Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
good stuff man :)
Comedic Relief for the board:
"Slap Chop"
been making $$$$ in the process, right?
well im riding a full scholarship, so the dirtiest four letter word of them all (debt, pardon my foul language) does not effect me
not really, just been living life, going to college, etc.
hey ace how have you been man
leemalone, we were unsuccessful in capturing mrweekend's landscape business :(, but the next time my army is in boston, we will capture that swine and subject him to water torture
hey lang, my friend made a options video that he asked me to share with anyone interested in options. its a free 45-min video explaining Implied Volatility. http://masteroptions.com/
if you have suggestions or would like him to do a specific topic, please tell me, or leave a comment under the video.
BTW i love the ibox seems like theres enough there that i dont even need to open anything else when trading lol
BTW if you have any suggestions for a video/article you would like to see, please tell me. the owner of the blog said he would be glad to do em. and I personally would make sure he sees to it :)
wow, so you had a sound understanding of options when you were 5 years old, quite impressive! :)
YO my friend recently made a video on Option Implied Vol
http://masteroptions.com/
its 45 minutes long, but it good
YO whats the good word man, long time no see
http://online.wsj.com/article/SB123681371776601701.html?mod=todays_us_marketplace
"Nortel Networks Corp. is in talks to sell its two main businesses to rivals, a sign the firm could break itself apart rather than emerge from bankruptcy as planned."
any comments on this?
I was shocked when i read this, I never thought a blue chip would EVER be trading in pts upfront for its cds, thats a little shocking...
thanks :D
actually reading through it, I feel as it it is a little condensed, I really ought to sit down and write something out, not just for the board, but also for myself, I've been meaning to, but never had a real purpose, b/c after RIMM, I just stayed away from the strategy.
right, the "waiting patient" part does involve some Directional analysis, so this "speculative" called writing is not completely neutral, as some may think. "nonspeculative" imo would be writing 1 year out, at like a 50% above, something like that, but to each his own.
another problem -> the spreads. if you short faz options, you cant cover right away, in most cases covering = losing $$, so you should consider if you short a call for $4, and it goes to $2 bid ask may be , ask may be 3.50 or something wild.
im in the camp of active writing, meaning, if im short a call it goes down enough, i cover. however, you can choose to be less active if you'd like, to each his own...
an alternate (i think) is buying leaps and selling higher strike calls, EG buying like FAZ jan 11 70call, and selling like 110 calls against it, but that leads us into a discussion about interest rates, bc any leaps trader knows rho is actually important for leaps.
Ive been thinking like this for a while. If you observed my trading, you'd say "this retard prolly has no clue wtf hedging or conservatism is" (partly bc my investment philosophy is scared money dont make money, remember that it is True) However, I do have a soft spot in my heart for covered writers, after that traumatic experience with RIMM, I became sympathetic with all ppl. Losing 20% on a safe strategy was more mind-boggling than i can handle, so I am always open to discuss covered writing, and its implications :D
I think the risk with the play is the risk inherent in all covered call plays.
Consider that if by expiry, FAZ is at 55 and FAS is above 4 (doesnt matter specifics, its going to be called away from you.
You make ~3170 from the premium and assignment; however you lose ~2500 from holding the FAZ, overall a gain, so no worries.
Now consider that you want to roll the position, which FAZ calls do you sell? The 85's may have too little value (if underlying at 55) for you to make the type of profit you'd like. So ideally, if you keep the strategy you'd be looking at the 60 or 65 calls, something in that neighborhood. Which, assuming some drop in volatility, should be at ~12 for the 60's. So now you are short the 60's at 12, and own the FAZ itself at a cost basis of 55 (you bought at 80, minus initial 12.80 and minus this new 12). So now, if FAZ rallies to above 60, you sell all FAZ at 60, leaving you a gain of about 11% for FAZ alone for the 2 months, a little less than the pro rated of about 12% a month you expected from the FAZ side of the position, right? And now you are neutral, so you have to establish the position again.
Now consider the FAS side. You buy 3.80, and essentially sell it for 4.70 (.20 from assignment + .70 premium), leaving you a return of ~24% for the FAS position of the first month, pretty good :), combine this with the gain from the FAZ, first month pretty OK, not exactly what you expected (b/c you do technically have a paper loss from the FAZ) but $$ izz $$ undeniably. So with the first month down, lets see what happens month 2. Assuming FAZ still at 55, FAS may be 8 (I really dont know the exact math, but I can probably say its somewhere above 7, for this example lets just call it 8).
So, since you are re-entering the position, you buy at 8, and would most likely sell the 10 calls, which assuming some dropoff in IV, prolly worth ~.60. Now if FAZ rallies to 60 or 70 or so, FAS may be worth 6.50-7, and next month, you may have to sell lower price calls, in which case if FAS rallies, you would be getting out prematurely.
I didn't assign money values, but hopefully you get a rough sketch of the risk inherent in covered writing. It may not seem obvious at first, but the big risk of covered writing is what I call "continuity risk" (prolly called roll-over risk formally, but I sticks to my own terminology). If you buy a stock and sell a call, you MAY make overall profit the first month, however, isnt there a risk that the stock can drop materially by expiration, thereby causing you next month to sell lower strike calls and should the stock then rally, you actually may end up with a loss and waste of 2 months if the moves were steep enough? Another example (this actually occurred in Dec of 07 I believe) with RIMM. I had a similar idea of buying RIMM, and just doing covered writes. At the time RIMM was trading about 130~, so naturally I sold the 135 calls for about ~3. However, RIMM tanked by expiration to like ~100, and selling 135s was no longer a viable option, so I sold 110s for ~2.5. So I owned the stock effectively at 124.5 (I bought at 130, minus 3 first premium, minus 2.5 second premium). Much to my chagrin, it rallied, and I lost $$ big time. How? If you accept that I "really" owned the stock at ~125, consider that I got assigned on the 110 calls, causing me to sell my shares of 125 at 110, a loss of ~15, Yikes.
