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PCola's Options trades

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Last Post: 10/20/2009 3:30:27 PM - Followers: 1 - Board type: Premium - Posts Today: 0

This is just a place for me to document my options trades. I lost a ton of money trading options earlier in the year, and felt like every time I went heavy into something thinking it would move one way, it would seem to always move hard in the other way. So I started hedging by trading straddles instead, and sometimes will buy both a put and call out of the money.

Update: I spent a few hours creating a spreadsheet to do some backtesting of options strategies.  It's fairly flexible, but also simplified greatly in many ways.

It was created with straddles in mind (or ones that I don't know the name where if the stock is trading at $1 you buy $10 puts and $12 calls, because you expect a big move but not sure which direction)

The first step is to pull historical data from yahoo finance.  It has daily high, low, open, close, and volume

Then I set up some parameters to test.  They include the following:

Current price

Call Strike Price

Call per Contract Cost

Number of call contracts (actually, as of now it's set up to assume the same number of calls and puts.  You can buy only one or the other by zeroing out the cost of the one you're not looking to buy, but you can't buy 10 calls and 20 puts for this iteration of the model)

Put Strike Price

Put  per Contract Price

Number of put contracts

days unti lexpiration

1st sell trigger (e.g., sell 50% of the position if the contract value goes up 100%)

2nd sell trigger


What the model does is look at the data and figure out what the gain or loss on the position would have been assuming every day was options expiration.  In other words, if there are 5 days until expiration, it takes the closing price from 5 days ago, converts it to the current price and looks to see if the sell triggers would have executed at any point during the next 5 days, and if there are contracts remaining, sells them at the value of the contract as of the closing price after the 5th day.


One important simplification is that I assume NO PREMIUM.  So if you have an $11 call and the stock is trading at $12, I value tha contract at $1, even if there is a week until expiration.  Calculating the true value would be WAY too complicated (if even possible), and so this model inherently UNDERESTIMATES gains, and the underestimation gets larger as you go further from expiration. 


A "simple" example is here.  Stock ABC is trading at $10.  You buy 4 $9 puts at $1 and 4 $11 calls at $1.  The options expire in 5 days, and you'd sell 1/2 of your position if the price doubles (<b>note that here I mean the combined price, since if the price rises your put value goes down, so you want to double your intial outlay in order to be riding "free" shares<b>), and another 1/4 if the price goes up 300%.  The closing prices for the last 6 days were 10, 13, 16, 11, 12, 8. The stock went up 25% in the last 5 days (8 to 10) so recalibrating the values as if today was day 1, you'd have prices of 12.5, 16.25, 20, 13.75, 15, and 10.  So what we're doing there is saying "if the % change for the last 5 days happened over the next 5 days (until options expiration), what would happen to the stock (and underlying option) price?".  So after day 1, the price would now be at $15, and your $11 call would be worth $4.  So you would have sold 2 contracts at $4 at some point during that day (you've now gotten your initial $800 back, and have 2 "free" contracts).  The next day the price dropped from $15 to $13.75, so no further action would have occurred.  The 3rd day the price went up to 20, so your call option would now be worth $9.  So at some point during that day you would have sold 1 more call option at $8.  You're now sitting on an $800 realized gain, and are riding 1 "free" contract.  The 4th day the price drops to 16.25, so nothing happens.  Then the 5th day (option expiration) the price closes at 12.50, so just before the close you sell yoru contract for $1.50 for another $150 gain, and your puts expire worthless.


So in the above example, both your 1st and 2nd sells were triggered, but had they not been, all 4 contracts would have been sold for $1.50 at expiration, and you would have lost $200.

The above process is repeated for each day that data is available (10+ years for most big board stocks), and then I do 4 calculations for multiple time periods.  I find the number of gains, average gain/loss, maximum gain/loss, and minimum gain/loss (really just the maximum loss) for the last 5 trading days (~1 week), 10 days, 15 days, 20 days, 40 days, 60 days, 80 days, 100 days, 125 days (~6 months), 188 days (~9 months), 250 days (~1 year) 500 days (~2 years).  So that is what I will refer to when I say things like "if I made this play each day in the last month I would have had a gain 15 of the 20 days, and made an average of $2,000", etc.

