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Let's Trade Options

  • #1
  • First Post: May 12, 2013 12:48am May 12, 2013 12:48am
Any options traders here? Want to talk about trading options? Not sure if this thread will go anywhere. If I find even one cool trader in FF who wants to share some good options trading ideas, then I'll be happy.

I am not a very sophisticated options trader - been trading options m/l full time for only the last year or so. I am basically a beginner, but I make money consistently. So, being a greenhorn, I am not out to be anybody's guru. And I'm not looking for one, either. I like learning by doing.

I don't want to spend much time discussing options in general, like, what is an option? why trade options? etc - but I'll get those topics out of the way in this first post. There was another thread about options trading on FF awhile back and that trader laid out some good thoughts for beginners - worth a look if that is you:

http://www.forexfactory.com/showthread.php?t=103256

Also, if you are relatively new to options trading I highly recommend you get on the CBOE website and make use of the free education and trading tools that are there:

http://www.cboe.com/

Some good books to start with:

http://ecx.images-amazon.com/images/...SH20_OU01_.jpg

http://ecx.images-amazon.com/images/...iL._SX225_.jpg

So, wait, dude, this is a forex site, why are you talking about options?

Well, of course you can trade options on anything - stocks, FX, metals, indices, financials, ags - almost anything that trades on the futures and stock exchanges. And, as our friend PayTheLimit used to say, "It's all one trade."

So that's one thing I like about trading options: there's lots of variety available to you if you need or want it. If you're into intermarket analysis as I am, you can always find good trades. But the main reasons I have become m/l an options trader are these:

1) Risk Control: Generally speaking, and for me anyway, trading options has forced me to live within defined risk parameters for every trade. I never, ever have uncontrolled trades anymore. I still get my ass handed to me, and regularly, no doubt, but it's on my terms.

2) Tax purposes: I trade options from multiple accounts. Brokerage accounts and IRA accounts. I am at daytrading level ($25k) on one account and building towards there on the others. What I really like is the idea of trading from the Roth IRA accounts, where all gains are tax-free. I couldn't trade spot fx from the IRA's, but options trading is allowed. There are other ways to beat the taxman, but this is a simple one I have found. So my focus now is on building those Roth accounts.

OK, so enough generalities by way of introduction. If you are doing some options trading, I'd like to hear about what you are looking at.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2
  • May 12, 2013 1:23am May 12, 2013 1:23am
So, some recent trades that I have closed or opened. Mostly I trade the monthlies and expiry is coming up next Friday so I have been closing trades that had that date.

Good Trades:

Closed 5/18 $63 YCS long calls when I saw U/J spike on Friday. YCS a decent way to short the yen, have done this same trade several times this year. Probably left some on the table there as yen will prolly keep sliding next week. But it was about a 120% roi so np.

Closed 5/18 $11 EWJ long calls. Good profit. EWJ a bullish Nikkei trade. (Approximately.)

Closed 5/18 $78 XLE puts (back in April when XLE dipped to $74.) I like trading options on XLE and the other SPDR ETF's. I also trade options on oil via USO.

Dumb Trades:

Played a straddle on TMF. 5/18 73 put/call. It did exactly what I thought it would do, went up to $77+ a week after I bought it and I sold the call there thinking that was a top and that I would make money on both ends. And it did slide, so I sold the put at around $71 and I made good money on the straddle. Bad trade though because there was puny volume on TMF and that broke one of my rules: don't trade overpriced options with poor volume. And then, I sold too soon - TMF was as low as $66.41 on Friday.

June 22 $40 TSLA puts. Tried to play a mean reversion put on a volatile move up for TSLA. The reversion did occur and I tried to close at like 40% profit but just missed, then passed on chances to bail at breakeven, 25% down. Pretty quickly was down 75% as TSLA has been one of the hottest stocks of the Spring. Worst trade this year, I will sell finally coming month on any kind of pullback for prolly a total loss of premium - TSLA will prolly go to the moon as much as its being hyped.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #3
  • May 12, 2013 1:33am May 12, 2013 1:33am
New Trades:

I watch the high %gainers and %losers, the high volumes of options traded, etc. I actively seek out mean reversion plays. One I saw late last week was LINE. Here's a 2-yr chart:
Attached Image (click to enlarge)
Click to Enlarge Name: 2013-05-11_LINE.png Size: 88 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4
  • May 12, 2013 1:41am May 12, 2013 1:41am
So LINE looked to me like a good mean reversion candidate. I did some dd and read that the dip in the stock likely was the result of a hatchet piece by a journalist at Barron's, not the first time either. Is that the truth? Who knows? But it smells of manipulation. Which is a common smell in the markets. Which is also the smell of money. Anyway, I ended up buying Jun 22 $35 calls. 1 day return was 12%. Stock was up to $35.10 AH on Friday, I am looking for at least $36...

