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Usually you are not exercised before expiration
I sell before they are exercised if I am itm.
Question for experienced options players.
If I am holding call or put options that are in the money is there ANY chance they would be exercised before expiry? The main point of this question is if the dollar value of the stock I control with the option is more then the amount of capital in said account is there a chance I would be put the stock before expiry? It’s also my understanding if I’m holding out of the money contracts on expiry they just go away and don’t cost me anything other then what I originally paid for them.
mrnatural -- i, like the idiota that i am...downloaded STOP Zilla and CAN'T get rid of it....they seem to want me to REGISTER it -- you know, PAY for it?? tells me that iHUB has infected my computer....they on STOPZilla "Black List"
i've downloaded AVG -- FREE version -- but what the heck...will try yours.
Buddiee18, try MALWAREBYTES, I had a similar problem and this took care of it...and its free!
http://www.download.com/Malwarebytes-Anti-Malware/3000-8022_4-10804572.html?part=dl-10804572&subj=dl&tag=button
Buddiee18, try MALWAREBYTES, I had a similar problem and this took care of it...and its free!
http://www.download.com/Malwarebytes-Anti-Malware/3000-8022_4-10804572.html?part=dl-10804572&subj=dl&tag=button
yup...just registered with my hotmail under "BUDDIEE". they want a "legit" email address ??lol...don't know mine at all...so will see how fast i last there. just posted at the "V" forum.
...and i just installed something i can't get rid of -- states my system is infected:
"Critical System Warning!
Your system is infected with version of Trojan.Win32.Agent.azsy. It is a Windows PE EXE. Once launched, the Trojan copies its body to the current user's Windows startup directory and attempts to steal passwords from Int."
and then i get this thing also that keeps popping up:
"W32.Ackantaa.B@mm - Worm Found!
W32.Ackantta.B@mm is a mass-mailing worm that gathers email addresses from the comprised computer and spreads by copying itself to removable drives and shared folders.
[Block] [Ignore] "
i keep hitting "Ignore" -- cause if i hit "Block" it directs me to pay a subscription to the "Personal Anti-Virus" -- in their wet dreams will i pay for it.
sooooooo am having trouble accessing iHub.
got it! tks!
hotstockmarket.com
"HSM"??? what is that ?? url site, please Lee.
I have unlimited posting at HSM. My handle is mrweekend. If I am anywhere on the internet during market hours, it is in the live chat there. I also own a business that keeps me quite busy so lately I am not around too much. I slow down from Nov-Dec so will be more active then. There are a few good option traders in there.
I have unlimited posting at HSM. My handle is mrweekend. If I am anywhere on the internet during market hours, it is in the live chat there. I also own a business that keeps me quite busy so lately I am not around too much. I slow down from Nov-Dec so will be more active then. There are a few good option traders in there.
LOL...THANKS, Lee!!! :)
LOLOLOL...Lee ?? it's going to take me 7 days to re-read and re-read your post, which, by the way - I THANK YOU FOR IT!!!
...and 4 years for moi to get about "SELLING the PREMIUM INSTEAD OF b.u.y.i.n.g. it"
"Buy to Open"
"Buy to Close"
"Sell to Open"
"Sell to Close"
when i BUY either Calls/Puts -- i click on:
"Buy to Open"
and then when i SELL either my Calls/Puts...i then
"Sell to Close"
sooooooooooo what you are advocating to SELL the PREMIUMS...then i do the following??
.."Sell to Open"
and then when i want to get rid of it:
..."Buy to Close"
??? is this correct ??
tia...
instead of wasting your posts -- you can email me @ buddie29@hotmail.com -- if you wish to.
ps...i've printed your post so that i can re-read it as many times as possible. THANKS!!! :)
LOL, I had to reply.I rarely add more than 8 replies a day anyway, cuz I tend to be long winded, as you are soon to find out. Dont consider yourself a slow wit. It took me about 2 years just to learn all the mechanics of most of the type of option strategies out there and i studied 6-7 hours a day until I could memorize them. I still dont understand them all-lol. I would encourage you to play options in a way that sells premium instead of buying it.
See if this makes sense to you. When you buy front month premium, Time is your enemy. The minute you buy a call or a put, time starts to decay your premium if it isnt deep in the money. Most option OTM plays are losing trades because of this decay and because the stock doesnt move strongly enough before the TIME eats away all the premium. Thats why, if you buy premium and the trade goes against you, then you have choices to make: I normally chose 1 and 3. Number 3, gives you the option of turning a losing trade into a winning tade.