As I said, there are a lot of simplifications here, but I don't have the time or energy to correct them all.


Please let me know if you see anythign egregiously wrong in what I've done here.




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#36   Got 15 $7.50 calls on CONN for 1.00. PCola77 10/20/09 03:30:24 PM
#35   Ended up getting a straddle of 10 contracts PCola77 10/16/09 03:54:02 PM
#34   BIDU was basically flat overnight. I was able PCola77 10/16/09 09:34:31 AM
#33   Got some BIDU 420 calls at .80 also. PCola77 10/15/09 04:00:39 PM
#32   Thanks! KIRBY 10/15/09 03:30:08 PM
#31   Good luck, I'm just trying to learn some PCola77 10/15/09 03:29:25 PM
#30   In some BIDU $380 puts at .60. PCola77 10/15/09 03:28:48 PM
#29   Hi PC, board marked, new to options so KIRBY 10/15/09 03:21:51 PM
#28   Sold those last week at 1.90. Took PCola77 10/12/09 10:38:30 AM
#27   Sold those at $1. PCola77 10/12/09 10:38:00 AM
#26   In 10 CRM $60 puts at 3.40. PCola77 10/06/09 10:28:01 AM
#25   Forgot to post this earlier but posted it PCola77 10/01/09 11:44:40 AM
#24   BIIB took a loss,out at .48 average smokeeater 09/30/09 04:16:08 PM
#23   BIIB in $55 calls at .55 on pullback,traded smokeeater 09/29/09 01:36:09 PM
#22   RIMM sold calls at the open for .69 smokeeater 09/29/09 01:22:27 PM
#21   thx looks interesting! smokeeater 09/29/09 01:21:51 PM
#20   I just added a description of my program PCola77 09/29/09 12:54:18 PM
#19   thx! I use Questrade,looks like their competitive smokeeater 09/29/09 06:59:41 AM
#18   ETrade is 9.99 + .75 per contract and PCola77 09/29/09 12:26:59 AM
#17   curious,if you don`t mind me asking,what commissions to smokeeater 09/28/09 10:59:12 PM
#16   thx,doing well!I opened an account on Aug 21,2009 smokeeater 09/28/09 10:44:38 PM
#15   Damn dude, you're on a nice roll to PCola77 09/28/09 10:10:38 PM
#14   RIMM bought $75 calls at .62 here smokeeater 09/28/09 03:45:26 PM
#13   XRX all out at .20! weeee!! smokeeater 09/28/09 03:03:22 PM
#12   Nice job. I set up a simple PCola77 09/28/09 02:10:46 PM
#11   XRX bought some $8 calls at .15 here,spread smokeeater 09/28/09 01:35:27 PM
#10   RIMM all out at .32 for a modest smokeeater 09/28/09 01:31:07 PM
#9   Nice, you're already up 10%+ on them at PCola77 09/28/09 12:54:25 PM
#8   RIMM in some $80 calls at .28 smokeeater 09/28/09 11:37:08 AM
#7   No, that would be great. Hopefully we can PCola77 09/28/09 11:31:24 AM
#6   Hey Paul, just starting out tinkering with options,I'm smokeeater 09/28/09 11:24:54 AM
#5   Well, I got smoked. had an plan PCola77 09/21/09 02:48:31 PM
#4   Trying something with AIG for tomorrow's options expire. PCola77 09/17/09 04:05:22 PM
#3   VVUS just released news that they are doing PCola77 09/16/09 04:25:06 PM
#2   Just doubled up on each, calls at .40 PCola77 09/14/09 01:29:20 PM
#1   First documented trade is buying October VVUS $15 PCola77 09/10/09 12:02:15 PM