I like these mean reversion gambles but they are risky and you have to do good dd to see what you can see as to what is behind the big moves.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5
  • Edited 11:12am May 12, 2013 6:59am | Edited 11:12am
Nice tread Fool! Will follow.....
I am not an option trader but always wanted to get involved.....
That Line trade looks good, all last year it is ranging, now it is at the bottom of the range if it hit the top even the middle of the range you are in
  • #6
  • May 12, 2013 7:14am May 12, 2013 7:14am
Quoting The Fool
So LINE looked to me like a good mean reversion candidate. I did some dd and read that the dip in the stock likely was the result of a hatchet piece by a journalist at Barron's, not the first time either. Is that the truth? Who knows? But it smells of manipulation. Which is a common smell in the markets. Which is also the smell of money. Anyway, I ended up buying Jun 22 $35 calls. 1 day return was 12%. Stock was up to $35.10 AH on Friday, I am looking for at least $36... I like these mean reversion gambles but they are risky and you have to...
like this thread 'fool' strategies you employ are buying options, have you ever sold them. Its what most institunionals do. Make sure you understand margin requirements. still good thread
  • #7
  • May 12, 2013 10:02am May 12, 2013 10:02am
Quoting Cecil Gee
{quote} like this thread 'fool' strategies you employ are buying options, have you ever sold them. Its what most institunionals do. Make sure you understand margin requirements. still good thread
Hi Cecil, yes I know there's a world of options strategies to choose from & as I've said, I'm not very sophisticated. I do understand margin requirements & one reason I have avoided margined strategies is because I am trying to build up some small accounts quickly (I am limited in the IRA accounts how much principal I can contribute annually) and I don't want to limit the work that can be done with limited equity in those accounts. Also, in the small accounts, I can not day-trade options (daytrading options here in the US is defined as making more than 3 round-turn options trades in any 5 running market days) so I do not want to employ strategies that involve multiple options purchase/sales.

As I get larger and better educated I'm sure I will do more options selling & I'm interested in those strategies involving credit spreads, writing covered calls, etc.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8
  • May 12, 2013 12:41pm May 12, 2013 12:41pm
Quoting The Fool
{quote} Hi Cecil, yes I know there's a world of options strategies to choose from & as I've said, I'm not very sophisticated. I do understand margin requirements & one reason I have avoided margined strategies is because I am trying to build up some small accounts quickly (I am limited in the IRA accounts how much principal I can contribute annually) and I don't want to limit the work that can be done with limited equity in those accounts. Also, in the small accounts, I can not day-trade options (daytrading options here in the US is defined as making...
Hey F.

I totally umderstand your reasons and to be honest i too try and limit myself to just buying options now as its much easier and i can control my risk and trades to an acceptable level. To this try exploring the weekly options they potentionally have super leverage capabilities where the risk of small capital can increase dramitcally providing you trade the right components as in stock/etf's.
  • #9
  • May 12, 2013 3:26pm May 12, 2013 3:26pm
Yeah, as it happens, I'm sitting here ploughing through McMillan's tome right now.
I have no clue what I'm talking about.
  • #10
  • May 12, 2013 7:40pm May 12, 2013 7:40pm
I have July 20 UNG $21 puts. ETF UNG tracks the near month NG futures. Bought in Late March when UNG was a little over $22. Showing a small profit now. Should I hang in for more? Attached is the 1-yr UNG chart. Nat Gas will slide if there is a warmer than normal Spring. Main reason I bought - thought we would see a warm Spring. We have had a warm Spring. I was hoping for a dip to <$16 like last June. The politicized issue of LNG exports complicates things. UNG been on a slide from $23.50 last 2 weeks. Decisions, decisions.
Attached Image (click to enlarge)
Click to Enlarge Name: 2013-05-12_UNG.png Size: 37 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11
  • May 12, 2013 8:16pm May 12, 2013 8:16pm
Lior says keep those UNG puts on.

