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Let's Trade Options

  • #121
  • May 18, 2013 8:47am May 18, 2013 8:47am
Quoting The Fool
MSFT I'm looking at, prolly buy a straddle there for one of the IRA's next week.
Dd you check what the options did on friday, $34.50???
  • #122
  • May 18, 2013 8:50am May 18, 2013 8:50am
Quoting Cecil Gee
{quote} theres a divergence in ewz option pricing,
yes I see that. That's a good r:r - if the S&P, Nasdaq, Nikkei, etc are going up forever then emerging markets should come along.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #123
  • May 18, 2013 8:52am May 18, 2013 8:52am
Quoting Cecil Gee
{quote} Dd you check what the options did on friday, $34.50???
Yep, somebody made some money - you?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #124
  • May 18, 2013 8:58am May 18, 2013 8:58am
Quoting The Fool
{quote} Yep, somebody made some money - you?

Nope to much to track but that $34.50 option opened at 4c went straight down to 1c and back up to a high of 29c

so $1 per contract went $29 per contract in the 6.5 hr trading day. I have proof of that pricing if anyone one wants to see it


see and believe

MSFT May 2013 34.500 call (MSFT130518C00034500)

-OPR

0.28 http://l.yimg.com/os/mit/media/m/bas...nt-1093278.png 0.24(600.00%) May 17





Prev Close:0.04Open:0.04Bid:0.35Ask:0.38Strike:34.50Expire Date:17-May-13Day's Range:0.01 - 0.29Contract Range:N/A - N/AVolume:9,471Open Interest:4,023
  • #125
  • May 18, 2013 9:26am May 18, 2013 9:26am
Quoting The Fool
{quote} Hey dude, I hope you'll stop in to talk about options trading if you're still into that. Is that Union City, TN? (been there)

will do, that would actually be Union City, NJ

i recently recommended a friend of mine to buy strangles in USO->> united states oil fund which tracks the /CL crude oil future

trade was initially buying the Jul13 $36 call and the Jul13 $32 put
USO options vol is being tracked by ticker OVX, which is the crude oil version of VIX index for SnP 500 futures (symbol /ES, VIX)
the whole idea is that you start off delta neutral, i.e.; do not have any directional basis, what you have though is your option gamma, vega and theta

this is how your position would work out:

-gamma, suppose you bot the strangle when underlying is trading @ $34, and then it moves up a whole dollar, your option gamma would now INCREASE your positive deltas, acquired on the way up, SYNTHETICALLY making your position net long lets say 100 shares, depending on your gamma(which can be accessed through some specialized trading platforms), you look at your chart and say "hey i have strong resistance @ 35, i will make myself delta neutral by selling all of the positive deltas acquired by the call, which at the time of purchase may have been only a 20 delta call but has now become a 40 delta call, because of the proximity of the underlying having rallied a whole dollar or almost %3, which is a huge move in every way you see. Now your PnL has increased from the call appreciating in price but you have lost some money on the put having been depreciated in value, since the underlying has moved away from it. By selling 100 shares @ the Market, suppose market dumps a dollar right after you sold 100 shares to become neutral, now you put has appreciated and your call depreciated, but guess what, synthetically hedged your call PnL by selling 100 shares @35 and we are now @ 34, you have now made 100 bux should you decide to become delta neutral again and buying 100 shares @ 34

-vega, your position has also a long vega risk associated to it, since you PURCHASED options, if you want to be short vega (OVX->crude volatility index futures on the chart) you sell options. In our example you are long lets say 20 points of vega and the market rallies, VIX and OVX usually goes opposite to the underlying, therefore volatility usually decreases if we go up because more people are net long the underlying and do not care about option protection in case of a sharp drop, e.g.; people dump vega(volatility, VIX, OVX) and versus that they buy futures outright. Since you are long vega, most likely your put+call value might drop from that on the way up, but you stand to make a lot of money on they way down, since people are now panicking and are purchasing puts and straddles to protect the value of their core position, which is LONG underlying futures. In a case of drop not only your strangles would appreciate from the put, but also both the put AND call will add to their value based on their vega risk signature.

-theta This is option depreciation vs time. Simply put the shorter the time to expiry, the quicker your options lose value (erode), you are said to be eroding if you purchased options and COLLECTING premium if you sold options (naked, covered). Your best bet is for the underlying to move fast in order for your options to appreciate MORE than what they are eroding,

As you can see option trading is more multi faceted in terms of PnL than simple directional trading since you have reduced your risk significantly more.

