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Let's Trade Options

  • #14,501
  • Jan 8, 2017 1:40am Jan 8, 2017 1:40am
Singha, check the implied volatility - that will affect the values of the otm options; also the open interest - if there is little or no volume for a particular option, its bid/ask spread will be wide. If there is no volume for an option, it doesn't matter much what the price is until some volume shows up and some real pricing gets established.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,502
  • Jan 9, 2017 8:45pm Jan 9, 2017 8:45pm
Ok, thanks. I did some research and I see what you meant about implied volatility. The reason why I asked was because I wanted to see how options could be a strategy for buying dips during a trend but when I was looking at prices, I was seeing very expensive OTM calls and couldn't figure out why.

Is there a good method on buying dips option wise. I see a basic long call, straddles and straps but nothing else but even those look more expensive than I expected.
I love forex. One day it will love me back.
  • #14,503
  • Jan 10, 2017 3:11am Jan 10, 2017 3:11am
`Buying dips of what, Singha?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,504
  • Jan 10, 2017 3:13pm Jan 10, 2017 3:13pm
Filled a 12c YUM put calendar, Feb10/Feb17 --- YUM w/ ER @ Feb9....gimme some slippage and iv jack right into ER day.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,505
  • Edited Jan 11, 2017 12:55pm Jan 10, 2017 9:12pm | Edited Jan 11, 2017 12:55pm
Quoting The Fool
Filled a 12c YUM put calendar, Feb10/Feb17 --- YUM w/ ER @ Feb9....gimme some slippage and iv jack right into ER day.
MODELED a net 5% iv rise into the ER, makes it a 12c risk to net max 58c, might get a little better rush than that. Will protect the downside with a put vert for a few cents....Big Kahuna baby
Attached Image (click to enlarge)
Click to Enlarge Name: 2017-01-10_1906YUM.png Size: 70 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,506
  • Edited 4:31pm Jan 11, 2017 4:13pm | Edited 4:31pm
Bot DIA Jan20/Jan27 calendar calls @ $202.50 for 18c....I am expecting the Dow to punch thru the soft underbelly of 20k no prob and keep rising into fresh ath's Q1 .... long vol dreams need to wait til some macro clouds start to threaten, thinking hard Brexit + Eurozone elections early/late Spring.....still btfd all you really need to know in the stock markets.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,507
  • Jan 12, 2017 10:02am Jan 12, 2017 10:02am
Quoting The Fool
Bot DIA Jan20/Jan27 calendar calls @ $202.50 for 18c....I am expecting the Dow to punch thru the soft underbelly of 20k no prob and keep rising into fresh ath's Q1 .....
GOOD job Fool...way to buy the top....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,508
  • Jan 12, 2017 1:31pm Jan 12, 2017 1:31pm
Bot LLY calendar puts @ $72, Jan27/Feb3, 15c, setup for the Jan31 ER
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,509
  • Jan 12, 2017 5:41pm Jan 12, 2017 5:41pm
Quoting The Fool
`Buying dips of what, Singha?

Buying dips of trending stocks.
I love forex. One day it will love me back.
  • #14,510
  • Edited Jan 17, 2017 12:25am Jan 16, 2017 10:25pm | Edited Jan 17, 2017 12:25am
UVXY monthlies showing up now but as usual the strikes are limited.....you could take your chance on long vol, maybe we have a chance foR some with the Trumpo on the loose. Maybe we get a spike and then the lowest put strikes long dated can be had for cheap(ish)....
Attached Image (click to enlarge)
Click to Enlarge Name: 2017-01-16_2019UVXY.png Size: 73 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,511
  • Jan 16, 2017 10:38pm Jan 16, 2017 10:38pm
one year out puts go down to $1, look for a cheap fly or set of them centered on 10 or 15 .... UVXY might go a full year w/o a rev split but it's heading south no doubt
Attached Image (click to enlarge)
Click to Enlarge Name: 2017-01-16_2032uvxy2.png Size: 68 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,512
  • Jan 17, 2017 1:37pm Jan 17, 2017 1:37pm
Quoting The Fool
one year out puts go down to $1, look for a cheap fly or set of them centered on 10 or 15 .... UVXY might go a full year w/o a rev split but it's heading south no doubt
....filled a Jan '18 UVXY put fly - $12/15/18 @ 22c. Trying a Jan '18 $6/10/14 for similar debit. I'll be putting on more long-dated stuff this year, trying to ease off the trading screen time.

