegee58 · Aug 17, 2006

Quote from volente_00:

I don't trade options anymore. 90% of all of them written expire worthless.

That's why you should only sell them and not buy them.

volente_00 · Aug 17, 2006

I agree 100%.
But selling has the disadvantage of unlimited loss if you are wrong.

romik · Aug 17, 2006

Quote from volente_00:

I agree 100%.
But selling has the disadvantage of unlimited loss if you are wrong.

I thought option contracts are fixed premium based, are they not?

volente_00 · Aug 17, 2006

If you sell and are wrong you can get a nice hit.

Ex, When S&P was at 1262 a few days ago, if you were bearish and sold 1 spy 126 call naked for 1, Now those calls are getting 3.80. if expiration was today you either have to close the position, which means buying the the calls back for 3.8 when you sold them for 1, or it means having the position called away from you which would put you short 100 shares of spy from 126 even though spy is trading at 129.7.

Now say you were bearish back then and bought 1 spy 126 put for 1. That put is now worthless buy you only lost $100 on it. In the above call scenario, you would have lost $280.

Buy1Sell2 · Aug 17, 2006

Quote from volente_00:

I agree 100%.
But selling has the disadvantage of unlimited loss if you are wrong.

agreed vol, but so do short futures contracts. In my plan, I only sell options.

4re · Aug 17, 2006

Quote from romik:

If you are convinced that the market is at its top here, wouldn't it be more beneficial to buy some puts, I am not too certain still how it's done, maybe Gary can clarify, or you might already know this anyway. I am in a positional/swing short here and I am thinking, why don't I simply buy puts, instead of holding futures contracts.

Let's have an example here: I currently hold 7 contracts short at an average of ~1285, so assuming ES retreats to 1265 and I clear 20 points, the profit would be $7,000. At the moment I am down ~$5,000.

Q is: - Assuming my maximum risk would be $10,000 on this trade, could I have limited my exposure by buying put options. Any ideas?

Yes, you could have. For about 1,000 you could have bought some calls that would have helped you. Like I was telling you yesterday my option trade that I enetered on monday. The call side had already doubled by yesterday afternoon. I sold all my calls and left the puts where they are. Today I am going to enter a new play on the q's that will give me 2 levels of puts since i still have my other ones going for free. This is how a pyramid into a short position without costing me anymore money.