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Let's Trade Options

  • #5,141
  • Edited 8:21am Oct 3, 2014 8:08am | Edited 8:21am
Quoting The Fool
And also, there's gotta be something wrong with dough's calc's: on a $15 Oct/Nov call calendar, I can only lose $0.04, but stand to gain up to $0.98 if the stock stays between $10.xx and $26.xx. Really?
That is confusing... look at what I got yesterday for EWZ (I archive screenshots of most of my trades)

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Really don't understand this. Since I have never traded calendars, what could be max profit? I get that front month lose a lot of value and back month remains the same or get some value if direction is right.... If front month options expire worthless, but back month than rally to the sky, because EWZ was $49.50 at front month expiry, BUT than rallies like crazy????
Hope is dangerous in this game.
  • #5,142
  • Oct 3, 2014 8:20am Oct 3, 2014 8:20am
Quoting The Fool
MY NFP predictions: a healthy beat: 238,000...and we see 5 handle popped in the unemployment rate - 5.9%. US indices rally, fiber dips back below $1.26, commodities keep falling. random emoticon:
248 k....

Thinking about a day trade - long puts on VXX or UVXY... nearest OTM $0.5 or $1 strike bellow price.


Unemployment Rate 5.9% ??? hm....

ISM Non-Manufacturing PMI in 30 minutes.... the rest of the PMI this week was bad.
Hope is dangerous in this game.
  • #5,143
  • Oct 3, 2014 8:30am Oct 3, 2014 8:30am
My first ever options are looking positive
I know it's small amounts but I don't want to risk too much on options just yet.
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Enter Signature
  • #5,144
  • Oct 3, 2014 8:52am Oct 3, 2014 8:52am
Quoting StrayDog
Thinking about a day trade - long puts on VXX or UVXY... nearest OTM $0.5 or $1 strike bellow price.

I got into VXX 30.5 Oct3 puts for $0.33, choose a ATM strike after all. And all is going well... Small risk, just 100 bucks since expiry is today.

BUT.... I did a terrible mistake, wanted to put a closing order in advance at $0.66... Instead of that I closed position at $0.46.
Yeah, I made some money... Feeling so tired this all week...

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hahahaha - current max price is $0.66 - when VXX dipped bellow $30... I am such a dumbass.
Hope is dangerous in this game.
  • #5,145
  • Oct 3, 2014 9:35am Oct 3, 2014 9:35am
Quoting StrayDog
{quote} That is confusing... look at what I got yesterday for EWZ (I archive screenshots of most of my trades) {image} Really don't understand this. Since I have never traded calendars, what could be max profit? I get that front month lose a lot of value and back month remains the same or get some value if direction is right.... If front month options expire worthless, but back month than rally to the sky, because EWZ was $49.50 at front month expiry, BUT than rallies like crazy????
Well, it's a difficult thing to model because there are lots of things going on, so no offense to dough.com. Just keep an eye on the i.v.'s and P/L next week. WE are looking for a front month strike i.v. crash - but it remains to be seen how much that will be and how fast. With the call strikes way up at $50, the ideal scenario will be EWZ runs up, but not that far. Right, if/when the front call gets > $49.50, it's time to close it or roll it out. I wanted to do Nov/Jan so I would have plenty of time to roll and make money on subsequent short legs if I need to. If EWZ goes down or flatlines, I might need some time to sell far otm call legs for cheap credit - but that's not so bad since my original debit is low, everywhere < $0.20. If I have some blocks with very low debits (<$0.10) I'd maybe just take that loss and move on.

So, it's hard to model a dynamic scenario that unfolds over time with a fickle human making these decisions - but the fickle human should be as always leaving no stone unturned in his quest to know what he needs to do to protect his precious, precious equity and add as much to it as possible.

Good luck to all us tiny fickle humans.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,146
  • Oct 3, 2014 9:48am Oct 3, 2014 9:48am
Quoting The Fool
Good luck to all us tiny fickle humans.
As always TF, thanks for explanations. Really appreciate it.

