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Let's Trade Options

  • #1,841
  • Nov 26, 2013 1:43pm Nov 26, 2013 1:43pm
Quoting pipple
{quote} so you bought the 22 put and the 28 call for $520 total right?
or $52?
  • #1,842
  • Nov 26, 2013 1:52pm Nov 26, 2013 1:52pm
Been keeping my eye on this all day and ready to make a play on this,,it may not work with the public holiday and lighter volume but the set up is there for me.

long LVS $72 call for 12c.

LVS is trading was at at $71.02 when I made the trade

LVS Nov 2013 72.000 call (LVS131129C00072000)
-OPR
0.12 http://l.yimg.com/a/i/us/fi/03rd/down_r.gif 0.01(7.69%) 19:25
  • #1,843
  • Nov 26, 2013 1:59pm Nov 26, 2013 1:59pm
Quoting The Fool
{quote} I used to that kind of thing alla time when I was scalping fx all day. My cat stepped on the mouse more than once, executing trades that cost me $100's before I could get out....
Serves you right for having a cat . You know one of these would never have done that
Attached Image
I have no clue what I'm talking about.
  • #1,844
  • Nov 26, 2013 1:59pm Nov 26, 2013 1:59pm
Quoting Cecil Gee
Just been researching AAPL, I think it due some kid of move that could be $20 each way of it current price of $519. The IV and historical volatility is fairly low making it options prices quite attractive on the weekly $525 call closed at $1.90 on Friday and the $5.15 put closed at $2.10, if on Monday I could buy the strangle for the pair for around $3.10 then I'm buying them. so i would be long the strangle position. AAPL Nov 2013 525.000 call (AAPL131129C00525000) -OPR 1.90 {image} 0.99(34.26%)...
well I've missed the aapl trade as I was waiting for a cheaper price. Appl is now trading at 535.61.

the call side is just under $10. Had I bought the two for $4 as printed above at the time, we would have doubled our money fore sure, obviously the put side would be near zero. call side still climbing

AAPL Nov 2013 525.000 call (AAPL131129C00525000)
-OPR
9.90 http://l.yimg.com/a/i/us/fi/03rd/up_g.gif 7.70(350.00%) 19:38


Apple Inc. (AAPL)
-NasdaqGS
535.63 http://l.yimg.com/a/i/us/fi/03rd/up_g.gif 11.89(2.27%) 19:54 - Nasdaq Real Time Price
  • #1,845
  • Nov 26, 2013 2:05pm Nov 26, 2013 2:05pm
STO Jan GC 1230P for 18.90.
I don't like being long the shiny yellow stuff especially when many others are but hey, there's a set-up for a long and so ahm a gonna take it until it shows itself as a failure. Which it will probably do shortly.
I have no clue what I'm talking about.
  • #1,846
  • Nov 26, 2013 3:43pm Nov 26, 2013 3:43pm
Quoting Boy Wonder
STO Jan GC 1230P for 18.90. I don't like being long the shiny yellow stuff especially when many others are but hey, there's a set-up for a long and so ahm a gonna take it until it shows itself as a failure. Which it will probably do shortly.
if selling so close, again, why not do a future?
are you considering taking that to exp?? I only ask because you might consider writing deeper and on both sides as a less stressful option.
Just thinking out loud to you here...so not at all trying to tell you what to do....but I have seen people write these close almost intrinsic options over the years, and they almost never make sense unless it is part of a spread, which I am usually against doing.
Unless you have no issue being assigned the short at exp....I would be careful....Gold is in a strange spot man....really nothing to stop it from 1200, meaning historic technicals.
if your account is big enough, or even if it isn't, consider this instead:
sell 2 1140s @ $360 each
sell 2 1315s @ $310 each
total $670 per strangle x2 = $1340 (or x3 = $2010 total premium?
this not only would drive you less crazy, but allow room for error, as there is plenty of room to maneuver these before a nice deterioration starts......think about it.
Actually now that I look at my charts I am gonna try to initiate one of these just to show you how to trade out of it if necessary. haha and maybe make some accidental money right
  • #1,847
  • Nov 26, 2013 3:49pm Nov 26, 2013 3:49pm
im gonna wait till tomorrow to get better spreads.
a 1305/1145 strangle pays around $800 per
soooooo much margin, but not bad $$$
  • #1,848
  • Nov 26, 2013 4:29pm Nov 26, 2013 4:29pm
Quoting pipple
{quote} if selling so close, again, why not do a future? are you considering taking that to exp?? I only ask because you might consider writing deeper and on both sides as a less stressful option. Just thinking out loud to you here...so not at all trying to tell you what to do....but I have seen people write these close almost intrinsic options over the years, and they almost never make sense unless it is part of a spread, which I am usually against doing. Unless you have no issue being assigned the short at exp....I would be careful....Gold is...
I like the idea of that strangle and I was just trying to test drive that spread when TWS started misbehaving, grrr. Sorted the issue now, but the options market closed in the mean time so I'll have a play when they reopen.