Hope it made sense
Thank you Malcolm, Belekas, Jim, raczekfx and Ryanmcd !
  • #126
  • May 18, 2013 9:41am May 18, 2013 9:41am
Quoting djambazov84
As you can see option trading is more multi faceted in terms of PnL than simple directional trading since you have reduced your risk significantly more. Hope it made sense
Awesome, yes that makes sense. I am down on the learning curve but always climbing. It's all good, I have time. Most of the options accounts I have are small, so margin-averse and daytrade limited. Looking forward to being able to trade more intensively, though.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #127
  • May 18, 2013 9:55am May 18, 2013 9:55am
got a few on the watchlist for next week

namely CHKP: looks actionable and cheap for some put spreads around 51.50

YOKU looks good if it can get down to the 17.73 or a little lower to the 16.80

DAL looks good at the $17 level

all potentially + or nuetral vega vertical spread candidates

we will see
  • #128
  • May 18, 2013 9:58am May 18, 2013 9:58am
Quoting djambazov84
{quote} will do, that would actually be Union City, NJ i recently recommended a friend of mine to buy strangles in USO->> united states oil fund which tracks the /CL crude oil future trade was initially buying the Jul13 $36 call and the Jul13 $32 put USO options vol is being tracked by ticker OVX, which is the crude oil version of VIX index for SnP 500 futures (symbol /ES, VIX) the whole idea is that you start off delta neutral, i.e.; do not have any directional basis, what you have though is your option gamma, vega and theta this is how your position...
great post

this is why you really need to learn how to read your risk graphs and greeks properly.... good analytics will tell you everything about what your trade could do before you ever enter it

I use thinkorswim to do my options research... their platform is second to none

execute via IB(dirt cheap commissions and excellent fills)
  • #129
  • May 18, 2013 10:11am May 18, 2013 10:11am
Quoting Wulfgar
{quote} great post this is why you really need to learn how to read your risk graphs and greeks properly.... good analytics will tell you everything about what your trade could do before you ever enter it I use thinkorswim to do my options research... their platform is second to none execute via IB(dirt cheap commissions and excellent fills)

IB + thinkorswim = cant go wrong there, I`m using the exact same setup
Thank you Malcolm, Belekas, Jim, raczekfx and Ryanmcd !
  • #130
  • May 18, 2013 10:12am May 18, 2013 10:12am
djambozov8a

good post and join in that option trading is much much more than my simple directional plays, I too had to learn the greeks and most of the strategies before i focused on one of only two plays i use but the journey is a lengthy one so appologies to anyone who may be misguided by my simplicity approach but this is where i have arrived and it works as do most of the other strategies ONLY if you can understand the greeks/black-scholes model etc
  • #131
  • May 18, 2013 11:36am May 18, 2013 11:36am
Quoting The Fool
{quote} hey buddy how you been?
Surviving just and starting to wonder why I bother, yep that good!! Just started trading again, very part time, doing okay so far.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #132
  • May 18, 2013 11:18pm May 18, 2013 11:18pm
Quoting Cecil Gee
{quote} I'm working on them at the moment as FOMC minutes next week can make them move big sometimes. Gold has the potential to fall beloww $1000 with this momentum
Did some extensive work on GLD, Gold etc. I see GLD going deep deep, as monthlies are in play and broken down.
GLD has to get above 137.30 and stay above, if it can't then this can go well below $100 taking gold beyond the 1000$ level towards $707with a few bounces along the way. Sounds far fetched but benanke has 8 months left in office will he continue to pump money in sending equities higher and higher more $ strength. pull up a monthly chart in GLD and you will see
  • #133
  • Edited 11:45am May 19, 2013 10:52am | Edited 11:45am
Quoting Cecil Gee
{quote} Did some extensive work on GLD, Gold etc. I see GLD going deep deep, as monthlies are in play and broken down.
I am watching this level for a bounce, as I said above. Yours def a plausible scenario. So the EuroZone is not going to implode, Abe is on board, the ECB has cut rate & is Talking Turkey. The problem with QE has been that it was just uncoordinated and not enough. So, let's get nuts. Massive easing across the board. Even Mrs. Watanabe will get out of JGB's and into the Nikkei. The Great Rotation (yes I am dizzy but I like it.) Dow to 30,000 same for Nikkei. The US is the new Saudi Arabia (I heard). Dollar strength epic - I will be buying villas in Provence, a bulletproof one on Corsica. We need to kick the US housing starts back above 2MM, so the long bond rates will be sunk. And Gold to $300's. It's a glorious time. Just don't try to stand in front of the lava flow.

