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Let's Trade Options

  • #2,261
  • Edited 5:13pm Dec 23, 2013 4:27pm | Edited 5:13pm
I am m/l still a novice re: spreading but usually that is what I am looking to do. Much of the time I don't enter spread legs (teehee) all at the same time, however.

For instance, if I thought V was going up I'd just buy a call. But I'd put it out there at least a couple months and well otm. Then I'd watch and if V goes up I can a) sell the call for quick profit if it goes up hard enough or, b) wait a bit and sell calls a little closer in but maybe a little further otm for some credit against the original long call outlay. If V is moving well enough, step (b) may result in an outright credit spread. There's the usual heavy nods to TA to help with entries on this process, but some things are moving up so steadily you might never get a TA-indicated entry, so just "pay the limit" and ride....

If V were to move down I might repeat the process on the put side. I might end up with a bullish diagonal call spread and a bearish diagonal put spread then, which I will be trying to milk.....selling the weekly puts/calls against the farther out long put/calls. This takes some work but I can usually do a fair job of limiting my losses this way, and when I'm right from the getgo the earnings potential is high....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,262
  • Dec 23, 2013 5:11pm Dec 23, 2013 5:11pm
Quoting The Fool
{quote} Getting some relief here, TLT <$103.80. Have to babysit this thing all week but if TLT will drop and stay down I'll be a genius for saving the call leg of my 12/27 strangle. Still a dumb trade, though....(because if I had waited I could have sold further otm calls for enough credit to push the whole strangle into profit, but that's 20/20 hindsight talking a little...)
they bid it right back up AH to yesterday's close - isn't dat wacky?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,263
  • Dec 23, 2013 5:45pm Dec 23, 2013 5:45pm
Hey " The Fool" great thread you have around here, i was just starting in Vanila options ( Demo not live) and really have a question that keeps bugging me ...

Assume that i have 1000 Euros , with an account leverage 100 , i go to buy Dec EURUSD Call. Lets say the premium price is 950 EUROS. Is the leverage apply to premuim? So i will need only 10 Euros to hold the position ? I'm just interested to understand how it works.

Thanks in Advance
"It's the Margin, Stupid."
  • #2,264
  • Dec 23, 2013 6:12pm Dec 23, 2013 6:12pm
Quoting Vachus
Hey " The Fool" great thread you have around here, i was just starting in Vanila options ( Demo not live) and really have a question that keeps bugging me ... Assume that i have 1000 Euros , with an account leverage 100 , i go to buy Dec EURUSD Call. Lets say the premium price is 950 EUROS. Is the leverage apply to premuim? So i will need only 10 Euros to hold the position ? I'm just interested to understand how it works. Thanks in Advance
Vachus I'm sorry I don't know how to answer your question. The idea of "account leverage" does not apply to what I know about options trading, but I only trade American style options and European options may be different.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,265
  • Dec 23, 2013 6:18pm Dec 23, 2013 6:18pm
Quoting The Fool
{quote} they bid it right back up AH to yesterday's close - isn't dat wacky?
http://www.forexfactory.com/news.php?do=news&id=463694

fat fingers, tapirs, fuckall what's next?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,266
  • Dec 23, 2013 6:22pm Dec 23, 2013 6:22pm
Quoting Vachus
Hey " The Fool" great thread you have around here, i was just starting in Vanila options ( Demo not live) and really have a question that keeps bugging me ... Assume that i have 1000 Euros , with an account leverage 100 , i go to buy Dec EURUSD Call. Lets say the premium price is 950 EUROS. Is the leverage apply to premuim? So i will need only 10 Euros to hold the position ? I'm just interested to understand how it works. Thanks in Advance
considering rough numbers, if you were paying 950 premium for a EURUSD option and it was ATM then 950 would be somewhere like 150,000 notional for a front contract (2 weeks) so that is about 150,000/950 so that in itself is over 100 leverage, so from that I can assume there is at least some moneyness to this. But for sure, there is no way you are controlling 150,000 with ~10EUR
  • #2,267
  • Dec 23, 2013 6:51pm Dec 23, 2013 6:51pm
Quoting JeremyWS
{quote} considering rough numbers, if you were paying 950 premium for a EURUSD option and it was ATM then 950 would be somewhere like 150,000 notional for a front contract (2 weeks) so that is about 150,000/950 so that in itself is over 100 leverage, so from that I can assume there is at least some moneyness to this. But for sure, there is no way you are controlling 150,000 with ~10EUR
So, in practice you don't have leverage in options ? The leverage is assumed in the total value of contracts you are controlling by premuim and will only come into play if you exercise the right as spot. Then you will be holding the position with a marginal leverage. So, in my previous example leverage was actually 1000 not 100 ... correct ?!
"It's the Margin, Stupid."
  • #2,268
  • Dec 23, 2013 7:07pm Dec 23, 2013 7:07pm
Quoting Vachus
{quote} So, in practice you don't have leverage in options ? The leverage is assumed in the total value of contracts you are controlling by premuim and will only come into play if you exercise the right as spot. Then you will be holding the position with a marginal leverage. So, in my previous example leverage was actually 1000 not 100 ... correct ?!