1. Get out early, so the loss is minimal or at least not too hurtful.
2. Double down, increasing your risk dramatically and possibly wiping out your acct. This happens to many option traders at some point. I have porbably come in contact with a few thousand option traders over the years and many have said they wiped out thier accounts by buying premium and not getting out soon enough when the trade goes south after doubling down.
3. Sell premium, if possible, against the premium you originally bought to try to manage a profitable position. If a trade goes against you and you own calls, It may be possible to sell the same month (this is called a Vertical Credit Spread), lower strike call against it so you collect the premium on that sell and let that premium decay if the stock continues south or trades sideways. As long as the stock closes below the lower strike call on expiry, you can keep the entire premium on expiration friday and both options expire worthless. You keep premium and you dont even have to pay commissions.
THIS is important to note however. Even if both of the calls are not ITM on expiration Friday and are worthless and you have collected all the premium, you are still at risk of obtaining a defined maximum loss on that trade because the option doesnt officially expire until the third saturday and you still have a short call open (this would be the call you sold when the trade turned against you). If fantastic news comes out on Friday after the stock market closes and the stock shoots up above the original calls you bought, then you will recieve max loss if it closes after hours above that original call strike. Thats why I always close out my short positions if I am green on a vertical spread trade. You take all the risk off the table by buying back those short calls. My broker will buy back any short option before the close of the market on expiration friday for no commission. Now that's a broker that I like- One who doesnt want thier customers to risk money and are willing to let them close their short out of the money options that are worth .05 or less for free.
The trick with turning a losing trade into a winning trade is to sell the premium as soon as the trade goes against you and before your loss is too much. You may be able to sell enough premium to cover the cost of original calls that you bought before the trade went south, so you break even from a losing position. Note also that you must now monitor and manage both sides of the trade, the short call and the long call. If the stock turns back up then you need to set stops for what you are willing to risk on the premium you sold. So be aware to monitor both positions at all times.
I play about 5% of my portfolio on vertical spreads. I try to sell no more than 40 days of premium. Typically I will use them when a front month or 2nd month long option turns against me.
You can do the same with puts. If you own puts, you can sell front month puts against them if a stock starts to go up. Simply sell the next strike above the puts you bought and keep the premium if the stock stays above your sold premium price.
Sometimes, if you are good you can hold a long side and daytrade the short side to try to pay off your long positions and if the stock eventually turns back in your favor then you make money on both positions as a stock fluctutes. I did this with AIG this month. I originally bought the 23 puts a while ago and AIG continued up. So each day I was selling 25 and 24 puts against them, then buying them back as soon as they were 10-50%profitable. After several days I traded enough to pay off the 23 puts I own and actually brought in a few thousand extra in premium. If AIG takes it in to the crapper next week, those 23 puts could bring a nice chunk o change as well. If not, then the I can still sell those 23 puts for something. This has happend several times for me where I made money selling premium while the trade went against me, held the long position ( and in a couple of cases adding to that position while the premium was really low) and the stock reverses and the long position pays off hansomely too. I now hold 40 AIG 23 puts that were virtually paid for by selling/covering the 24 and 25 puts over and over last week as AIG climbed and retraced.
Read about credit spreads in my education thread for details on the mechanics of vertical spreads. Take your time reading about them until you totally understand the dynamics.
Once you have digested this, I'll introduce you to diagonal spreads, one of my favorite mid term option strategies.
If you've enjoyed this lil bit of information even half as much as I did, well, then I enjoyed it twice as much as you-LOLOLOLOLOLOL :)
leemalone -- i've saved this post of yours. you put it in such a way that a slow wit can comprehend. moi = slow wit.
MANY THANKS!!! and don't reply. i read in one of your posts that you only have 15 posts/day and i don't want you to waste it on moi. thanks again!
Hi AA
If you sell a naked put, you want the stock to close above the strike price. If you sell a naked call, you want the stock to close below the strike.
In either case you keep the premium. With the naked put, if it closes below 2.50, you will be "put" the stock which means you would have to buy it.
With the naked call, you would have to sell the stock at 2.50 and buy it at the prevailing cost if it closes above 2.50 on expiry.