Somewhere in the back of my mind I just have a nagging suspicion that they can't pull it off. I can fix that with good drugs, though.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #134
  • May 20, 2013 8:51am May 20, 2013 8:51am
Quoting Cecil Gee
Just looking at a possible trade for Mondays market opening, i'm looking to buy walmart WMT june 21 expiration the $72.50 puts. they closed today for 17c. While it may not reach this level by then i'll be hoping to harvest some gamma to the downside, i have 5 weeks on this and to me the option prices on wmt seem distorted. below is the closing price of options and the underly wmt closed at 77.87 WMT Jun 2013 72.500 put (WMT130622P00072500) -OPR 0.17 {image} 0.03(21.43%) 3:53PM EDT Wal-Mart Stores Inc. (WMT) -NYSE 77.87 {image} 0.63(0.80%) 4:00PM...
I'm gonna wait on the above trade because i need to see a close below 77.25 for me to be comfortable in buying puts, current price is 77.76 with a low of 77.46.
  • #135
  • May 20, 2013 9:01am May 20, 2013 9:01am
Quoting Cecil Gee
{quote} T.F. just took a look a USO oil fund ETF and looks like it has room to go higher which take oil higher too so be careful
Taken a trade

bought USO $35 strike for 15c, i'm a little pissed as i missed a much lower price of 7c earlier below are the real time prices of the option and underly price

United States Oil (USO)

-NYSEArca

34.53 http://l.yimg.com/a/i/us/fi/03rd/up_g.gif 0.32(0.94%) 11:54AM EDT - Nasdaq Real Time Price



USO May 2013 35.000 call (USO130524C00035000)

-OPR

0.15 http://l.yimg.com/a/i/us/fi/03rd/up_g.gif 0.03(25.00%) 11:32AM EDT





Prev Close:0.12Open:0.10Bid:0.14Ask:0.15Strike:35.00Expire Date:23-May-13Day's Range:0.07 - 0.16Contract Range:N/A - N/AVolume:115Open Interest:807
  • #136
  • May 20, 2013 9:04am May 20, 2013 9:04am
The above USO trade is for friday 23 may expiration
  • #137
  • May 20, 2013 10:14am May 20, 2013 10:14am
Quoting Cecil Gee
{quote} Taken a trade bought USO $35 strike for 15c
Watching that - I will be shorting oil if USD strength persists.

Entered some IAU long calls (Jul $13) at market open, anticipating a bounce off support at April lows, but thinking straddle too if gold keeps on sliding down. If todays gold strength holds awhile I won't be sad, holding off on the put leg.

Spent the weekend off/on reading/watching options related videos. Rome not built in a day. I might be trying my hand at some weeklies this week, though.

Good luck this week CG and all options traders.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #138
  • May 20, 2013 10:26am May 20, 2013 10:26am
Quoting The Fool
{quote} Watching that - I will be shorting oil if USD strength persists. Entered a some IAU long calls at market open, anticipating a bounce off support at April lows, but thinking straddle too if gold keeps on sliding down. If todays gold strength holds awhile I won't be sad, holding off on the put leg. Spent the weekend off/on reading/watching options related videos. Rome not built in a day. I might be trying my hand at some weeklies this week, though. Good luck this week CG and all options traders.
Thanks T.F. good luck with yours too, i'm am anticipating USD strength probably after the FOMC minutes on wednesday, so a bounce in commodities especailly in gold is what we are witnessing now. As in previous post if GLD moves above 137.30 and holds till the close of this month then some more upmove will continue until the monthly bear traders wake up again around $142 level.
  • #139
  • May 20, 2013 10:29am May 20, 2013 10:29am
Quoting Cecil Gee
The above USO trade is for friday 23 may expiration

make sure u watch closely SnP futures /ES symbol, lookslike CL (crude) futures-> are tracking equities to the T
Thank you Malcolm, Belekas, Jim, raczekfx and Ryanmcd !
  • #140
  • May 20, 2013 10:35am May 20, 2013 10:35am
Quoting djambazov84
{quote} make sure u watch closely SnP futures /ES symbol, lookslike CL (crude) futures-> are tracking equities to the T

Thx have them on my terminal as with $ index, if I can double my option by wednesday i be happy. I may even roll it out further if i see some trouble or change it to a spread which i rarely do with penny priced options
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