Replies to post #302 on Market Sense and Sentiment (MKTSS)

[bbgold]

Hi Leapyear, I just came back from running some errands and need to head out again. I will reply to your post over the weekend Ok? Thanks to Bernard for starting this thread. Hopefully we can all keep making contributions to it and help it grow.

Talk to you later Leapyear! Enjoy the weekend! Sincerely, Bob :^)

[bbgold]

Hi Leapyear, I was not online this weekend so I will have to take a look at the Options later on. Sorry about that!

I have to get some sleep. Sincerely, Bob

[Bernard Ng]

Thanks leapyear for taking the time to read this thread, I'm still trying to find a style for MKTSS... so far, it looks like "everyone is sharing their thoughts and strength here in a newbie way" that kind of style LOL.

signed,
Bernard

[bbgold]

Hi Leapyear, I called up Schwab and asked them about the Huge spread on the NDX Options. For an example I used the 1600 Put NDVXL.O. When I checked a quote on it this morning it showed a Bid of $60, an Ask of $69.40 and the last trade at $65 with a volume of 13. I asked them How was I supposed to place a trade with such a huge spread and why such a discrepancy from the Quote and the last trade? They put me on hold for around 8 minutes to find out. I guess that everyone took a look at it and was not sure Why either. They suggested that it could be due to the volatility of the index and the low volume on the Options. I guess that makes some sense. So I asked them Where should I put in my order then with such a huge spread and it looks like the last trade was in the middle, should I place my trade with a limit in the middle? They said that they could not be sure of whether or not the order would fill but to just place a limit with wherever you feel comfortable with the position. They said to look at How Badly you really wanted this Option in your portfolio as to which end of the quote to place your limit. I guess that if you want it badly then limit at the ask. Not so bad then limit near the bid. I just took a look and it is now trading at 60 x 67.50 with the last trade at 63. I think that the 63 must have gone through when the market was moving higher and now that it is moving lower again the Ask price moved up. Either that or the bid is Iffy and the orders going through more closely mirror the Actual Bid and Ask. I think that if you followed the quotes a while that you might begin to have a feel for where the actual orders would fill.

I hope that this helps some Leapyear. It made a little sense to me.

Good Luck Leapyear! Sincerely, Bob :^)

[bbgold]

Hi Leapyear, This is the Fourth time I am trying to put up this post. I have either lost my internet connection or accidentally dumped the post so this one will be Short.
I followed the NDX options a little today. I think that the volatility is indeed why the spread is so great. This morning the Dec 1600 Calls were around 48.60 x 56.60 with the last trade at $55. At the close the Calls were 75.20 x 84.40 with the last trade at $80. It would not have been too hard to cover the spread today Eh? Here is an example of the leverage that the options provide. The Nasdaq was up 58.20 or 3.1%, the QQQs were up 1.86 or 4.77%, QLGC was up 4.62 or 9.56%, the NDX was up 66.73 or 4.26% and the NDX Dec 1600 Calls were up $34 or 74%. The QQQs were selling for $39 yesterday, QLGC was $48 and the Calls were $46. The amount of cash that needed to be outlayed was fairly close but the returns were not even close. Even if I had purchased the Dec 1600 Calls at $55 when I called Schwab I would have had a 45% return. Of course that takes into consideration that the last trade of $80 could have been made. Of course I was also looking at the Dec 1600 Puts so I would have had to make the trade on the right side of the markets movement also.

Let me post this and continue. :^)

[bbgold]

Hey, it posted! OK so now let's take a look at what the Calls and Puts did today related to the NDX. Here are some quotes as to what the Options were trading at this morning and what they closed at:
Dec 1625 Calls open 39.30x44.20 close 60.40x69.50 last 62
Dec 1625 Puts open 73.30x83 and close 46.70x54.70 last 58
Dec 1650 Calls open 30 x 34 and close 48.20x56.20 last 40
Dec 1650 Puts open 88.60x98 and close 57.70x67.40 no trades
Dec 1675 Calls open 21.90x25 and close 37.90x42.90 last 25

I think that with the examples it is Clear to see how important it is to be on the Right side of the trade. The volatility can give you Great profits or Great losses. It is also interesting that this morning when I called Schwab there were only a total of 11 trades Total on the NDX. Having some kind of Open Interest might be a consideration before entering a trade. It will be interesting to see how much the numbers change tomorrow Especially if the markets turn back down.

I hope that some of this is helping Leapyear. Let me know what you think as I am just trying to learn this also.

Good Luck Leapyear! Sincerely, Bob :^)