I'm bidding $1... Mar 27, 2013 9:35 am

Not really. I have this problem where I lose every time I play earnings so I try to remind myself not to

You could buy 31.50 calls at 1.62 and sell 32.50 calls at 1.14 for a debit of .48. You would get max gain above 32.50 of 1.00 so .52 profit. Most of the $1.00 stock price spreads have a double available at max gain.

One thing to note about the virtual account at options house... it is 15 min delayed until you fund a real account with $1,000 minimum

Well, I now know I like pork bellies. More learning accomplished

Did we ever figure out pork bellies really is?

The most important thing you will want to consider is when interest rates start to rise in 2014 or so. It has an inverse relationship with the price you will pay for the bond. For example, I looked a AAA municipal bond selling for $120 with par at $100. They are selling for a premium because the yields from bonds are far better than anywhere else. If the fed started raising rates, that $120 you paid will now start selling for less, maybe $110. You either have to be prepared to get out of bonds in the next year or so, or hold them til maturity and receive par value. Of course nobody knows what will happen in the next 10 years, so its all a judgement call. Municipals are tax exempt also.

They think they are protecting you from losing all your money. Ironically, that penny stock you spent $1,000 on is also guaranteed to lose all your money

To be honest I do not know for sure. I liked TDA for no minimum but I got stuck at level 1 options as well

TOS is owned by TDA. I use options house. You get level 2 option trading with $1,000 minimum account. Cheap commissions too. Keep TOS for the tools though as options house is lacking.

I love all the 'I thought about buying a put $110 out of the money for over $1.00 per contract, but I didn't."

Quite honestly, hindsight is the only reason you wouldn't look like a fool. 99% of people would advise against it and 99% of us had no real idea this would happen. Most just looked simply for a gamble if they looked at all.

I thought about buying $485 puts...lol

You would have to wait until Jan13 expiration unless it goes up a lot more before then to get max gain right? I would assume at its current price you aren't closing the short for .05 until probably sometime in December at the earliest

I had been trying to figure this out all weekend. The number seem off, but I just had TOS find some spreads. It is their numbers. Most examples I have found of diagonals are similar to your methods. Buy long term, sell short term.

I was trying to find some more ideas for spreads. I don't know why, but TOS seems very adamant about selling the longer term one. Every diagonal that came up is this same way. This thing is not serving a purpose at the moment...

Perhaps you can help me understand a trade...

I'm playing around with TOS spread hacker

It is suggesting a diagonal spread:
Sell V Jan13 95 put at 1.10
Buy V Sep12 97.50 put at .12

It says max profit of 141% and probability of profit 98%

I sat and looked at this for a while and it seems similar to a vertical credit spread. In this case, I would receive a credit and the idea would be for the Jan13 puts to have lost a lot of value by Sep12 expiration I assume.

I won't be working with a very large account when I take this live, so it will take some time to build up, but if I stay away from 56,000% lottos and earnings plays and play the ones I know, I think I will be fine. Iron Condor looks best for me. I seem to be able to find where a stock won't go and I've gotten quite good at watching premiums turn to 0 in my account lol.

After looking at AAPL it may not be the best candidate since Oct 650 calls are $13. It would take a lot of selling to make those free.

So I assume it is in my best interest to buy farther out calls that I do expect to make it in the money, but still sell against them.

As you know I have been heavily researching various spread strategies and paper trading them for now. Very good win percentage so far, but I have a few questions and I need to do more research.

So from my understanding, if I buy lets say AAPL Oct 650 calls, I can sell weekly calls against it and still be covered. For example I could have sold $630 weekly calls today and but them back friday at .05. Clearly the margin requirement would be $2,000 per call sold.

If the above is correct, do you need to even worry about the long term option. I guess what I'm saying is, do I even care if AAPL gets to 650 by Oct expiry, or can I just keep selling weekly calls against it and pay for the call plus profit? And if the 650 call works out, even better.

I've got most of the basic mechanics down on spreads, but need to learn how to apply it effectively.

What is your trade on it?

What is your trade on it?

You are potentially right as more people shift to tablets and such, but I believe western digital makes solid state drives so those with fancy laptops will still need the drives and regular old HDs for less fancy computers. But western digital is a big time supplier of server side HDDs.