I watched that video about EWZ from tastytrade today (the one that njr posted link)... I am mad sometimes at myself for not learning fast enough, for making mistakes... for selling premium when IVR is not that high and then even directionally right, position is the same or underwater because IV gone up (like LNKD when it dipped) and lots of other stuff... BUT then Tom Sosnoff said in that video - because they were trading EWZ and PBR which are in 91% correlation - "we are still learning"... After all this years, he is still learning. And in every job if you want to be at the top - you have to learn all the time.
Hope is dangerous in this game.
  • #5,147
  • Oct 3, 2014 10:20am Oct 3, 2014 10:20am
Quoting StrayDog
{quote} And in every job if you want to be at the top - you have to learn all the time.
Sounds like a plan. You're welcome SDog. I watch those tt vids now and then and the main thing I takeaway is just how dumb I am. But that's ok, I know I am progressing. Next week will be fun with the EWZ trades...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,148
  • Oct 3, 2014 11:12am Oct 3, 2014 11:12am
Quoting Cecil Gee
{quote} On EWZ once I see $39 - $40 I may write puts, wit the high IV it may pay very well
In PBR also. Thinking about it, since it is a cheap stock with 91% correlation with EWZ.
But you will not see that levels on EWZ today. Let us know if you sold any puts... Expecting a vol crush on Monday whatever happens on elections.
Hope is dangerous in this game.
  • #5,149
  • Oct 3, 2014 12:31pm Oct 3, 2014 12:31pm
Quoting The Fool
MY NFP predictions: a healthy beat: 238,000...and we see 5 handle popped in the unemployment rate - 5.9%. US indices rally, fiber dips back below $1.26, commodities keep falling. random emoticon:
Hey TF - You are the man!!!! Nice prediction What's your forecast next week?

I've got a pending order to close my ES mini 1830 PUT at a circa 49% profit of max premium. However, one part of me is thinking that I should leave it open a little longer if ES mini / SPX continues to rise next week and there is a vol crush with the VIX. There aren't too many large data items next week so it could be a relatively quite week and I could try to squeeze out a bit more profit.....Got me thinking
  • #5,150
  • Oct 3, 2014 12:40pm Oct 3, 2014 12:40pm
Quoting darrenware
My first ever options are looking positive I know it's small amounts but I don't want to risk too much on options just yet. {image}
Hi Darrenware - Well done for placing your first option trade Don't worry, the first is always scary. It's certainly the right thing to do with keeping your size small for the moment. Get your confidence and experience up and feel free to ask any questions on this forum. We've all got different experience levels and trading styles so it's always good to share/discuss trade ideas/ask questions.....
  • #5,151
  • Edited 5:30pm Oct 3, 2014 1:36pm | Edited 5:30pm
Quoting njr
{quote} Hey TF - You are the man!!!! Nice prediction What's your forecast next week? I've got a pending order to close my ES mini 1830 PUT at a circa 49% profit of max premium. However, one part of me is thinking that I should leave it open a little longer if ES mini / SPX continues to rise next week and there is a vol crush with the VIX. There aren't too many large data items next week so it could be a relatively quite week and I could try to squeeze out a bit more profit.....Got me thinking
I would have to bet there's a window for US equities to move up in the next couple weeks. I see UST's (TLT) getting bought, too - but what else is new? But pretty soon the darker chorus will be heard - good is bad - the Fed must surely act, they are behind the curve, they are Bilderbergers bent on destruction of the USA and Janet Yellen's punch is spiked with ebola! And the ever stronger USD is going to start to weigh on US equities. Hell, idk though, njr, they may grind up til Xmas.

And, as usual, just a headline away from a pullback. So, in short, we'll see....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,152
  • Oct 3, 2014 1:37pm Oct 3, 2014 1:37pm
Quoting njr
{quote} Hey TF - You are the man!!!! Nice prediction What's your forecast next week? I've got a pending order to close my ES mini 1830 PUT at a circa 49% profit of max premium. However, one part of me is thinking that I should leave it open a little longer if ES mini / SPX continues to rise next week and there is a vol crush with the VIX. There aren't too many large data items next week so it could be a relatively quite week and I could try to squeeze out a bit more profit.....Got me thinking
Ok - so i didn't have the "cojones" to keep the position open to next week and my order was just filled and I have taken the profit. It was the 1830 put strike which was due to expire on 31 Oct so I figured that I'll take the 49% profit now rather than waiting another 4 weeks. Plus I would expect at least a few more down days in October so I'll look to reload on the next drop!

Have a good weekend all....
  • #5,153
  • Oct 3, 2014 1:39pm Oct 3, 2014 1:39pm
I might go down to the wire doing EWZ calendars. I got in some Nov/Jan $53's for $0.18 this morning, and I see debits coming down, the volume moving out toward $55's and beyond.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,154
  • Oct 3, 2014 1:41pm Oct 3, 2014 1:41pm
Quoting njr
{quote} Ok - so i didn't have the "cojones" to keep the position open to next week and my order was just filled and I have taken the profit. It was the 1830 put strike which was due to expire on 31 Oct so I figured that I'll take the 49% profit now rather than waiting another 4 weeks. Plus I would expect at least a few more down days in October so I'll look to reload on the next drop! Have a good weekend all....
no shame, brother - protect them cojones, they're hell to replace
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,155
  • Oct 3, 2014 2:00pm Oct 3, 2014 2:00pm
Quoting StrayDog
{quote} In PBR also. Thinking about it, since it is a cheap stock with 91% correlation with EWZ. But you will not see that levels on EWZ today. Let us know if you sold any puts... Expecting a vol crush on Monday whatever happens on elections.
yup I looked at the individual names in EWZ, only did a diagonal on VALE - Oct/Dec $12.5/$13.00 for a $0.04 debit. I might end up making some change on that.

