...HXL 17.5 puts on 27th December. My rationale was: channeling, rising on faltering volume, a hammer at support then a long red candle....
Meant to say resistance instead of support.
Quote from Cache Landing:
I think that your analysis of your choices is pretty well on track. I don't blame you for getting out of the situation at an 8% loss. I also wouldn't recommend right now getting into any calls because of the obvious resistence that we will see on HXL at the $20 mark. If it blows through that resistence then it would probably find new support there and might not make a bad bullish play.
On another note, instead of getting in originally on a long put play, if you'd have gotten in on a bear call spread, I would've ancouraged you to hold on to your position until it breaks through the $20 resistence. At that point you could buy back the short leg and ride what will likely be a nice bullish wave. Besides that, we might see some short covering if it does break through the $20 mark.
I don't know that I would say that I play mostly credit spreads, because there are certain times when other strategies make sense. As a single strategy though, I do think that there are many advantages that credit verticals have. You mantioned many of them. The thing that I mostly love is what you caught on to, about them being very mobile. That's what I hate about most options books (not that I will ever write a better one), they recommend poor strategies to beginners assuming that people are too dumb to untilize multiple leg strategies.
By the way, you might be interested to keep an eye on PAAS. Might make a good bullish play for you if it can get over that resistance.
It was actually a 55% position loss. (lost $60 on a $110 OTM put). When I quoted 10%, that was the theoretical maximum I'd invest in one position. In reality, most of the calls I've been looking at have been around $3.5, and the most I've spent on one position was $5.5 on an HYSL call today.
And that was without even realising it! I thought I was buying a $3.7 call, only to be told by IB customer support that I'd bought a contract for 150 shares.
It hadn't even occured to me that 33.375 was an unusual strike price!
I've decided to stay away from option books until I really get the mechanics. I imagine they'll be full of academic abstraction and financial models.
Had a look at PAS.
I really like the chart. That's just what I look for; recent 52 week high, nice strong uptrend, pullback, then a role reversal with bullish candlesticks. It's forming some kind of morning star, right?
Only problem is it's already $1 above support, so that's an estimated risk of about $1.20, which falls outside my limits.
I was interested in ten stocks before the market opened today and had to exclude seven because the estimated risk was over a dollar.
Which brings me to another question -
How many open positions do you have? And how much of your equity is on the line at any one time?
I bought five calls yesterday, and three today, bringing my overall tally up to ten, which amounts to 50% of my equity. Decided to wait and see what the results are like before I go on another spending spree.
Is it true that beginners open the market and the professionals close it?