As for the "just doing a future". No way dude, I the delta on a future is 1; even an ATM is only 0.5. I've gone a little way out, not much but enough. I would say it's better than 50/50 that we get at least some movement up from here, but I always think that and half of the time I'm wrong I probably will be wrong.
If I think I'm wrong, I'll probably short the underlying rather than close the put. It depends on the price action.

But the strangle...I want to check the margin implications, more than anything.
Do you never sell e.g. iron condors then? Or maybe iron butterflies, etc.? Always naked strangles? I'm thinking I perhaps should experiment more.
I have no clue what I'm talking about.
  • #1,849
  • Nov 26, 2013 5:09pm Nov 26, 2013 5:09pm
Quoting Boy Wonder
{quote} I like the idea of that strangle and I was just trying to test drive that spread when TWS started misbehaving, grrr. Sorted the issue now, but the options market closed in the mean time so I'll have a play when they reopen. As for the "just doing a future". No way dude, I the delta on a future is 1; even an ATM is only 0.5. I've gone a little way out, not much but enough. I would say it's better than 50/50 that we get at least some movement up from here, but I always think that and half of the time I'm wrong I probably will be wrong....
I prefer the naked strangles. As far as the margin goes, usually I use $5-6k as a rule of thumb for the metals, even though it may very well be less than that, you would be doing yourself a favor to not max out just incase you have to adjust. When you put on one side of the strangle, your margin will go down after you put on the other side. So for example, if you were to write a call at 1300, the FCM might charge you around $4500 in margin.....then it might drop to $4000 after you sell the put, because they know the market cant be 2 places at once, and you cover your ass a touch. The closer your strike price is to the futures, the closer your option margin will be to a futures contract. Deeper OTM options will carry far less margin than that 1230 put you just sold.
Usually when I settle into a strangle I will "even out the book" by writing an even # of whatever I was lopsided in, just because it is free money. For example in crude now, I am top heavy with almost 2 calls for each put.....so in another week or so I will do some math and throw on some cheap options just to collect more for the client, since it wont be any extra margin, it will actually drop the margin.
Iron condors I have heard good things about.....I don't know, I just kinda like writing em naked. I like the action I guess.
remember if you write 1 call and 1 put, and you become wrong, only 1 side is wrong, and it only may be temporarily wrong because expiration day will come....so rolling the one side to 2 further strikes (or even 1) is never a bad move, it is safer that way....widen the strangle....buy yourself more time
  • #1,850
  • Nov 26, 2013 5:32pm Nov 26, 2013 5:32pm
Quoting pipple
{quote} I prefer the naked strangles. As far as the margin goes, usually I use $5-6k as a rule of thumb for the metals, even though it may very well be less than that, you would be doing yourself a favor to not max out just incase you have to adjust. When you put on one side of the strangle, your margin will go down after you put on the other side. So for example, if you were to write a call at 1300, the FCM might charge you around $4500 in margin.....then it might drop to $4000 after you sell the put, because they know the market cant be 2 places...
Iron condors, well, some maybe think they're the holy grail...but you're picking up pennies but selling them reduces your margin requirements massively of course because you're covered by the long options.

