Learning Options and Strategies ($$$$)

[andre136]

nice share, cool thanks

[blasher]

LOL . . yes!, so true . . .
pennies are so much nicer than nickles . . . .
and remember sixteenths ?!!!?

[Porgie Tirebiter]

Good news for us little guys!

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201012031725dowjonesdjonline000576&title=us-options-markets-plan-another-year-of-penny-priced-contracts

[horserider234]

Thanks PT & Blasher. Those were insightful comments. I believe I'll be fine. I've done miles of research on this gut trade of mine. Sometimes there's money to be made in gut trades. I acknowledge their risky nature too!

[blasher]

good stuff guys . . . 'PT', you responded very well.
I agree with everything you said.
'Horserider' .. your biggest risk is a Big Drop in the stock. (like PT said).
If you're ever fearful of a further Drop,
just Buy back the options (at a lower price) ...
and then Sell your stock position at a loss ...
but your profits from the options should make up for it.
Good Job !!!!

.

[Porgie Tirebiter]

OK, I took a look and now I see you sold 2012s. Not quite as exciting, but still a good deal.

I see DNDN has an implied volatility of 78 and that's why these are so expensive. You sell options to sell volatility, and that's what you've done.

I also see this company doesn't make money. But since the calls look a lot pricier than the puts, someone must think that is going to change.

Thanks, you've given me something to look at.

[horserider234]

It's DNDN

[Porgie Tirebiter]

You got $11 for calls that only have about $3.00 of intrinsic value? Wow, that is a great deal, I'm really curious what the stock is. It must be extremely volatile. Obviously a lot of other people think it's heading up as well.

As long as the stock stays below $35 by next January, that money is yours to keep. Even if the stock does rise above $35, and you get called, you still have made a great deal, because the stock would have to reach a price of $43 before you would miss any of the gain in share price. So you have limited yourself to roughly a 25% gain. At least that is better than a poke in the eye.

Your risk is if the stock gets called it may change the tax status of your gains on the investment in the stock, or if the stock drops below around $21 the loss in the stock value would wipe out the profit you made selling the calls.

My numbers are all rounded off roughly, so no one needs to pick my math apart. Thanks in advance.

Selling covered calls is a great way to add a little income to long term investments.

I'd still like to know what stock that is.

[horserider234]

I'm a newbie in options, and I admit it upfront. I have 1100 of a stock at $31.99, and I have just sold 10 Jan 2012 $35 calls against 1000 of the stocks @ $11.10 each. I believe this stock is headed higher than $35 shortly. What will happen if:
1. the stock races past $35 in a few weeks/months
2. the stock never gets to $35

I'll appreciate your discussing other scenarios that I may not have thougth of. Thanks.

I posted this elsewhere, and I was redirected here.

[blasher]

A very good article on using ITM versus OTM options . . .

InTheMoney vs OutofTheMoney Options


Enjoy!

[blasher]

This looks like a good board and someplace
I may be able to help out.
I will definitely be coming here more often!

[blasher]

hhmmm . . you asked the question in a confusing way . . .
so I will answer the best I can in broad terms:

If at expiration (3rd Friday in Sept), the contract would be worth $5.00 - $2.50 = $2.50 = the difference between the stock price and the strike-price

if the underlying stock reached $5.00 sometime before Expiration,
then it would be worth that $5.00 (intrinsic value) PLUS the "time portion" . . .
the risk value in Holding it longer.

Let me know if you have a more specific question.

[medge1]

If i buy a 2.50 sept call (1$ per contract) for a stock worth worth 2.60 and the stock rises to 5.00 what would the profit be if i sold it at 5$. (Fee .50 per contract). Trying to learn so if my question sounds like i am confused i am. Also is it worth it to buy a stock while is already in the money verses buying a high call option price.

[fxcm77]

Thank you so much for the clarification.