REMINDER to moi...TO COME HERE MORE OFTEN!!!
ok...thanks...that what I thought but at first I had it backwards
Hi AA
If you sell a naked put, you want the stock to close above the strike price. If you sell a naked call, you want the stock to close below the strike.
In either case you keep the premium. With the naked put, if it closes below 2.50, you will be "put" the stock which means you would have to buy it.
With the naked call, you would have to sell the stock at 2.50 and buy it at the prevailing cost if it closes above 2.50 on expiry.
actually I have it backwards....I need it to go up to make $....I would have to sell the 2.50 Call and it not go above 2.50 to make $ correct?
Hey lee got a question for ya. I think I under stand but making sure.
Looking at UIS stock and its at 2.19. If I sell 2.50 put for .35 then I will get the money and not have to buy the stock as long as the stock don't make it above 2.50 by expiry?
Also if it matters then it would be a naked put.
Sorry you had to burn another post! I emailed you, maybe we can correspond via email. Have a great day, like you did yesterday, today!
I have 15 posts. I do hang out on paltalk as stockzilla sometimes and also hang out atwww.hotstockmarket.com in the live chat room most of the trading day. Feel free to join us there. There are a few option traders there.
Hi LM...are you able to reply here (unlimited) or only ur 15 posts?
didn't realize about that site -- the options calculator. thanks for the info also.
Go to www.cboe.com and look for the options calculator. It based on the Black-Shoales model. You can plug in the expected price, date, and volatility and it will give you a theoretical value for the option.
lololol,
Thanks for the list.
:)
I'll check the list out. Thanks
Here is a list of penny increment options and also a list of options with 1.00 strike prices. http://www.888options.com/help/faq/general.jsp?prt=nyse
You're welcome.
Take your time learning this stuff. No need to rush.
thanks for the info...i am still new to and learning about options...
The platform I use, Think or Swim, shows put vs call skews. I would think there are other places on the web where this info is available, but I havent spent any time looking for them. I'm not aware of a search feature for unusual volume for alerts, but keep in mind that volume on options doesnt take into consideration of whether people are buying the calls or selling them (or puts), so I havent put a lot of faith into volume of the options with one exception. If a company puts out positive news and call volume is high, I assume it is buying.
I think investools may have a search feature for unusual volume on options, but I am no longer a subscriber so I cant verify that.
Lee... hello there..is there anyway to get options scanners...like real time volume alerts and stuff of that sort...i would presume they would be expensive...but when pete naj or someone goes on TV and says the volume was crazy on XYZ sept 20's...they cant watch every option..they have the tools...where can i get them?
just looking to get ahead anyway i can...thx
Sorry for the late reply.
You can buy and sell the option at any time prior to expiration. It doesnt have to hit the 10.00 strike.
If stock is at 9 and you buy a 10.00 call and the stock goes up to 9.5 then you would of made money or should of unless you are getting close to when they expire. Also if takes awhile to go from 9 to 9.50 then you might not make money due to time.
when do i made $ if i buy call 10.30
the stock have to go up 10.30 ?
thankyou
you can buy the call at anytime. The Call for 10.00 doesn't mean you have to wait for it to get closer to that price. A call means you think the stock will go up in price. You can sell the call anytime like a stock.
hi leemalone2k3
can you tell me please
stock is 10.00
if i buy option call , that mean we want it go up
do i have to to buy it closer to 10.00 or higher ?
thankyou alot
very cool.....
Vertical Trade Mechanics
here's some trade mechanics to chew on:
Long Verticals:
If you expect a quick, big move:
Buy ATM and sell OTM. Make a quick exit just like you do with long calls or puts and take your profit on that move. Do not hold until expiration. Remember, you need the stock to move fast and large!
If you expect a small or no move:
Buy ITM (puts time decay in your favor) and sall ATM and hold until expiry.
With Long verticals early exercise gives you max gain and there is no margin requirement.
Short Verticals:
If you sell ITM be very careful. This means the stock must move really hard and really fast. This type of play is the highst risk/lowest possibility of getting the right move. That is why they pay the highest credits- beware of high credits.
If you sell ATM the stock still may need to move a little bit, but in many cases the stock can stay where it is and you can still collect premium or at least not lose money and in a few cases the stock can go against you a little bit and still you can break even. The probability of a winning trade is higher than if you sell ITM (aboove) and these type of plays give decent sized credits and decent risk reward.
