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The option should be worth it's intrinsic value on expiry. You have 5 weeks of time value on those calls. Try to think of an alternate strategy should the trade go against you. I personally dont hold directionals that long.
Cool thanks. I now have an "option addiction" LOL. I bought quite a few today at the low of day we'll see if my calls work out or not. Thinking I did good on my JAN 7.50 call on PCX but we'll see
Yes, because even though it is in the money it still has time value added to it. Come expiration day your option should be worth however much in the money it currently is.
For example: You bought 1 call on XYZ at the 5.00 strike price. Then at expiration day XYZ is at 8.75. Your call will be worth atleast 3.75
I would have to say yes to that. Cause the price dont have time to move up more or down.
Can you answer this one bud. I'm wondering if the closer you get to an option's expiration even if you are in the money does it's value still go down the closer you get? TIA
Here's more info on option education straight from the horses mouth.
http://www.optionseducation.org/
E. None of the above. They actually expire the 3rd Saturday of the month, but since the options market is closed on saturday, they essentially stop trading the 3rd Friday.
Standard expirations for US options occur on the _______ of the month?
What is the correct answer?
First day
Last day
Second Tuesday of month
Third Friday of month
I answered it on the other board, but will post it here too.
Very good question, btw.
If CME stays above 155 on expiry you will collect your premium. If it drops below or gaps below, you may be put the stock which means you will have to buy 1000 shares. Your price will be at 151.00/share since you brought in 4.00. If it starts to drop you can buy the contracts back as long as it is above 155. Selling puts is a great way to bring in premium and let Theta decay that premium, or buy stock at a discount. Be careful though, if you are put the stock, you will need enough money to buy that much stock.
If you are put the stock, your breakeven price is 151.00
I posted this question on other boards but thought i would post it here to just in case some newbies were wondering the same thing.
"Got a question for all the experts on here
Im trying to learn about about naked short selling an option.
For example, CME (currently at 194.57)..i dont think it will fall below 155 before Dec expiration, so i want to sell 10 155.00 Puts @ 4.00 which would credit my account $4,000. Now if CME closes higher than 155 on Expiration day that would mean the puts are worthless so i would keep the whole $4,000. Now obvisously if it suddenly drops down to that level or even below i would have to buy the contracts back probably at a higher price (which would result in a loss) so i dont get caught naked.
Can i do this?
Trying to find some good ways to play Expiration a week or two before, especially with premiums getting as high as they are."
Thnks Mike,
To answer your PM, I hope to do the next class one night on the week of the 15th. Gotta get my schedule in order. I'll let you know.
Excellent! I've only executed one option trade so far for a dec 20th call. Not looking too good right now but wasn't for a lot of money. Very much looking forward to the training when it's available. Congrats on your early retirement. I hope it works to in your favor.
Mike,
I was able to retire because the company I work for is leaving the country (surprise, suprise) and offered us a package to scram.
Options are only a part of my investment strategy and this volatility has been great for them to move, but usually options are used for longer term plays.
I am new to this training stuff and havent set up any webcasting yet, but most of what i talk about is all right here. I will go into some examples but dont really give out plays. If you miss it we can set up a time to review but as of now, I have to wait till I am done with work to try to schedule anything. We will probably spend evenings since that is when most people are free.
Marked your board. Congrats on retiring next month Lee.
Were you able to retire due to the success of trading primarily options? I'm very interested in your training class and learning more. You mentioned the first week in December. Was there a set time you were looking at for the training? I would have Thursday and Friday available of that week. Is there any way to record the training on a website or CD for review for those of us who would miss the class? Also, Would you consider having a training class for an hour in the evenings? Greatly appreciate your help!
You're welcome.
Options are a nice vehicle to generate income and protect your equities if used prroperly. Most people trade them directionally (straight calls and puts), which in reality is the highest risk plays out there. What happens is that many lose thier entire investment if the stock turns against them. If you play directional always protect your capital.
Never lose more than 50% on any option play.
I focus on long vetricals and diagonals mainly during volatile markets, usually by legging into the play.If bullish and playing calls, I go long on dips and go short on the next stike up on rallies. As the stock pulls back I cover the short side. This reduces the cost of the long call and allows me to hold my long position. Do this several times and you could end up owning the long side for free or profitable even if the stock slides. You can also be bullish using puts in the same fashion.
I may start looking at buying some leaps on companies that have good fundamentals and have been trashed by the market at some point and selling against them, but I am still bearish medium term.
When the market is stable I'll focus on butterflies and condors.
Im a bear by nature, so I'll counter that rally with a massive dump.lol
i'm getting spanked a bit this week but chin is up.....need a good 400 point rally to close the week off!
Yes its was a great week....I like to trade with actual dollars goals to make a purchase...stops me from getting greedy...last week paid for my Lasik eye surgery for next month and a new red and whits stripped golf seat for my golf cart.....the rest went lays in waiting to strike if needed....currently holding spy nov 105 calls from .27 spy dec 105 calls, LDK dec and Jan 22.5 calls all bought cheap thursday ....so i hope.....Monday is looking good so far.........ps been educating myself on the whole delta thing...helps a whole bunch...any tips for good delta numbers would be appreciated...tia
Burp,
You seem to be catching on fast and have had a wonderful week- congrats man!. I'm in the process of retiring in a month and getting my notes together for the next class. Will probably be after the first week in Dec.
out FXP buy 2.00 sell $5.20...also sold all NOV spy puts from tuesday buy .30 sell 1.32 woot woot! had to get out of nov options time value is eroding fast....imo...
Lotto options play...FXP nov 150 calls in @ 2.00....now gimme some candy!