:) all the best

[blasher]

it is a 28-strike-price for $1.00 = $100 for ONE contract.
IFF you feel strongly that MSFT is going Up,
you can trade the 28-strike-price Call option.
BUT, expiration is this week ...
so you have to believe that MSFT will go Up Big
over the next few days so you could sell it back for more than $1.
It would be better to either:
1 - Trade more than $100 and Buy a lower strike-price option
OR
2 - have a slightly longer-term plan with more money invested
so you can Trade a Near-the-Money June option and have a little more time for your
Plan to play out.

Good Luck !!!

[fxcm77]

Thanks a lot for taking the time on me with your replay. Ok so ask 3.95 is 395 for 100 shares. but strike price a $1.00? where do you see that? If I can ask . When I look on Yahoo finance the lowest Strike price is $25.00.

What would be the option play for beginners in Options?


Thanks

[blasher]

'fxcm77' .. so, let's sya you Buy that MSFT CALL option
for 3.90 . . .
That is the price per share ...
each ONE Option Contract = control of 100 shares.
SO .. ONE Option = 3.90 * 100 = $390.
SO .. you can not play MSFT options with only $100
unless you Buy the 28-StrikePrice CALLs for around 1.00 ...
and none of that includes commission costs.

Good Luck !!!

[fxcm77]

Hi board I trying to research it anything about Options, but can't find @ least one example simple one to understand How to purchase option either Call or Putt or Hedge. How much it cost how I can gain example; MSFT if I would like to purchase Call options there is strike price $25.00 bid 3.85 ask 3.95. So how many shares or contract I can by example $100? and what would be the gain if the stock move $1.00 up or the other way?


Can anybody explain?


Thanks

[Toofuzzy]

Hi All

I was hoping this board was more about education, how the various options work and how to use them.

I personally tend to SELL PUTS and CALLS. I find that the decay in the premium is in my favor.

Buying options seems more like gambling to me than investing. But I am glad somene is on the other side.

I particularly like to sell both when I first buy a stock. If I can take in 30% of the stock price between both for 6 month options, I either get to keep it, get to buy more stock at a 30% discount, or it gets called away from me and I make more than 30%.

I don't like to sell options shorter than 6 months as I want as much premium as I can get. I have gone out as far as a year.

My buying style is to buy more of a stock as it goes down and sell gradually as it goes up so this style works for me (but not always >grin<)

Toofuzzzy

[JPresly]

is that for sale?

[Windfall Magic]

Basic questions;

I new to options..been in the microcap market for a year but want to move some of my bank to options.

the questions are:
1 is e-TradePro a good platform for options? if not what is and can it link with my e-trade account?
2 how do you narrow down the options to review...what do we use as a criterium for the options. what key charts do we review..and how do we set up our model for notification?

Warm Regards,

Windfall Magic

[makesumgravy]

What Is Executive Stock Option

http://finance.kosmix.com/topic/What_Is_Executive_Stock_Option?p=hl&as=yhoo&ac=1386

[jospatrick]

here's a simple Q from a simple guy; Me! When a firm goes Chapter 11 (not 7), do they cancel subsequent earnings & their earnings reports or just dividend pymts?

[rstar]

good refresher now that i've made a few option trades.

http://www.cboe.com/LearnCenter/Tutorials.aspx

[njnorm]

the closer you get to expiration the faster you lose value

you should look at some of the tutorials on the CBOE website

[rstar]

what is the time frame moving towards expiration that value starts to really fall off?
i got caught in ncc last month- thinking they would get bought out- but then too close to expiration the price just fell off...
in abk nov 5s- they expire nov 22

[User-65225]

Nikkei slides 6 percent as yen advances, banks slide
Mon Oct 27, 2008 1:19am EDT

TOKYO, Oct 27 (Reuters) - Japan's Nikkei average fell more than 6 percent on Monday to a 26-year-low, beaten down as Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) and other exporters slipped on the yen's advance against the dollar and bank shares tumbled.