If you sell OTM, the stock is already where you want it to be. This play has the highest probability of success but tiny rewards. You could do 20 of these with all winning trades and it would only take 1 losing trade to take back all the gains you got on the winners.
With Short verticals, early exercise equals max loss and margin is required.
Hope this helped explain it
In all verticals there is a max gain and a max loss- both clearly defined. If I see 80-85% of max gain, I will usually close out the trade because I dont like the risk of losing those 85% gains just to get another 15%.
here's some trade mechanics to chew on:
Long Verticals:
If you expect a quick, big move:
Buy ATM and sell OTM. Make a quick exit just like you do with long calls or puts and take your profit on that move. Do not hold until expiration. Remember, you need the stock to move fast and large!
If you expect a small or no move:
Buy ITM (puts time decay in your favor) and sall ATM and hold until expiry.
With Long verticals early exercise gives you max gain and there is no margin requirement.
Short Verticals:
If you sell ITM be very careful. This means the stock must move really hard and really fast. This type of play is the highst risk/lowest possibility of getting the right move. That is why they pay the highest credits- beware of high credits.
If you sell ATM the stock still may need to move a little bit, but in many cases the stock can stay where it is and you can still collect premium or at least not lose money and in a few cases the stock can go against you a little bit and still you can break even. The probability of a winning trade is higher than if you sell ITM (aboove) and these type of plays give decent sized credits and decent risk reward.
If you sell OTM, the stock is already where you want it to be. This play has the highest probability of success but tiny rewards. You could do 20 of these with all winning trades and it would only take 1 losing trade to take back all the gains you got on the winners.
With Short verticals, early exercise equals max loss and margin is required.
Hope this helped explain it
In all verticals there is a max gain and a max loss- both clearly defined. If I see 80-85% of max gain, I will usually close out the trade because I dont like the risk of losing those 85% gains just to get another 15%.
With options, time is the important factor. Every day, premium erodes and option value changes with underlying stock value, time, volatility and interest rates changes.
Go to www.cboe.com and look for the options calculator. It based on the Black-Shoales model. You can plug in the expected price, date, and volatility and it will give you a theoretical value for the option.
I haven't used the calculator there because I use the thinkorswim trade platform and it has a theo value projector right on the trade tab.
If it hits 7.50 tomorrow it will be worth .41. It has a theta of -.04 which means it loses .04/day.
im here, i want to do my best to understand how to make trades
my calls are pretty good, like on TTWO 7.50 will hit soon
7.50 TUOCU.X 0.35 0.00 0.35 0.40 123 2,244
what happens when the strike has met 7.50, what will .35 cents become? and the pricing? so many questions, i hope i dont sound too dumb
I probably wont be trading today Mike. We just got power back last night after a nasty ice storm last week so I've been out of the loop for a while. I'm hoping to be back in action next week.
Are you looking at anything special that catches your eye?
What options are you looking at tomorrow LM2k3?
Very solid advice.
yup
Practice these strategies on paper for a few months and you can really get creative as well as consistently make profits.
Many people try to get the big bang with options but the risks are so high that they wipe out thier accounts. I like higher probability plays more than the multibaggers. If I believe that multibaggers are still available after taking a profit on a spread I will hold a portion of them long and collect on them.
Capital management is the key with options. Never put too much into an option play because you may need to hedge your position at any given moment. I consider a good trade not only one that makes me a profit , but also one that may have lost money but limited the loss to a small amount instead of a huge amount.
When I find stocks that are trending sideways medium term, 8 weeks to 4 months, i play condors and butterflies.
At this point I am looking at some value plays for LEAPS calls. During that time I hope to lower thier costs with back ratio and vertical spreads.
Cool play em both ways makes sense.
During high volatility, I like to play front month or next month calls that tend to move with deltas above .50. Buy them at lows and flip them as quickly for 30-50% gains if possible. If the trade should go against me, I will sell calls against them.The problems with directi0nal plays during high volatility is that premiums are at maximum prices and theta (time) eats away value quickly on those premiums. I would rather sell time than pay for it so I usually play bull put credit spreads and let the time decay eat away at the value.
During trending times, I will buy calls deep in the money at support 3-8 months out and and wait longer to take profits. I sell calls against them at reversal levels and cover them at support to bring in premium and lower the cost of the long calls.
When I think an uptrend is reversing I like to play vertical bear calls for 30-45 day plays and try to take 50-75% of max gain.
What is your strategy on stocks you like for calls?
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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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