SO I am going to buy some of the FXP calls....thoughts....
Out at 3.70 for a better than double....
Ok Zilla picked up some MS $12.5 calls for $1.75.....may hold till after the elections.....
Thanks good to be here
Welcome to the board FEDEX, nice to have you here.
damn hobbies weeeeeeeeeeeeeeeeeeeeee GM 2K3
Thanks tradeforprofit!
Hi Zilla--Thank you for the lesson--well explained!!! Again, thank you!
Have a fun time at the wedding!
yeah that was my goal is to buy 1 contract until I get the hang of it.
Whatever you do, don't rush into trading options and also start out slow, like only 1 or 2 contracts, till you get the hang of it. Playing this market incorrectly causes Max Pain on your contracts.
Yeah I will street trader was helping me out yesterday, starting to get the feel for them.
Hey Strongtower,
Welcome to the board. We got lots of good info here. Absorb and feel free to ask any questions you may have. Get yourself a practice account and start paper trading so you can get the feel of how these move and after a few months, you should be ready to dip your feet in and increase your probability of winning trades.
what's up leemalone
Hi $treet,
Looking forward to it bud.
Hey Lee, bookmarked this board
just got back, will send you a PM on paltalk tomorrow
Yes. That is how I trade them. If the trade goes against me, I have the OPTION to change the trade in my favor. Remember, directional plays are the most risky trades in the options world.
So you can "morph" your strategies on the fly with these, correct? You aren't strapped into a pure up or down play.
I like to play the same stock's options as long as it is volatile. I usually play front month or next month expiration directional plays (basic calls and puts) when there is at least 3 weeks till expiry. I dont like going any closer to expiry unless I am familiar with how the option prices move in relation to the underlying stocks movement. In cases where the stock moves against me, i will try to turn the trade into a vertical spread.
I try to focus on selling ATM credit spreads with high implied volatility the week of expiration. That way you sell time and collect premium as the options erode.
If the stock is trading flat or in a channel I play butterflys spreads and Iron Condors.
On upward trending long term stocks I sometimes play calendar spreads.
Everyone has thier own style and I basically learned by watching how the option moves in relation to the stock. If you practice for a few months you will begin to see how they trade.
My whole focus is to get as much return as possible in as little time as possible with as little money as possible.
This week I have been playing HD 25 puts. I like to take a core position. When HD dropped the other day I sold them and then bought more when it rose again. Then when HD moved off a bottom and runs up,if I cant sell them for a profit, I turn it into a bull put spread by selling the 27.50 puts. As it climbs, I cover those 27.50s by buying them back cheaper than I sold them. This lowers the cost of owning the 25's and losing value in them as HD climbs, while allowing me to keep a position. If HD drops then they become more valuable, but if HD continues to climb then I continue to sell the 27.50s against the 25's I bought. That is my basic strategy. In every case it is smart to take a profit when you get one because the trade can turn against you if you are greedy.
Hey zilla, can you give us a looksee at some options you have been in and the reason for your taking your position & getting out of them. Old expired ones would make a good pattern for the unwashed like myself to see what you saw in them. Thanks.Mic3s..Breakout.
Excellent!
I wish you the best of luck 8 more zeroes.
I've been very passive with visiting IH. Just got your board on my radar.
Am using TOS flatform and have learned lots. They are the way to go. Am making small amounts but will take time.
Thanks for sharing.
yep. i find myself holding too many that expire worthless.
Welcome to school!
Thanks UPB,
I put a lot of time and money into learning this stuff and wanted to pass it on to others. If you have questions, feel free to ask, and send your friends here as well.
Options are fun to trade and can give the thrill the otcbb gives. The main problem I have seen new options traders make( I made too), is to learn when to stop out when you make the wrong trade. Master that, and options can be a good trading vehicle.
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This board is for those who wish to enhance thier trading experience by investigating options. Here, you can learn how to determine option pricing and the advantages of using different strategies to hedge your portfolio during bear markets and to maximize profits on them during bull markets.
Before you trade any options, heed this advice:
1. Get a practice paper trading account and trade the same amount that you plan to fund your account. Practice for at least 3 months before you place your first real trade. Failure to do so will likely result in what is known in the option world as Max Pain on the options you own.
2. Call your broker and find out what Level of Options Trading Authority they will give you. There are 5 levels, and it is essential that you are allowed at least Level 4 trading authority. This way you can limit your risk and increase your chance of a winning trade.
I use the Think or Swim ( www.thinkorswim.com ) platform because they offer all 5 levels to everyone. It is a decent platform, They have a web based platform and a desktop application (which is what I prefer) and have the ability to project future option pricing and backtesting for those who prefer it. They have 2 charting programs for redundancy, one of which is prophet charts, one of my favorites. They are very customer focused and will likely match commissions. Most brokers will only allow level 1 or 2 to inexperienced options traders, which is, in reality limiting your ability to hedge any trade that goes against you. You need to be able to hedge your trades, which is the true meaning of the word OPTIONS, in my book. You need to have the option to turn a losing trade into a winning trade with these levels of authority.
3. Get with a group of traders who focus only on options and futures. You can learn alot from people who are all focused in the same direction. Contact me for details. I am not a paying member, so my posting is limited but can reached at optioneducation@yahoo.com, and "mrweekend" at HSM. I am sometimes found on paltalk as stockzilla too.
4. This is NOT A GAME! This is serious business and if you treat it like a business, you can reap the rewards of owning your business. Those rewards come in the form of $$$$$$$. If you treat this like a hobby, you will be paid accordingly. Every hobby I have been invoved in has cost me money. None have ever paid me.
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