Shares of Mitsubishi UFJ and other large banks were hammered on concerns they may need to raise billions of dollars each to offset hefty losses on their stock portfolios. [ID:nT73810]

The benchmark Nikkei .N225 was down 6.4 percent to 7,156.80 and the broader Topix .TOPX down 7 percent to 749.47. (Reporting by Elaine Lies)

[User-65225]

The Nikkei is crashing, its down almost 6% right now.

Dow futures are dropping as well




My posting contains many opinions. So please do your own research and validation.

[njnorm]

I remember the similarities after the last 2000 bubble

good to see it in black and white (err color)


A Quitter Never Wins and a Winner NEVER Quits!

For THE adventure of your life go to http://landmarkeducation.com/

[User-65225]

DJIA and Nikkei charts -

Check out this Nikkei chart. Its look very similar to the DJIA.... They both have triangle patterns, similar looking MACD's, etc.

If the DJIA follows the same pattern, look for 7000's soon IMO...

[njnorm]

Rocket - thanks a million for starting the options board.

You can count on my participation here as we all get way better in options trading.

Also much thanks to StockZilla in Bills room for all his Options expertise.

I am liking trading options much more than all the scammy manipulated pennies although I still play some for momo.

[Mikey]

possible plays .....a few ETF'S......

[rambob]

John, I went through the etrade tutorial and it cleared alot of stuff up. Print you out a reference card and start memorizing what this things mean. Makes it so much faster I am learning. Now I have to learn when is the right time to buy. I sold some etrade this am and bought some november calls. That frees up that cash for some swing trades. There are some great opportunities out there to ride for months and I am a firm believer the trading room will find them first. This is getting kinda fun. LOL

[Limitless1]

Rocket thanks for the refresher on Mike's post, that is One I used when I first go onto Bill & Mikes chat room. My 3rd week there and my acct. looks much better. I have been following your post everyday and will have options approval this week.
Thanks for the insight.
Chuck

[john wayne]

Ok why when I try to enter an options order (as an expirement only)does it say buy to open, buy to close, sell to open, sell to close instead of just buy and sell or puts and calls?

[Soapy Bubbles]

Only certain stocks. What you do it check if a symbol you're interested in supports options. Your broker will have a listing of "options chains" for each symbol supporting it.

[john wayne]

Is it any stock or only certain ones? Also do the usual indicators come into play here, RSI, MACD etc?

[Soapy Bubbles]

You're trading "rights" to buy/sell stocks at a certain price in the form of a "contract". You don't trade the actual stock itself, but the contracts allowing you the rights to buy/sell stock.

This can happen on any exchange -- PK, OTC, Bigs.

[john wayne]

Thanks for the support guys. I guess to start I would like to know when I trade options am I trading stocks or stock exchanges?

[Soapy Bubbles]

We'll try :)

[User-65225]

No problem Duke. Myself or another member will answer your Q's.

[john wayne]

Rocket - I would like to ask you some extremely basic questions about options. I apologize if it seems so simple, but I do alot better when I can ask questions and get feedback rather than just reading about options on line, thinking I know what it means, then having to go back and read everything all over again because I get confused.

I hope you can spare a little time to help a total option newby.

[User-65225]

Heres the post by Mikey that i mentioned earlier...

For some this might not mean anything, but for those that have take some bad blows in this market and are looking to find their groove again, i think it would be helpful... Taking small profits instead of swinging for a home run will help you learn options without discouraging. Its the best way to start...

Posted by: xbigshot1 Date: Saturday, September 27, 2008 1:41:31 PM
In reply to: None Post # of 16653
how to get your CONFIDENCE back when you have taken hits!

in a volatile and turbulent market, sometimes we play it safe, sometimes we roll the dice. the last couple of months have either taken its toll or been a lifesaver.......or in some cases a combination of both.

ups and downs come with the territory, and sometimes the results are NOT a reflection of how well you trade. whipsaws, hedgefunds, insider buying, insider selling, shortsellers, lack of shortseller, talking heads, news, etc. can have negative or positive effect on your play, and make no mistake, can change a chart in a heartbeat.

