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Let's Trade Options

  • #6,021
  • Nov 25, 2014 10:03pm Nov 25, 2014 10:03pm
Quoting The Fool
OPEC meeting this week offers a binary event. If they don't cut production, the price of oil and related stocks will turn lower..
so....looks like that getting priced in, heavy drop in crude price today, futures a little flat....I am guessing we can see some good movement in the oil prices over the next weeks, looking for a trade to capitalize on that
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,022
  • Nov 26, 2014 5:48am Nov 26, 2014 5:48am
Quoting The Fool
{quote} Lots of the oil patch stocks have been beat down, could rebound fast on news that OPEC will cut production. {image}
check SDRL
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,023
  • Nov 26, 2014 6:01am Nov 26, 2014 6:01am
Quoting The Fool
http://en.wikipedia.org/wiki/Hydraul...ring_proppants I have kicked around several ports on the west coast and seen giant buildings literally full of bags of fracking sand ("proppant') and been told that that single product accounts for half or more of the throughput at those ports..
http://247wallst.com/energy-business...fracking-boom/

I like the high profit potential of deep itm calendars. The trick, as with all calendars, is getting in as cheaply as possible. You can get lucky and find very small spreads between front/back month or you can try legging in, but the latter is not practical since the deep itm options value is so high. One thing I have found & also read several places is that you can usually get filled in the deep itm strikes at the mid or lower, so use limit orders at something low to see what happens.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,024
  • Nov 26, 2014 6:22am Nov 26, 2014 6:22am
Quoting The Fool
{quote} so....looks like that getting priced in, heavy drop in crude price today, futures a little flat....I am guessing we can see some good movement in the oil prices over the next weeks, looking for a trade to capitalize on that

http://finance.yahoo.com/news/saudis...105842186.html

deep drillers and frackers have had their share prices drop almost by half in the last few months. Crude oversupply could persist for months/years...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,025
  • Edited 10:36am Nov 26, 2014 9:45am | Edited 10:36am
Quoting The Fool
Whaddup, StrayDog? Earnings season's played out, whatcha gonna do now?
Yeah, next cycle is about 45 days away, I can see that Alcoa has ER's on Jan 12... A few names will have ER's in Dec also.

Opportunities comes and goes, always something to do. Looks like VIX is going under $12 again. Still, I am reluctant to do any bullish plays on VIX, since that was my only loss in past 10 trades. I will watch it and maybe enter something later, pre FOMC, let the theta decay eats some of the premium until then.

I will look for some neutral/bullish plays for indices, I just hate the current low IVR everywhere, and I don't have any ideas for debit spreads.
But, even in this environment, there were some plays (BBRY Dec 9 puts dropped from $0.30 to $0.17 in 3 days, I looked at some LNKD plays - short strangles and Iron Condors, both looking good now). Currently my account is cash only, looking for opps.
Hope is dangerous in this game.
  • #6,026
  • Nov 26, 2014 12:21pm Nov 26, 2014 12:21pm
Since the market is soooo exciting , I am reading Chapter 16 from "THE COMPLETE GUIDE TO OPTION SELLING" (Second Edition)...

quote:

--------------------------------------------------------------------------

We had a client for several years who we’ll call Sam. Sam would buy and sell futures contracts because he felt the market was “too
high” or “too low.” Consequently, his strategy often was to buy or sell against the trend. Sam employed a custom version of scale trading in
which he would continue to add to his position as the market moved against it. His thought process was that as long as he had enough capital,
he simply could continue to average down until, eventually, the market would reverse from its extreme levels. Although Sam had
substantial capital in his account, this strategy often required him to meet margin calls to continue to hold his positions. He was a stubborn
man, though, and he did well for a while. Although he had some big wins and big losses, he was running at about even after a couple
of years. About halfway through his third year, Sam was betting big that crude oil prices were “too high” above $26. He continued to short
futures, and prices continued to go up. As you can guess, Sam’s story ends badly. Crude oil continued to increase in price and soon
exceeded $41 a barrel. Eventually, Sam got a margin call that he could not (or did not want to) meet. In other words, he ran out of money
and was forced to liquidate all his positions at substantial losses. His account was nearly depleted.

--------------------------------------------------------------------------

I immediately began to recall the names of some of the stock traders I met... They did exactly like that guy from the story. Some of them depleted their accounts. Many trade like this.
Hope is dangerous in this game.
  • #6,027
  • Nov 26, 2014 12:30pm Nov 26, 2014 12:30pm
Quoting StrayDog
Looks like VIX is going under $12 again. Still, I am reluctant to do any bullish plays on VIX, since that was my only loss in past 10 trades. I will watch it and maybe enter something later, pre FOMC
yeah, I'd guess comatose Bear may have a chance of waking up with the FOMC. Fed Heads have been subdued lately. Equities are going up forever & that is apparently their mandate so why say anything and jinx it? Nah, I jest, US equities are the best place to be for the yieldseeker, until something changes. If the Fed puts the fear of a funds rate hike back in the market, maybe we can see some vol return.

VIX derivatives getting lowlowlow & I have been looking at otm call debit spreads, out to Jan, I could see getting in a cheap diagonal spread on VXX, with the front leg expiry set pre-FOMC.

I also have lotsa dry powder in some accounts, others are set up in trades that will take several more weeks/months to play out....like the smaller IRA account below...
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,028
  • Nov 26, 2014 12:43pm Nov 26, 2014 12:43pm
Quoting StrayDog
I immediately began to recall the names of some of the stock traders I met... They did exactly like that guy from the story. Some of them depleted their accounts. Many trade like this.
lol, been there, done that. I like options trading because you can set up trades where the risk is well defined and its often not easy or even possible to get back on the trade and make a loser worse.