leverage is not applied across the board on an account but is instead implicit in the way American options are priced. I will give an example later...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,269
  • Dec 24, 2013 7:22am Dec 24, 2013 7:22am
Quoting Vachus
{quote} So, in practice you don't have leverage in options ? The leverage is assumed in the total value of contracts you are controlling by premuim and will only come into play if you exercise the right as spot. Then you will be holding the position with a marginal leverage. So, in my previous example leverage was actually 1000 not 100 ... correct ?!
not quite, options are the most levered asset class that is around (if we exclude the >100:1 retail FX world) and when we consider the definition of leverage to be < Notional value of trade / amount YÓU put up (whether its called premium or margin or whatever) >

in the previous example, I'd need to know the notional value and the Implied Volatility to paid (as well as moneyness and strike and maturity) to determine the leverage.
  • #2,270
  • Dec 24, 2013 7:26am Dec 24, 2013 7:26am
Been waiting to bear spread on YELP, looking for $70.....paint drying, might have to move on it this week...
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,271
  • Dec 24, 2013 7:33am Dec 24, 2013 7:33am
Quoting JeremyWS
{quote} not quite, options are the most levered asset class that is around (if we exclude the >100:1 retail FX world) and when we consider the definition of leverage to be < Notional value of trade / amount YÓU put up (whether its called premium or margin or whatever) > in the previous example, I'd need to know the notional value and the Implied Volatility to paid (as well as moneyness and strike and maturity) to determine the leverage.
Jeremy, i think i'm missing too many details - so, i will go back to study again and try to cover as much as possible ...
"It's the Margin, Stupid."
  • #2,272
  • Dec 24, 2013 7:39am Dec 24, 2013 7:39am
Quoting Vachus
{quote} Jeremy, i think i'm missing too many details - so, i will go back to study again and try to cover as much as possible ...
look into how options are priced, time value and intrinsic value, etc - leverage is implicit in the options pricing, so it doesn't have to be applied across the board in your account, as in forex...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,273
  • Edited 2:19pm Dec 24, 2013 7:57am | Edited 2:19pm
Quoting The Fool
{quote} TLT pulling back just under $104 premarket, maybe bonds will do what they should, which of course is sell off in the teeth of a roaring bull market in equities and in the face of continuing good US econ data....and the tapirs, my god the tapirs...
ok, sure, hot green econ data out and long bonds selling off premarket. We couldn't get any rational action on Tapir Day? Spike AH Monday to $104.25 was an "accident"? ........RRrrrright...

TLT finished the day at $102.83, around where it was last week on FOMC day....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,274
  • Dec 24, 2013 2:16pm Dec 24, 2013 2:16pm
lol Yahoo charts ran out of upside, TWTR went near $70 today. I asked Jethro Bodeen to do some cipherin' for me and tell if TWTR gains $10 a week where it will be by Jan opex? He's still workin on it. Would it ever be safe to put on a vertical call spread? My options borker's Jan strikes stop at $90.....
Attached Image (click to enlarge)
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,275
  • Edited Dec 25, 2013 3:06am Dec 24, 2013 2:41pm | Edited Dec 25, 2013 3:06am
Quoting The Fool
lol Yahoo charts ran out of upside, TWTR went near $70 today. I asked Jethro Bodeen to do some cipherin' for me and tell if TWTR gains $10 a week where it will be by Jan opex? He's still workin on it. Would it ever be safe to put on a vertical call spread? My options borker's Jan strikes stop at $90..... {image}
seriously tho this freak has got to gap down and soon, up near 40% in the last week....

....Look at Mar/Jan put spreads....
Attached Image (click to enlarge)
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,276
  • Dec 24, 2013 7:39pm Dec 24, 2013 7:39pm
Some things in the earnings radar for the January cycle:

MU - 1/7, close..............................C - 1/16, open
BBBY - 1/8, (?)..............................INTC - 1/16, close
AXP - 1/13, (?).............................UNH - 1/16, open
MU - 1/13, (?)..............................GE - 1/17, open
BAC - 1/15, 0700...........................SLB - 1/17, open
COF, 1/16, close............................WFC - 1/14. 0800
"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,277
  • Edited Dec 25, 2013 2:25am Dec 24, 2013 9:59pm | Edited Dec 25, 2013 2:25am
Maybe.

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"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,278
  • Edited 2:48am Dec 25, 2013 2:37am | Edited 2:48am
NFLX needs a breather, I need new credit spreads.

buy Feb $290p, sell Jan 24 $310p - $4.00/$4.65, net credit $0.65, or

buy Mar $290p, sell Jan 24 $320p - $6.20/$6.25, net credit $0.05, then sell Feb 20-30 dte puts....
Attached Image (click to enlarge)
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #2,279
  • Dec 25, 2013 2:47am Dec 25, 2013 2:47am
MERRY CHRISTMAS TO YOU ALL ON FOREX FACTORY...GOD BLESS YOU INDEED
  • #2,280
  • Edited 2:55pm Dec 25, 2013 9:56am | Edited 2:55pm
oil co. stocks will move on the oil storage inventory number releases, which come out every Wednesday morning at 1030 - will be worth a shot with weekly options, look at XOM, CVX, BP, etc
"If The Fool persists in his Folly he will become wise." - William Blake
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