Watching the UVXY monthlies, no puts below $25 as of yet.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,513
  • Jan 17, 2017 1:56pm Jan 17, 2017 1:56pm
Quoting The Fool
...filled a Jan '18 UVXY put fly - $12/15/18 @ 22c. Trying a Jan '18 $6/10/14 for similar debit. I'll be putting on more long-dated stuff this year, trying to ease off the trading screen time. Watching the UVXY monthlies, no puts below $25 as of yet.
IF we get a vol spike in coming months and the fotm (bottom) puts get real cheap, can roll those up to long puts at $18 and make a wide-ish vertical....if UVXY drops steadily and gets to the mid-zone of the fly way early, profit will be small, but oh well. It'd be nice to get in these cheap centered around $10 or lower because UVXY might scud along a bottom rail down there for a while....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,514
  • Edited 4:23am Jan 18, 2017 3:55am | Edited 4:23am
Quoting Singha83
... Is there a good method on buying dips option wise. I see a basic long call, straddles and straps but nothing else but even those look more expensive than I expected.
Straddles are strategy, when you expect a large move on either side. Strangles also.
Buying a single call option is rarely a good thing. If you want to buy dips, use debit spreads for that.
You can sell spreads bellow to finance buying call spreads above, but that is for advanced traders and require increased vol to get anything meaningfull for credit (sold) spreads.

So, basically, the most simple thing would be to buy call spreads, and with that you will get more for your money, than by buying just calls - because you buy one and sell one. You go directionaly cheaper, remaining defined risk. Vertical spreads is something everyone is recommended to learn first. Than you can play directionally with other stuff, like calendars, diagonals, butterflies and so on... but simple vertical spreads is the begining.

I suggest reading this post from page 49 of this thread, about vertical spreads vs simple buying single options
http://www.forexfactory.com/showthre...18#post6796218
Hope is dangerous in this game.
  • #14,515
  • Jan 18, 2017 1:59pm Jan 18, 2017 1:59pm
[quote=StrayDog;9451664]... but simple vertical spreads is the begining. I suggest reading this post from page 49 of this thread, about vertical spreads vs simple buying single options http://www.forexfactory.com/showthread.php?p=6796218#post6796218[/quote]

Hey SDog, good to see you here. I don't use straddles or strangles anymore, never did much really. If I want to go bi-directional I will do double calendars, double diagonals, or even double verticals. Often now though I will make directional trades using flys. If you can get in a wide fly with good time for a bargain, they will often have the most forgiving P/L and highest maxP.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,516
  • Jan 18, 2017 10:19pm Jan 18, 2017 10:19pm
Trading anything is all about finding a bargain. Whether you're buying options or a piece of land, your prospects of making good money on the trade is based on how well you do going in. Selling options, no different. Are you selling for 15c on the $1 spread in a condor? Not good: you're risking 85c to make 15c. Anyway, I'm a bargain hunter. Options are so screwy, prices changing all the time - what you see overnight won't be there in the morning. You can try to fill at a cheap mid but it will never happen.

However, sometimes they fill....I have made some large returns on cheap filled spreads. Many made nothing, but at least I did not lose alot.....shopping in the 1-yr-out UVXY puts, as far otm as I can get.....filling a $3 vert for anything less than 2 bits would be a coup....
Attached Image (click to enlarge)
Click to Enlarge Name: 2017-01-18_1957UVXY2.png Size: 95 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,517
  • Edited 4:39pm Jan 19, 2017 3:07pm | Edited 4:39pm
filled today: Feb17 IWM put fly $124/120/116 for 11c......Jan27/30 SPX calendar calls @ $2290 for 45c
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,518
  • Jan 20, 2017 1:37pm Jan 20, 2017 1:37pm
something I don't do so often but just bot Feb17 UVXY long $20 puts at 11c today, looking for a stocks breakout north and a sharp fall for UVXY, where I would look to spread short puts against $20 puts, make a fly on it, etc....long puts on this turd would seem to be solid, but as I have shown before....not so much. If we get a vol pop I could spread short against $20 condor or diagonal and maybe make money that way.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,519
  • Jan 20, 2017 2:31pm Jan 20, 2017 2:31pm
trying UVXY put fly 1yr out Jan '18, $7/10/13 for 12c....it won't hurt my feelings if vol pops in coming months and I might cheaply roll the above into a $13/10 vert or something near that....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,520
  • Jan 23, 2017 12:15am Jan 23, 2017 12:15am
Quoting StrayDog
{quote} Straddles are strategy, when you expect a large move on either side. Strangles also. Buying a single call option is rarely a good thing. If you want to buy dips, use debit spreads for that. You can sell spreads bellow to finance buying call spreads above, but that is for advanced traders and require increased vol to get anything meaningfull for credit (sold) spreads. So, basically, the most simple thing would be to buy call spreads, and with that you will get more for your money, than by buying just calls - because you buy one and sell one....


Do you need a margin account to do vertical spreads? I am assuming you do due to "selling" calls? I am assuming that just a regular stock long position would be better if this was the case?
I love forex. One day it will love me back.
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