http://seekingalpha.com/article/1428...n?source=yahoo
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12
  • May 12, 2013 8:49pm May 12, 2013 8:49pm
Quoting The Fool
I have July 20 UNG $21 puts. ETF UNG tracks the near month NG futures. Bought in Late March when UNG was a little over $22. Showing a small profit now. Should I hang in for more? Attached is the 1-yr UNG chart. Nat Gas will slide if there is a warmer than normal Spring. Main reason I bought - thought we would see a warm Spring. We have had a warm Spring. I was hoping for a dip to <$16 like last June. The politicized issue of LNG exports complicates things. UNG been on a slide from $23.50 last 2 weeks. Decisions, decisions. {image}
Options on natural gas eh. You do realise they call natural gas the widowmaker? To be fair, NG used to be a lot more volatile, but still, it's a very difficult commodity to predict. I suppose you could sell a front month put at maybe 18 to turn it into a diagonalized bear spread. Bring a bit of time premium in to offset your own. But you would of course be giving up some downside profitability in the event of a crash in NG...but how likely is that, I wonder.
I have no clue what I'm talking about.
  • #13
  • May 12, 2013 10:00pm May 12, 2013 10:00pm
Quoting Boy Wonder
{quote} Options on natural gas eh. You do realise they call natural gas the widowmaker?
Inserted Video
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14
  • May 13, 2013 1:32am May 13, 2013 1:32am
Quoting The Fool
I have July 20 UNG $21 puts. ETF UNG tracks the near month NG futures. Bought in Late March when UNG was a little over $22. Showing a small profit now. Should I hang in for more? Attached is the 1-yr UNG chart. Nat Gas will slide if there is a warmer than normal Spring. Main reason I bought - thought we would see a warm Spring. We have had a warm Spring. I was hoping for a dip to <$16 like last June. The politicized issue of LNG exports complicates things. UNG been on a slide from $23.50 last 2 weeks. Decisions, decisions. {image}
looking at the chart your right the 50 and 200 day moving average which is sitting at 20.47 or so on the daily which suggests choppiness for a while which in turn will eat away your time value left, subsequently lowering your profit. I like boy wonders selling a DOTM put option to bring in premium FRONT month as theres little time value remaining or aternatively roll your existing option out further perhaps into september. Just a suggestion. Good luck.
  • #15
  • May 13, 2013 1:41am May 13, 2013 1:41am
Quoting Cecil Gee
{quote} looking at the chart your right the 50 and 200 day moving average which is sitting at 20.47 or so on the daily which suggests choppiness for a while which in turn will eat away your time value left, subsequently lowering your profit. I like boy wonders selling a DOTM put option to bring in premium FRONT month as theres little time value remaining or aternatively roll your existing option out further perhaps into september. Just a suggestion. Good luck.
thanks to you and to BW. I will be watching that one in the coming week. I expect a volatile move lower, which typically means she will jump up....we'll see.

Anybody got any current options trades they'd like to share?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #16
  • May 13, 2013 1:51am May 13, 2013 1:51am
Quoting The Fool
{quote} thanks to you and to BW. I will be watching that one in the coming week. I expect a volatile move lower, which typically means she will jump up....we'll see. Anybody got any current options trades they'd like to share?
Hopefully in a couple of days time if not sooner, I trade GDX, GLD, very volatile, weekly
  • #17
  • May 13, 2013 2:25am May 13, 2013 2:25am
Quoting Cecil Gee
{quote} Hopefully in a couple of days time if not sooner, I trade GDX, GLD, very volatile, weekly
Yes, I have been watching GLD. Looking at those weeklies & might long some puts there Monday. Made a really nice trade in DUST outright earlier this year - bought around $26 and sold it at $60 - right b4 the big April gold takedown. My luck. But I ain't complaining.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #18
  • May 13, 2013 2:34am May 13, 2013 2:34am
Quoting The Fool
{quote} Yes, I have been watching GLD. Looking at those weeklies & might long some puts there Monday. Made a really nice trade in DUST outright earlier this year - bought around $26 and sold it at $60 - right b4 the big April gold takedown. My luck. But I ain't complaining.
Also look at FCX, C , I used have a big list of volatile movers with high liquidity plus tight spreads and dollar wide strike pricing but now just 5/6 stocks/etf's, its enough
  • #19
  • May 13, 2013 2:38am May 13, 2013 2:38am
Last I have to clean up for May 18 is EUO $19 calls. Currently sitting at 90% profit. EUO a 2x leveraged short euro etf. Looks like the euro is getting talked down some more this morning. I will be looking to sell out in next day or so.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #20
  • May 13, 2013 2:45am May 13, 2013 2:45am
Quoting Cecil Gee
{quote} Also look at FCX, C , I used have a big list of volatile movers with high liquidity plus tight spreads and dollar wide strike pricing but now just 5/6 stocks/etf's, its enough
yup I watch the high %movers daily, check the Yahoo Finance Options Center site for the high volumes, % change in open interest, etc. The Yahoo site is decent & I can watch it on the employer's computer while I pretend to work. You're right, though, I don't think you need a huge long list of underlying instruments - just find what you like & work it. Good trades this week, mate - gotta catch some z's.
"If The Fool persists in his Folly he will become wise." - William Blake
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