Sharing+Discuss Option Trades/Strategies
- Thread starter Put_Master
- Start date
Exactly,
seems like a simple misunderstanding to me,....
Stock is @ 7.24 right now, $5 call is selling for $3.20 right now.
I bought several lots over the last few days when it was below $7 and the calls were fetching between 3 - 3.10 each.
Not called, That is right,....
I still own the stock, and I keep the 3.20, which means I have $3.90 worth of skin in the game, (7.10 - 3.20)
Then, I'll see what happens going forward. July calls are currently selling for $3.00 too
1 other choice I have if I am not called out, is to sell the Jan 11 2.5 which is currently going for 5.1 right now.
This is a last resort that I would consider, and many other variables would need to be present.
it will really be decided on June 19th.
But just for laughs,....., using the 7.1 original cost basis, before selling against it the math looks like this:
7.1 - 3.2 - 5.1 = +1.2 profit per share.
$1.20 per share profit on $7.10 = 16.9%
and I have all my original capital back, plus profit and just let that position sit as i have all my money and profit out of it.
Now that would be a worst case scenario and is not something I am looking to do unless forced into something like that.
There are other things I can do as well.
Just let me trade my money as I see fit and we will let you do the same thing.
Isn't that what it is all about?
Cheers,
Steve
I still own the stock, and I keep the 3.20, which means I have $3.90 worth of skin in the game, (7.10 - 3.20)
Then, I'll see what happens going forward. July calls are currently selling for $3.00 too
1 other choice I have if I am not called out, is to sell the Jan 11 2.5 which is currently going for 5.1 right now.
This is a last resort that I would consider, and many other variables would need to be present.
it will really be decided on June 19th.
But just for laughs,....., using the 7.1 original cost basis, before selling against it the math looks like this:
7.1 - 3.2 - 5.1 = +1.2 profit per share.
$1.20 per share profit on $7.10 = 16.9%
and I have all my original capital back, plus profit and just let that position sit as i have all my money and profit out of it.
Now that would be a worst case scenario and is not something I am looking to do unless forced into something like that.
There are other things I can do as well.
Just let me trade my money as I see fit and we will let you do the same thing.
Isn't that what it is all about?
Cheers,
Steve
Steve, the only issue I'd like to mention is, as a general rule, I don't bother annualizing trades of one month or less. Particulalrly less.
The reason being, they always calculate out to high % returns.
Unless you continue to bounce from one 3 week trade to another, with no time gaps in between, those calculations are somewhat meaningless.... other than to use for a "comparative unit of standard".
For short term trades, I focus more on dollars risked and dollars earned, vs % return earned.
Someone might do a 1 - 2 week trade, and earn a super high annualized return, but earn very few actual dollars.
After all, when we go to the store, we spend dollars, Not % return.
I only evaluate % returns on trades longer than 1 month.
Putz Master
The reason being, they always calculate out to high % returns.
Unless you continue to bounce from one 3 week trade to another, with no time gaps in between, those calculations are somewhat meaningless.... other than to use for a "comparative unit of standard".
For short term trades, I focus more on dollars risked and dollars earned, vs % return earned.
Someone might do a 1 - 2 week trade, and earn a super high annualized return, but earn very few actual dollars.
After all, when we go to the store, we spend dollars, Not % return.
I only evaluate % returns on trades longer than 1 month.
Putz Master
PM,
I agree.
when I do end of month analysis, I final out everything, (closed positions only), by seeing what I collected, divided by what amount was at risk during the individual trades.
Maybe sort of medieval, but I try to keep things simple.
I am not day trading by any means.
Right now, my average monthly returns are right around 12-18% on the portfolio at risk amounts.
I'm not going for huge gains, just the slow and steady, with lots of risk management when needed.
I found this forum and it has lots of great info on it, that is why I signed up for it.
As per Attica's request, I have read lots of posts, and gone through lots of threads that are full of great info.
I agree.
when I do end of month analysis, I final out everything, (closed positions only), by seeing what I collected, divided by what amount was at risk during the individual trades.
Maybe sort of medieval, but I try to keep things simple.
I am not day trading by any means.
Right now, my average monthly returns are right around 12-18% on the portfolio at risk amounts.
I'm not going for huge gains, just the slow and steady, with lots of risk management when needed.
I found this forum and it has lots of great info on it, that is why I signed up for it.
As per Attica's request, I have read lots of posts, and gone through lots of threads that are full of great info.
Perhaps more inexplicable than SVNT, is TOL. PM, let's calculate your return on a spread with expiry in Sept. (you couldn't find the stikes you desired in July???) .30 credit on a $1,500 spread for 106 days ($7 comm) is 5.4% per month on a housing stock thru the summer (to each his own). BTW, Black Scholes using a "100 day hv" (80) comes back with a theoretical probability of profit of 11%. You've lowered your standards.
<<< Right now, my average monthly returns are right around 12-18% on the portfolio at risk amounts. >>>
That's my point.
You are unlikely to end the year with a 150 - 200% return.
That's why its somewhat meaningless to annualize S-T trades.
I can see doing that as a "comparative unit of standard", if you simply want to compare various trades to one aother.
But they are NOT a reflection of how the year is going or how it will end up..... unless there are never any time gaps between your 15 - 18% return trades. Nor any losses.
Putz Master
That's my point.
You are unlikely to end the year with a 150 - 200% return.
That's why its somewhat meaningless to annualize S-T trades.
I can see doing that as a "comparative unit of standard", if you simply want to compare various trades to one aother.
But they are NOT a reflection of how the year is going or how it will end up..... unless there are never any time gaps between your 15 - 18% return trades. Nor any losses.
Putz Master
You do not subtract 3.20 from your 7.10 share-cost basis to arrive at the position cost-basis. The misunderstanding is yours to bear.
7.10 - 3.20 = 3.90... but that is meaningless.
Your cost basis on shares is 7.10. You sold a call at 3.20. The call grants the buyer the right to own the shares at $5.00. Therefore, you lose 2.10 on stock if assigned, and gain 3.20 on the option. 3.20 less 2.10 = 1.10, which is all you keep if assigned.
WTF does "5.1" come from?
I realize how you erroneously arrived at a 3.90 cost-basis, but it is absurd. You have no business writing options.
Quote from travelboysteve:
Well, I always let them run their course and don't care as much about the Gamma, etc. I'm not looking at trading the options as much as collecting "rent"
I use price, charting, and fundamentals etc. to acquire and then calculate.
Has worked great for me for quite some time.
called return gives me $5 on $3.90 a share, or 1.1 / 3.9 = 28.2% cash
Uncalled is 3.2 / 7.1 = 45% cash
You are right Atticus.
I have no business receiving $8.20 for a stock I paid $7.10 for.
I will immediately buy back the options, sell my stock, close out my accounts, beat my wife, kick the dog, and then go back pan handling in the streets,....