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Let's Trade Options

  • #14,541
  • Jan 26, 2017 11:44pm Jan 26, 2017 11:44pm
I am shopping some SPX put spreads for next week in hopes JY can say something to make the markets take a dump

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"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,542
  • Jan 26, 2017 11:58pm Jan 26, 2017 11:58pm
the Fresh Prince is back...lol

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"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,543
  • Jan 27, 2017 12:06am Jan 27, 2017 12:06am
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,544
  • Jan 27, 2017 12:29am Jan 27, 2017 12:29am
they announce 2/1
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,545
  • Jan 27, 2017 2:55am Jan 27, 2017 2:55am
Quoting The Fool
closed a lot of bullish SPX and SPY weeklies spreads today. All in decent ~3bag profit territory. These were things with short legs @ 1/27. Hit with a margin call @ E* - what's up with that? Margin call on a SPX call calendar? I called them to inquire. They have in-house margin policies - recently imposed - on any index spread, if there's a short leg as part of a spread you have to have maintenance margin....20% of the underlying value or 2x the premium of the short leg. No notice. No info on the website. Crazy...I...
Seems like wrong broker for trading index/equity options. Amazed by this horrible no info anywhere BS. No comment on margin req.
I remember that many many years ago a friend of mine was bragging about them, how he managed to open acc. with the "Mercedes among brokers, yada, yada, yada"... what a fukin bs. There is absolutelly nothing that can happen dramatically with spreads... I saw that tastytrade become broker also, I think...
Hope is dangerous in this game.
  • #14,546
  • Jan 27, 2017 3:17am Jan 27, 2017 3:17am
yeah I don't get it, SDog, but the house can impose any kind of margin requirements it wants, I suppose. We see that when there is big volatility & possibility of big moves, in fx futures options, everywhere. But we are in the middle of total doldrums and they won't even let a long calendar slide? BS....

yes tastyworks, they have pretty good pricing if you don't mind trading small....I will try them out
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,547
  • Jan 27, 2017 2:15pm Jan 27, 2017 2:15pm
wary of bizarre maint margin req's on index spreads, I put on some SPY put flys @ 2/3 and 2/8 - $227.5/225.0/222.5 - just looking for a little pullback of the FOMC. Paying ~22c for these....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,548
  • Jan 30, 2017 1:56pm Jan 30, 2017 1:56pm
Hey Fool. I got a friend (stories are usually bullshit when they start that way but I swear I really do have friend who..) thinks he wants to play a possible tax holiday being a huge boon to AAPL stock. He told me he is considering buying outright 2 long July contracts 135 strike at 1.65 ask. I told him he should consider a vertical spread or fly centered around his target instead cuz bigger payoff for same risk (assuming he doesn't want to own 200 shares at 135 of course). Now I'm thinking it's really a calendar spread I should have been talking about. Aside from his premise about AAPL, it's a calendar that makes sense in his case right?
  • #14,549
  • Jan 30, 2017 6:32pm Jan 30, 2017 6:32pm
not sure I agree with the premise of the AAPL trade, but lots of people are saying buy AAPL, so ok. If you have $160 to spend, the calendar is prolly a better trade (that would be a July/Oct $135 calls calendar) - because the long July calls are about $160, but the Jul/Oct calendar is about $160, also. I will show why later when I can get on tos, but the calendar will have a lower b/e, and if AAPL trades <$135 at expiry, you have the option of letting the Oct long calls run. In the latter sense, the choice boils down to paying $160 for July calls or the same amount for Oct calls.

If AAPL were to rally hard beyond $135, the calendar might actually lose money, not so with the long call. Always trade-offs to consider.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,550
  • Jan 31, 2017 7:28am Jan 31, 2017 7:28am
Ok. So it was the option to let the October calls run that made me think it should be calendar for him. But the devil is in the details as always. A bull vertical spread would also apply? Depending on how (or almost when) he wanted to protect his downside right?
  • #14,551
  • Jan 31, 2017 10:20am Jan 31, 2017 10:20am
both the calls calendar above and a bull calls vertical would have risk to the downside equal to the cost of the options.