in my particular case, my portfolio is up dramatically in the last couple of months, but not without a price to pay..when you are climbing that mountain, you are gonna have to step on a few stones along the way and in some cases, you might even fall into a damn cave..........and i have always contended that if you want to get outta the cave......find someone who is familiar with the cave, as opposed to reading flyers from folks who are telling you to be careful of the cave///// they dont really tell you HOW to get OUT of the cave, they only tell you to be careful of the cave.......welllllll isnt that special?...wonderful words, eh?

so here is a good start: make 3,4, or 5 good trades in a row, to get your confidence back.......i dont care what it is, i dont care what exchange, i dont care how much you make.....it immaterial......what you REALLY REALLY want to do.....is LEARN TO WIN AGAIN......sometimes we have a tendency to do the wrong thing at the wrong time, and continue to miss.......and sometimes when that doesnt work.......we have a tendency to work harder at MISSING, by pushing the envelope a lil harder.......that almost never works and the misses become self inflicted to a GREATER extent!!!!!

you NEED to break this chain, immediately.......STOP what you are doing and go back to basics......LEARN TO WIN AGAIN......YOU CAN DO THIS!!!!!!!!!......i have had to regroup three times in the last two weeks on MAJOR hits......i had to learn to win again......i knew what i needed to do......WIN!........its working

again........make 3,4,5 trades in a row and learn to win.......forget about the money on these trades.......learn to buy.....sell.......pay for the commissions and see GREEN.......i dont give a rip if its $10.00 profit...........JUST DO IT!!!!!

and WATCH YOUR CONFIDENCE RETURN!!!!!!! I WILL GUARANTEE IT!!!!!

mikey


My posting contains many opinions. So please do your own research and validation.

[rambob]

ahhhhh, ty.eom

[User-65225]

Also, those looking to jump into the options game should start SMALL on their first bet, with the goal of making a SMALL profit.

Betting $200 and selling for even a $10 profit(after commissions) will be more profitable in many ways than just making $10... The EXPERIENCE of how the buy and sell process works is important and being able to walk away with ANY KIND of a profit on your FIRST TRADE will make ya feel good... As Mikey (xbigshot) often states... "Just get into the groove of making money, even if its small profits"... Those aren't his EXACT words, but its a wise POINT he is making. Its a worthy reminder for those that have heard the whole spiel in Bill Panetta's live trading room.

[User-65225]

rambob, new options traders (including myself) often confuse PUTS with going short. A PUT is a bet on the decline of a stock, but it has LIMITED RISK just like buying a CALL. This is the beauty of PUTS... What you bet, is what you risk.

On BOTH CALL and PUT options you can ALSO go short, which is where the risk of losing MORE than you bet comes into the pictures. I would advise against selling CALLS/PUTS short until someone is experienced in options trading... Most brokerages will RESTRICT inexperienced options traders from selling short, this is why they have different "account levels" when you request an options trading account.

There is no need for having a trading level higher than 2 at the beginning. In fact, if your broker offers to give you a higher level, TURN IT DOWN. It will prevent you from making ACCIDENTAL trades which can wipe out your account.

http://www.optionetics.com/market/articles/article.asp?id=15264

Glad you joined us rambob

[rambob]

Just found the board. Thanks for doing this. Once I learn what I am doing I promise I will contribute in whatever way necessary. Research ect...Call options entice me, put options scare me to death. LOL I will focus on call first.

[Soapy Bubbles]

Cool. I will look for a PDF.

[sunshinevibrations]

I'm now reading Understanding Options by Michael Sincere. Seems pretty good so far.

[Pro-Life]

Alibris is my personal favorite for a bookseller - they offer new and used, paperback and hardbound...



Click below and type "options trading" or enter the titles from the outstanding i-Box into the "Keywords" box -

http://www.alibris.com/booksearch






* The novelist George Eliot once said that "it is never too late to become what you might have been." That quote inspires me to seek those investments in the future that I didn't in the past.