Covered writing, like every other strategy, has its risks. And for this, the risk is that next month, the stock may decline, thereby causing you to short lower strike calls, and leaves the door open for you to lose $$ and time if it rallies. Now in your scenario, you are taking both sides, which sorta mitigates the issue, but not quite eliminate. Bc you can keep getting chopped, having to take a loss on FAZ and prof on FAS, or vice versa, and that may not make it worth your time if the returns are ~5% a month. And keep in mind, it only takes 1 bad month to remove many months of covered profits.
Now what some people do to eliminate this "month-to-month" risk, is simple: sell calls 6 months out. You will receive LESS premium selling 1 6 month call, then calling 6 1month calls every month, if you consider it. A 1month call may be 3, and a 6m call may be 11, so "all else being equal" if you can sell 1m call 6 times, it should leave you 18 by the end of 6 months, but as we know there is that month to month risk. With the 6m, there is less continuity risk, b.c you only care about every 6 months, therefore, what happens month to month really doesnt bother you. Like all things in investing, you take on less risk for less reward.
In sum, I like the idea actually, but Do Not be fooled that this is an easy way to make ~20%. BC especially with FAS and FAZ, they can go down substantially, causing you to short lower strike calls, and then rally, causing you to take a hit on one side. So there is some directional betting going on with covered writes, unless you go extremely OTM and only want like 1% a month, which is a different story.
As a side bar, Covered Writers are concerned with 2 returns: return if exercised, and return if assigned. The first basically says "how much % i make if the stock is above the strike and it gets called from me" and the second is "how much i make if stock below the strike and still have it" In your case, be concerned with 3: Return if FAS assigned, return if FAZ assigned, and return if neither assigned. It would be quite unusual to see them both assigned, but stranger things have happened I guess...
Anyway I hope this helped, Im sure leemalone gonna say something that totally proves me wrong :D, but just learn from my RIMM mistake. I bought the stock, shorted calls, had it plummet, shorted lower strike calls, had it rally, and lost $$. Covered writing month to month leaves the door open for you to get chopped and screwed to death, but offers more reward. 6-month out writing is less reward with less risk.
if you're going to comment on institutional action, please be fair enough to include those SELLING:
Dodge And Cox Institution 0.80 % 2009-01-30 15,105,986 $4,833,916 $0 0.00 % Sold Some -25,610,216 -62.89 %
Capital World Investors Institution -2.27 % 2008-11-14 20,803,551 $6,657,136 $-4,992,852 -42.85 % Sold Some -22,273,400 -51.70 %
Growth Fund Of America Inc (Growth Fund Of America Inc) Multi-Cap Growth -2.11 % 2009-01-28 None - - - % Sold All -18,248,700 -100.00 %
New Perspective Fund Inc (New Perspective Fund Inc) Global Large-Cap Core -1.46 % 2008-12-08 None - - - % Sold All -11,938,400 -100.00 %
as you can see there are more big time SELLERS than there are buyers. hmmmmmm, why do you suppose that is?
thanks :D
yessir, it especially helps that i bought GS calls 2 days ago :D
this is my last day trading as a 17 year old, come monday, im going to be trading as an 18 y/o :)
how have things been 'round here?
agreed, i think down tomorrow as well, i think NT going to have a hard time emerging from bk in the future, and a bigger company struggling just demonstrating how difficult it gonna be
could you blame him for doing so?
as a side note do a google search for DABA (Dating a Banker Anonymous) to see just how amazingly ignorant some people are. that site is the blog/chat place of the gold-diggers that married these bankers and are now not being able to take their monthly vacation to Europe, :(
man thats too easy LOL
thats a little unreasonable to have a target thats like 750% higher than the current price (assuming a price of .12) dont ya think? especially with this being a higher priced penny stock....
a gap down i assume you meant.
no, id just like evryone on this board to trade a 100mm portfolio :D
wow thats epic LOL
hmm maybe this board should be next to ask for bailout money.
Larry McMillan Jr. is what im going to start calling you :D
Feb 9 my man, give me a call.
again, throw a little cash into the Malice Fund, Guaranteed 100-Bagger, does any other investment offer that?
LOL
does any1 here actually use Black Scholes model?
sounds good :D
yep, or as my hedge fund buddies know me, "Pete" but i really dislike it, I dont get why people dont call me PETER, i mean is 1 more syllable really that difficult to pronounce?
February 9, I become Sir Malice, not just Mister :D
Should have been a 3.80 :(
but it is what it is, next semester I'm actually gonna try hard in ALL of my classes, and hopefully get that 3.88
yeah boss, Mister Malice is on a 30k scholarship and a 3k grant HOWEVER, for Mr Malice's parents it is a zero sum ordeal, because He lives in an apartment where rent is 2.5k a month (which His parents own), so technically His scholarship makes up for the lost 30k His parents would have made had they just rented it out, so technically yes, Mr. Malice is only 17 years old and paying for his own housing :D, He is sure that there are people at least twice that age still living at home with their parents.
(i love talking in the third person)