So may I ask what's your preferred adjustment strategy? I saw you stopped out on a crude call, I think the other day, for a dollar. It made me think, because I tend not to do that, - eg if I was short a put I may sell a call if the trade (short put) starts going against me. More aggressively I might short the underlying. But then it can get kind of complicated. And I may be selling a call on the cheap at the worst time.
I have no clue what I'm talking about.
  • #1,851
  • Nov 26, 2013 6:02pm Nov 26, 2013 6:02pm
Quoting Boy Wonder
{quote} Iron condors, well, some maybe think they're the holy grail...but you're picking up pennies but selling them reduces your margin requirements massively of course because you're covered by the long options. So may I ask what's your preferred adjustment strategy? I saw you stopped out on a crude call, I think the other day, for a dollar. It made me think, because I tend not to do that, - eg if I was short a put I may sell a call if the trade (short put) starts going against me. More aggressively I might short the underlying. But then it can...
that was a futures trade. on some larger accounts when my option premiums are skewed a touch I might be inclined to throw on a future. don't do it all the time. also don't do it for every account....
its a lot of feel....lot of charting and price action.
heres the basis:
short a call of anything for $300-400
short a put of anything for $300-400
market moves, I determine what to do when the call or put is worth about 30% more than what I sold it for....that's when it has my attention. I will usually make a move to roll when (if ever) it goes to about 50% more than what I sold it for.....at which point I adjust, I can write twice as many of the losing side further out, or buy back and wait if I expect a further move, then write again......or.....sell 50% of the starting # of calls at a lower strike, etc etc. there's a lot of options and the strategy has to be adjustable.
the price action will determine for me when and what I do
for example on my current crude trade I wrote an even # of 100 calls and 87.50 puts, then I thought the market would continue to chop with a lower bias, which it pretty much has, so I went and wrote about 65% the # of 100 calls at 99
so if I had 30 calls at 100 I wrote 20 more at 99
still having the 87.50s
delta matters obviously....the puts had more chance to explode in my face
if the market had gone up to 97 or so, I may have rolled to a 101 or a 102.....
a lot is read and react.....chart/math/read and react
be active and nibble away....I don't have to take em to expiration....at this point I can buy everything back at a nice profit, but I am not in love with what I would do from there, so I am just sitting and collecting the premium. I still don't trust it either, and this thing could give me a problem on Friday, so I don't ever get comfortable.
bottom line is expiration day will come and market cant be 2 places at once.
for practice you should throw 2 random strikes on and practice trading out of them....that's how I got good at this....I did that hundreds if not 1000s of times....just to prove to myself I could do it over and over again. its not impossible, very doable. have to think fast sometimes.
  • #1,852
  • Nov 26, 2013 6:05pm Nov 26, 2013 6:05pm
Quoting pipple
{quote} so you bought the 22 put and the 28 call for $520 total right?
Bought the puts for $25 and calls for $27 per contract, contract covers 100 shares so if I say puts for $0.25 it means $25/contract.

HPQ beat and was up $1.50 AH. Disappointed, I was looking for $2.50-$3.00, but since the strangle is for Dec 21 expiry maybe I'll get some follow through in next trading days...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #1,853
  • Nov 26, 2013 6:59pm Nov 26, 2013 6:59pm
Hey pipple, novice to options here...

I've asked Fool and Wonderboy about this before, but it's a head scratcher:
First I know next to nothing about options, so please educate my ignorant question:
Why can't someone just have a buy option, say on gold at $1230, and a sell option on $1230, both for the same premium, and have the expiration be the same exact time on both? Wouldn't the net payout be profit, with the gross profit being more than the losing premium? Sorta like hedging in spot forex, but with a guaranteed stop loss?
Thanks
Too close for pips, switching to points.
  • #1,854
  • Nov 26, 2013 7:04pm Nov 26, 2013 7:04pm
Quoting pipple
{quote} that was a futures trade. on some larger accounts when my option premiums are skewed a touch I might be inclined to throw on a future. don't do it all the time. also don't do it for every account.... its a lot of feel....lot of charting and price action. heres the basis: short a call of anything for $300-400 short a put of anything for $300-400 market moves, I determine what to do when the call or put is worth about 30% more than what I sold it for....that's when it has my attention. I will usually make a move to roll when (if ever) it goes...
First off, thanks for sharing this. It's really interesting as you're the first guy I've met who does what I do (sell futures options) but on a much more professional basis.
I see you add to your winning leg (eg the calls in your example), which is kinda funny cos I thought, that's interesting, but then I realised, just before I read this I did the same thing - I looked at CL, on which I'm long the underlying but short ATM calls (actually 93s - they were higher but I rolled them lower last week because I wanted more protection for my longs), and thought, uh-oh, this looks like it's headed even lower at least short-term and so sold a couple of 94 calls.
It's a great game this, when it works, but when it doesn't, shit, it's awful. I still hate losing - and I'm not sure I'm ever going to be able to change that. That's a big problem for a trader.
Have to say, you've got some big balls having that many options open. You must have some big accounts...or a broker that requires small margins for short options trades. On IB each short CL call is..I dunno, but it's very margin hungry, maybe 4k. But then that's not a bad thing - it protects me to an extent from myself.