You do realize cloud computing does not remove the need for storage? In fact, as more clouds appear, more storage is necessary. You still need HDDs to run a computer to access your cloud which is stored on HDDs.

Thanks Lee. I am 7 of 8 on spreads now. Started paper trading them last week. I lost .05 on the one loser.

closed GOOG call spread

open
bought 600c at 13.80
sold 605c at 11.00
total cost(debit) of 2.80

close
sold 600c at 11.20
bought 605c at 5.80
total received 5.40

I could have closed the 605c on dip at open and probably received 7.00 to 8.00 instead.

Should have closed the short GOOG 605 calls when it dipped to $600

On the credit spreads I'm doing, if it moves deep in the money, you have the puts/calls you bought to offset those you sold. So if I bought 600 puts and sold 605 puts, I'm only on the hook for the difference in strikes which is $5 x 100 so $500. You need that much margin to do the credit spread anyway. So my max loss is the credit from the spread minus the $500.

Here are a few

Sell AAPL 600w put at 2.85
Buy AAPL 595w put at 1.47

Sell 3 TLT 130w call .78
Buy 3 TLT 131w call .50

Sell 3 TLT 130w call .49
Buy 3 TLT 132w call .17

Sell FFIV 85w put 2.85
Buy FFIV 75w put .43

I need to look farther out as well. Doing these type of trades yields small returns with large margin requirements or max loss, but every one has been a winner. I'm holding these for about a week or so on average

I did this today for GOOG earnings

Buy GOOG 600w call for 13.80
Sell GOOG 605w call for 11.00
cost 2.80 for the spread and might be in max gain of 5.00 at open

Yes I am. It seems it might take a little longer to make decent money with a small account, but I'm 7 of 7 so far in the past 2 weeks

I think Gambler had a different issue going on. this is what you get being the resident expert in spreads lol

Thanks for the advice.

I had not researched iron condor yet, but it sounds promising. Too many novice spreads to learn first. I can live without the multi baggers since I most often end up with worhtless options.

Spreads are much less stressful, much easier to monitor and defined. I would much rather setup trades with a defined cash flow and limited risk. And still play a few long options every now and then.

Thanks for the reply. They both expired worthless. I'm using Options House virtual platform to play with spreads. I closed the short side on another one today and my margin came back instantly. Maybe that is what I will have to do. I didn't know if there was some holding period rule or somthing I was not aware of. So far I'm 7 of 7 on credit spreads.

Lee I have a spread question for you...

I entered a credit put spread, sold 95p and bought 90p, and had 5 of each so margin was $2500. I let the options expire last friday as worthless. My buying power was decreased by the $2500 margin requirement when I entered the trade, but it has yet to be returned.

This is all in a paper trading account and I'm trying to learn the ins and outs of spreads and selling premium. Is there a time frame for the margin requirement being returned to me to use?

You are correct. I can't read. I like the idea of spreads but that is a lot of risk for little profit. Not as easy as it seems at first glance. I paper traded an AAPL 600wp/595wp vertical spread successfully this week. $138 profit for 1 with $500 margin.

So if I have this right, your margin requirement would have been $5000 with max loss about at $3800.

What was the specific trade if you don't mind. I'm investigating trading spreads

A couple other people helped me out. It turns out my order ticket was in wrong. I was looking at selling 600w put and buying 595w call.

I ended up pulling a paper trade of STO 600wp at 2.85 and BTO 595wp at 1.47 for a credit of 1.38.

So if I have this right, I keep the 1.38 if AAPL closes above 600 on friday and if it closes below 595 I am out $500. I also figured out my margin requirement is $500.

Yes it does. I get it now. Its also the margin requirement. Would be $500 per contract in this spread.

Yes. Thanks

In my initial example I filled out the order ticket incorrectly

I filled out the order ticket incorrectly

So if I have this right...

If you buy the AAPL 600wp and sell the 595wp its a credit around $6.10 as I'm typing this. Close above 600 by expiry and I keep the credit.

Now how do I figure max potential loss?

Can't get into chat on my phone. It says "This user name is already in use"

Thanks jb