I think I am done with EWZ. Now just wait and see. I think perhaps it may be hard not to make some money on them - I have $48. $49, $50, and $53 calendars, all Jan/Nov - but I may be in for harsh education. Time will tell.

Have a good weekend ya'll.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,156
  • Oct 3, 2014 2:09pm Oct 3, 2014 2:09pm
Quoting darrenware
My first ever options are looking positive I know it's small amounts but I don't want to risk too much on options just yet. {image}
Hi darrenware. Looks like profit so can't complain, huh? One thing I would recommend you do is look at all the tastytrade vids that deal with how to manage trades. Most of my losses in a young career trading options have been due to not understanding when is the best time/best way to close or roll out of trades. I might not comment much on your fx options trades - I don't trade the currencies much anymore, just equity and equity index options, mostly.

I had a long Jan $20 EUO call block that I sold today for about a 300% net, that felt good. I needed that margin for more boondoggles. Anyway, I think fiber may start to grind some gears going below $1.25....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,157
  • Oct 3, 2014 2:12pm Oct 3, 2014 2:12pm
Quoting The Fool
{quote} no shame, brother - protect them cojones, they're hell to replace
I hear ya TF!!!!!

Art's point of view on today's "relief rally": http://www.cnbc.com/id/102057979
"The real thing is: Let's see if we can kick it in to high gear and break out of that resistance [1,965 to 1,969 on the S&P 500],"
  • #5,158
  • Oct 3, 2014 2:48pm Oct 3, 2014 2:48pm
once USD$ reaches 87.40-80 area I will start looking for weakness in S/P and DOW/NASDAQ, notice how some large cap stocks have not moved like the indexes, hesitation

USD has seen a high of 86.73
  • #5,159
  • Edited 9:35pm Oct 3, 2014 9:15pm | Edited 9:35pm
http://www.riskreversal.com/education/calendarspreads/

"Let’s say there is a large horizontal volatility skew between two months. If you think the implied volatility in a front month is outsized to the movement you expect in that month and if you think the implied volatility in a later month is trading low given that there are potential events upcoming, then you might put on a long calendar spread to take advantage of this implied volatility skew. If you are correct than implied volatility will come in on the front month option plus time decay. You can buy it back or wait for it to expire and own the later option at a good price. You could use that later option as the first leg of a spread."

Anticipation. Here's what I hope to see in the EWZ play: Rouseff wins a clean majority and there is no runoff. The elections are a done deal and will not be dragged out to a runoff in the later weeks of October. Rouseff victory will be a seen as a double-edged banana somewhat: on the one hand, Brasil is stuck with the same old same old that had overseen a rundown of the national economy into recession; otoh, there will be great promises of reform and at least the uncertainty overhanging the elections will have gone away.

EWZ will go up to the upper $40's but then will slide back on increasing USD strength, Fed rate raise fears, etc. I'd like to see EWZ bounce in the $40's thru October, and then I will roll out of my November short call legs in early November as they near nil value. Of course, if thereafter they shoot up over $50 and I make $1,000%+ on my calendars I will not complain.

If the elections are dragged out that might not be a bad thing either. If EWZ shoots up near my short leg strikes I will just roll higher, maybe increase my debit somewhat, but that's the risk. If EWZ slides lower I will wait. As the front month calls near nil value or expiry I will make a decision as to what to do. If EWZ shares have slid quite far I might turn my nose up at further spreads, but I will have til January in all cases to do something to salvage value if I want to try.

Inserted Video

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Good luck to all the people of Brasil!
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,160
  • Oct 3, 2014 10:46pm Oct 3, 2014 10:46pm
..see article link above..

"Calendar spread as directional play
The calendar spread can also be used as a directional play. On the site we have used the long calendar spread for stocks going into earnings. For example, say the market is implying a move of 5% on earnings.* If we expect the market is correct, we might choose a direction and put on a call time spread if we are bullish or a put time spread if we are bearish on the strike that is 5% in the direction we think the stock will move. The best case scenario is if the stock moves to that strike and then, since the event has happened, it stays still until expiration. Ideally, if implied volatility was not as elevated in the later month as in the front month then the implied volatility will collapse much more in the front month than in the later month."

thinking of earnings coming up - the first person who can show me a decent idea for the above use of a calendar spread as a directional play at ER will win a fabulous prize!
"If The Fool persists in his Folly he will become wise." - William Blake
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