As for CL, I think, there is a good chance we see 91 before a rebound to maybe the high 90s. It's just a guess, but as I always say, guessing is all we've got. Well, it's all I've got anyway. Looks like we might get a dip though in the next 24 hours on ES. Gonna try and buy that, if it comes.
I have no clue what I'm talking about.
  • #1,855
  • Nov 26, 2013 9:03pm Nov 26, 2013 9:03pm
Quoting Thepipster
Hey pipple, novice to options here... I've asked Fool and Wonderboy about this before, but it's a head scratcher: First I know next to nothing about options, so please educate my ignorant question: Why can't someone just have a buy option, say on gold at $1230, and a sell option on $1230, both for the same premium, and have the expiration be the same exact time on both? Wouldn't the net payout be profit, with the gross profit being more than the losing premium? Sorta like hedging in spot forex, but with a guaranteed stop loss? Thanks
option values die as expiration comes, so the call you bought today will be worth much less even if the market goes nowhere by expiration day, there will be no time value (theta) left.
without a scenario of specifics I think you would just end up with a futures contract out of one of the options (because it is intrinsic, thus exercised) and a waste of money on the other.
to be sure give me a scenario, are they both calls, both puts, where is the market when expiration happens?
remember also there is a bid/ask.....you cant sell and buy a call at the same strike for the same price without working an order or getting the market to move a touch.
  • #1,856
  • Nov 26, 2013 9:06pm Nov 26, 2013 9:06pm
Quoting Boy Wonder
{quote} First off, thanks for sharing this. It's really interesting as you're the first guy I've met who does what I do (sell futures options) but on a much more professional basis. I see you add to your winning leg (eg the calls in your example), which is kinda funny cos I thought, that's interesting, but then I realised, just before I read this I did the same thing - I looked at CL, on which I'm long the underlying but short ATM calls (actually 93s - they were higher but I rolled them lower last week because I wanted more protection for my longs),...
really not ballsy...you may think so......but I will run from a position if it gets me nervous....there are too many options that will expire worthless for me to play chicken with the market
  • #1,857
  • Nov 26, 2013 10:00pm Nov 26, 2013 10:00pm
just sold some Jan soybeans 1380 calls for $350 each
  • #1,858
  • Nov 26, 2013 11:24pm Nov 26, 2013 11:24pm
Quoting The Fool
{quote} Bought the puts for $25 and calls for $27 per contract, contract covers 100 shares so if I say puts for $0.25 it means $25/contract. HPQ beat and was up $1.50 AH. Disappointed, I was looking for $2.50-$3.00, but since the strangle is for Dec 21 expiry maybe I'll get some follow through in next trading days...
so are you gonna just sell one side when you see where you think it is going?
  • #1,859
  • Nov 26, 2013 11:39pm Nov 26, 2013 11:39pm
Quoting pipple
{quote} so are you gonna just sell one side when you see where you think it is going?
one side will be near worthless, the other worth something. We'll see if AH buying follows thru early Wed. If HPQ can get near or over $27 this week the $28 calls will be worth $0.75 or so. If I saw that Wed I'd prolly take it and then take my chances on a retrace to revive the far otm puts for something.

idk, everything's gettin bought, I could see $28 actually in the cards....but my expectations are low. We'll see, I might decide to bail for a small loss overall if I don't see some action tomorrow...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #1,860
  • Nov 27, 2013 12:13am Nov 27, 2013 12:13am
Quoting The Fool
{quote} To-do for short week of 11/25: 1) sell another put leg of TSLA credit spread, look at 11/29 $105 lt $0.36; 12/06 $95p lt $0.46, 12/13 $90 lt $0.61; watch for moves down Mon-Tue 2) sell SSO puts, another leg of a debit spread with Jan $82 long puts, look at 12/06 $92, lt $0.25; watch for moves down Mon-Tue 3) Look to sell TZA Dec calls on any move up 4) watch USO & other US oil patch stocks, consider XLE 5) consider HPQ for an earnings release play (~23/27 12/21 long strangle @ $0.65 net debit would get >$1.00 if either strike hit in a week.)...
1) missed a great chance Tue morning when I watched TSLA dip to $116, will try again Wed. If he's gonna drop like a brick I'm better off just getting out of the way.
2, 3) re: SSO and TZA: dead wrong on these so far, new index highs almost daily. Tried to be a hero, pick a top and got burned. TZA is $0.36 in the hole, SSO is $1.00 in the hole, might just write off TZA as a total fckup, but could maybe be safe selling Dec 21 $88 SSO puts for $0.35 or better
4-7) nothing new, ZNGA up 10% on the week....
"If The Fool persists in his Folly he will become wise." - William Blake
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