Look at the risk I have set up in those IRA account trades above. The EEM and PBR calendars, at this point I will only likely lose the debit (or close to it) that I incurred initially. The GLD double diagonal has substantial risk out on the wings, but I know where my danger zones are out there in relation to time.

For now I am liking GLD flatlining, that helps me - I need it to move some but not too soon...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,029
  • Nov 26, 2014 1:00pm Nov 26, 2014 1:00pm
SnP looking to close above its 5dma for the 29th straight day, this has not happened since the Cretaceous. Looks kinda teetery, huh? Perhaps we can see some heavy profit taking & tax selling in the first half of December? Perhaps the Fed will shake things up a bit? Maybe oil keeps diving, USD keeps getting stronger - too much of a good thing could weigh on US equities there.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,030
  • Nov 26, 2014 1:58pm Nov 26, 2014 1:58pm
I am in TWTR Jan 35 / 49 Short Strangle (1 SD wide, 52 DTE) for $1.11 credit. Even with IVR of only 12, still a decent credit and ROC for a $41 stock.
Interested to see how will Thanksgiving + short Friday + weekend reflect on option prices and theta decay. Probably more on those with less DTE.

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Hope is dangerous in this game.
  • #6,031
  • Nov 26, 2014 2:03pm Nov 26, 2014 2:03pm
Quoting The Fool
SnP looking to close above its 5dma for the 29th straight day, this has not happened since the Cretaceous. Looks kinda teetery, huh? Perhaps we can see some heavy profit taking & tax selling in the first half of December? Perhaps the Fed will shake things up a bit? Maybe oil keeps diving, USD keeps getting stronger - too much of a good thing could weigh on US equities there. {image}
Probably just consolidation, another bull flag... this will not going to go down until rates increases, IMO. Maybe some shallow retracement and that is it. Nowhere to go for decent yields, IMO - that is the biggest driver of the stock market.
Hope is dangerous in this game.
  • #6,032
  • Nov 26, 2014 2:18pm Nov 26, 2014 2:18pm
Quoting StrayDog
{quote} Probably just consolidation, another bull flag... this will not going to go down until rates increases, IMO. Maybe some shallow retracement and that is it. Nowhere to go for decent yields, IMO - that is the biggest driver of the stock market.
I'd have to expect a pullback at least if the Fed puts some rate hike fear back in the mix. They might not, though: it's a hyper dovish Fed.

Oil is the other wild card. We could see something dramatic out of OPEC - like the beginning of its end. I did a cheap ($0.16 debit, Dec $59/$58) vertical bear put spread on DVN today....just in case.

Possible that "no production cut" out of OPEC this week is already priced into the market, I had considered doing a Dec XLE diag call spread for small credit, maybe hang on to my margin instead....

Anyway, an oil price (further) collapse could have negative impacts on the US economy, as I noted above, but I'm not sure that would stop the Bull, not overnight, anyway. It's a tangled web....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,033
  • Nov 26, 2014 3:13pm Nov 26, 2014 3:13pm
http://www.forbes.com/sites/kitconew...ack-in-france/

Crazy? Perhaps a corollary of "race to the bottom" currency devaluation programs everywhere....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,034
  • Nov 26, 2014 8:16pm Nov 26, 2014 8:16pm
Quoting The Fool
{quote} check SDRL
http://blogs.barrons.com/stockstowat...rrons&ru=yahoo

We are seeing a new era dawn in the oil market. That sounded pretty dramatic, huh? Well, it just may very well be true. Very well.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,035
  • Edited 9:34pm Nov 26, 2014 9:00pm | Edited 9:34pm
/CL down near $1 overnight, down to $72.75

Oil rout victims: tar sands: CNQ, SU, PSX
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,036
  • Nov 26, 2014 9:40pm Nov 26, 2014 9:40pm
http://www.simpleroptions.com/public...7e7cb1ddb8fa9a

I don't look at any of these options JC is talking about - DUST/NUGT, DIG/DUG, etc. But I suppose they have their place in those scenarios where a big move is imminent....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,037
  • Nov 27, 2014 11:45am Nov 27, 2014 11:45am
Quoting The Fool
/CL down near $1 overnight, down to $72.75 Oil rout victims: tar sands: CNQ, SU, PSX
<$69.50 in the light of Turkey Day. We will see how my DVN short spread fares on Friday. It might take a while longer than 1-2 days.

"OPEC Policy Ensures U.S. Shale Crash, Russian Tycoon Says"
http://www.bloomberg.com/news/2014-1...coon-says.html

The demise of the weakest shale oil and tarsands producers is already writ in their huge share price drops over the last several months, but that does not mean there be not more to tell. We will find out who has been naughty and who has been nice. (Naughty=overleveraged, heading for bankruptcy).

Happy Thanksgiving, ya'll.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,038
  • Nov 27, 2014 6:20pm Nov 27, 2014 6:20pm
/CL $68.60 Asian Friday. Not sure where the bounce will be on this one....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,039
  • Nov 27, 2014 6:46pm Nov 27, 2014 6:46pm
Quoting The Fool
Oil rout victims: tar sands: CNQ, SU, PSX
http://www.bloomberg.com/news/2014-1...tml?cmpid=yhoo

Wish I had put some puts on these guys Wednesday....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,040
  • Nov 27, 2014 6:50pm Nov 27, 2014 6:50pm
Another place to look for victims of the oil glut is in the solar stocks. FSLR, SPWR, SCTY etc etc. Most have fallen hard with oil since late summer. They might bounce before the oil producers do, though.
"If The Fool persists in his Folly he will become wise." - William Blake
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