To compare these spreads you just have to have an analyzer and you have to run thru the P/L for every day of the life of each spread. You have to keep in mind the changes that iv will be undergoing as the share price moves up or down - the best approach is to try to include that in your modeling. You have to understand how things change over time.

Sounds like work & it is but that is how you get a feel for what the spreads do and what scenarios they are best used for
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,552
  • Jan 31, 2017 1:41pm Jan 31, 2017 1:41pm
Quoting The Fool
Sounds like work & it is but that is how you get a feel for what the spreads do and what scenarios they are best used for
takes time but after a while you pretty much know the drill on different spread setups
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,553
  • Jan 31, 2017 4:19pm Jan 31, 2017 4:19pm
filled SPX Feb3/Feb6 2290 calendar calls for a $1, btfd, what else.....?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,554
  • Jan 31, 2017 9:19pm Jan 31, 2017 9:19pm
I'm a slow learner. I'll get it. But it'll take a while. As always I appreciate your patience with the noob questions. I'll try to keep it to a minimum as I know you are a busy guy.
  • #14,555
  • Jan 31, 2017 11:29pm Jan 31, 2017 11:29pm
options are complicated, you can not learn without doing. Definitely get on a play money $100k account and trade for 3-12 months. Put on lots of different kinds of trades so you can watch how things work. With $100k play you can work on the full range of trades in all kinds of time horizons. Then, after you think you understand some things, start a new play money account of say $10k and trade it like you are trying to make money, just as if it's a real $10k. Don't start trading real money until you are making positive play money consistently. If you can't make money with $10k play, go back to the drawing board or give up.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,556
  • Feb 1, 2017 12:46am Feb 1, 2017 12:46am
something to note about SPX....they're cash-settled, meaning you will be credited their cash value when they expire. But look at those bid/ask spreads! and, even worse, look at the value of just slightly otm options....nada.....a lesson I learned the hard way some time ago - plan on closing before expiry.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,557
  • Feb 1, 2017 12:48am Feb 1, 2017 12:48am
Quoting The Fool
something to note about SPX....they're cash-settled, meaning you will be credited their cash value when they expire. But look at those bid/ask spreads! and, even worse, look at the value of just slightly otm options....nada.....a lesson I learned the hard way some time ago - plan on closing before expiry. {image}

you ever go in, just before the bell on expiration and try buying some out of the money shit hoping for a huge swing on the settlement print?
Look Sharp/Trade Tight
  • #14,558
  • Feb 1, 2017 1:09am Feb 1, 2017 1:09am
Quoting PayTheLimit
{quote} you ever go in, just before the bell on expiration and try buying some out of the money shit hoping for a huge swing on the settlement print?
yeah....kinda, but I'm a working stiff, not a day trader, so I can not always fine tune my entries. I am usually doing what I'.m doing right now - scoping out trades around the LO, right as I am going to bed, then I will get up at the NYO and adjust them or take em off or whatever.

I was looking at a Feb1 SPX strangle tomorrow to get a move off the FOMC.....but I prolly won't do it, I don't know if the market moves on anything any more except a DJT tweet....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #14,559
  • Feb 1, 2017 1:10am Feb 1, 2017 1:10am
just that they call it a special Opening Quotation suggests a certain amount of sneakiness involved...

https://www.cmegroup.com/education/f...ng-the-soq.pdf
Look Sharp/Trade Tight
  • #14,560
  • Feb 1, 2017 1:19am Feb 1, 2017 1:19am
sneakiness indeed....I will have to study that, thanks....I'm strictly a crumb picker though....the only time I ever eat really well is when there's a big feast for the big dogs - then I might hope to get a bone with some meat left.
"If The Fool persists in his Folly he will become wise." - William Blake
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