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This Forum overtrades options
- Thread starter bwolinsky
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Here is a real trade, not a paper one.
SDS is the S&P 500 short.
SDS is 19.63 now.
SDS Diagonal
Sell the Mar 2012 33 calls and
buy the Dec 2011 30 calls for a
.75 credit/contract.
If SDS closes below 25 or above 33 by Dec expiration on Dec 17th you keep the premium of 75.
The margin cost is about $216.
So your return is 75/216 = 34.7% return on margin.
Here is the best part.
Running analysis this trade according to TOS has a 96.42% chance of success.
If SDS price nears 25 I would close it out immediately but thats not likely to happen.
You don't want to be in the trade if price is between 25 and 33.
Just get out, period, for a small gain or small loss.
Your max loss is about 155 if price closed at 30, but if price is above 33, your max gain is unlimited.
WOW.
Check it out.
let me know if my math is wrong.
Hank
SDS is the S&P 500 short.
SDS is 19.63 now.
SDS Diagonal
Sell the Mar 2012 33 calls and
buy the Dec 2011 30 calls for a
.75 credit/contract.
If SDS closes below 25 or above 33 by Dec expiration on Dec 17th you keep the premium of 75.
The margin cost is about $216.
So your return is 75/216 = 34.7% return on margin.
Here is the best part.
Running analysis this trade according to TOS has a 96.42% chance of success.
If SDS price nears 25 I would close it out immediately but thats not likely to happen.
You don't want to be in the trade if price is between 25 and 33.
Just get out, period, for a small gain or small loss.
Your max loss is about 155 if price closed at 30, but if price is above 33, your max gain is unlimited.
WOW.
Check it out.
let me know if my math is wrong.
Hank
Quote from hankster:
Here is a real trade, not a paper one.
SDS is the S&P 500 short.
SDS is 19.63 now.
SDS Diagonal
Sell the Mar 2012 33 calls and
buy the Dec 2011 30 calls for a
.75 credit/contract.
If SDS closes below 25 or above 33 by Dec expiration on Dec 17th you keep the premium of 75.
The margin cost is about $216.
So your return is 75/216 = 34.7% return on margin.
Here is the best part.
Running analysis this trade according to TOS has a 96.42% chance of success.
If SDS price nears 25 I would close it out immediately but thats not likely to happen.
You don't want to be in the trade if price is between 25 and 33.
Just get out, period, for a small gain or small loss.
Your max loss is about 155 if price closed at 30, but if price is above 33, your max gain is unlimited.
WOW.
Check it out.
let me know if my math is wrong.
Hank
Yeah, there's a bunch of things wrong with that, Hank.
The gain is not unlimited, it is capped at $33, SDS will never go to $30 by then so that call is worthless.
All in all it's really a bad trade to post, and I don't even know why the December 17th strike means you keep $0.75. In fact, your gain on the option is capped at $3 since you've sold away your position if it ever goes beyond that, furthermore, I can pretty much tell you that the buy call will lose because SDS is going only one way, to zero, and this is guaranteed mathematically and statistically.
Seriously, what makes you think your gain's unlimited if you have a $33 cap on your profit? And a cap for most of next quarter, too! The premium you'll keep for selling because it's not going to hit, but you're right, you wouldn't want to be in that more than $25 but you're overcomplicating it significantly in that you do not need to buy the call because it is guaranteed to lose. The only way you'll profit is by selling the option premium and only doing that.
You're doing that all wrong and really the only money that'll be made on that trade is the call sale. The call buy will expire worthless in all likelihood, I guess making my point that you are indeed guilty of overtrading, which is typical of the trading strategies I see on this forum.
Yes, A perfect example, thank you for sharing, and even based on the brokers TOS. Oh! Priceless, I even pointed that out in this thread too, Ho ho.
DontmisstheeducationIpaidtwentydollarsmorethanthenhundredthousanditcostme,
I utilized Envestnet asset management, 3rd party asset managers, and I significantly outperformed the market while managing over $5.5 million. My favorite recommendations were for Wentworth, Hauser, and Violich that had an excellent International Stock fund designed for managed MMA's and those worked great once Wall Street stopped panicing.
Incidentally, if you want to know what people like you don't do for a living, I'm exactly what you'll never be. So get lost, and have a little professional courtesy, asshole. You're such a dickhead, and that's putting it lightly.
Huh? You really don't get it, do ya? The above makes very little sense.
For one, can you make your mind up? Is the gain "capped at $33" or "capped at $3"? I am all confused, 'cause you seem to be alternating between the two.
Roflmao... the blind leading the blind-- now that's priceless....
BWego-- it is now more crystal clear than ever u don't have a clue about options....
The chart is not for the trade you wrote about. You talk about a 30 33 spread. This is for a 33 37 spread.
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