Options for Dummies

Join the InvestorsHub Community

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.

Live Updating

Older

hopscotch

05/21/08 8:37 PM

Post #70

Re: #67: @Churak - De Nile is a river in Egypt

http://investorshub.advfn.com/boards/read_msg.asp?message_id=29492422

hopscotch

05/21/08 8:28 PM

Post #69

Re: #67: @Churak - De Nile is a river in Egypt

http://investorshub.advfn.com/boards/read_msg.asp?message_id=29492208

hopscotch

05/21/08 8:10 PM

Post #68

Re: #67: @Churak - De Nile is a river in Egypt

blah blah blah

Churak

05/21/08 7:51 PM

Post #67

Re: #66: @hopscotch - Oh, well then are you in denial?

De Nile is a river in Egypt

hopscotch

05/21/08 7:50 PM

Post #66

Re: #65: @Churak - u r axing the wrong person...lol...

Oh, well then are you in denial?

Churak

05/21/08 7:48 PM

Post #65

Re: #64: @hopscotch - Hello. I'm Hopscotch, and I am an options

u r axing the wrong person...lol...

hopscotch

05/21/08 7:47 PM

Post #64

Re: #63: @Churak - OK...how about getting this board going again, Grand Poobah...

Hello. I'm Hopscotch, and I am an options dummy. Please help me.

Churak

05/21/08 7:40 PM

Post #63

Re: #1: @Mattu - OK, let's talk about this on Tuesday.

OK...how about getting this board going again, Grand Poobah...

SmokingUSA Free

06/06/07 7:29 PM

Post #62

My friend is introducing me to options and I was wondering if you can swing trade them?
Also what is this Strike price for.
Lets say I was going to buy 1 contract . a put on a stock or index and it has a strike price of 80.00 what does this really mean?
Is it something to worry about if I wasn't going to hold it til even close to when the option expires?
Thanks..
Just learning.

alaskaman

10/17/06 12:49 AM

Post #61

Hi guys,

Anyone know of a good options program where I can plug in all my Intel calls and then play with the variables. The closest thing I've seen is at the website 888options but it only does 4 different strikes at a time with a limit of plugging in 250 contracts.

I'd like to be able to plug in all my Jan's and all my 08's and then see what they'd be worth after changing the stock price and time to expiration.

Gd2Aussie3 Free

10/13/06 4:31 PM

Post #60

MOT, PENN and KG are good option plays.

So far MOT and PeNN have done very well. Just started today with KG.

Any thoughts appreciated.

G'day Mates.

Aussie

Bernard Ng Grandfathered

11/07/05 8:11 AM

Post #59

Re: #58: @WinLoseOrDraw - Spending a rainy afternoon going through the interest

Thanks WLD, looking forward to seeing another options experiment. TIA!

WinLoseOrDraw Free

11/04/05 5:47 PM

Post #58

Spending a rainy afternoon going through the interest rate derivatives chapters of Joshi's Concepts & Practice of Mathematical Finance.

Ultimately, if the goal is to use options as the weapon of choice in the long-gamma battle, it makes sense to understand how derivatives are priced. Doesn't mean you have to derive every formula, but it does mean understanding the assumptions underlying the models, because it's in the assumptions that the seeds of future disruptions lie. And long gamma is all about taking advantage of future disruptions.

In a way, where you end up is in a kind FA on (market) structure: instead of focusing on what might cause the crack, concentrate on the easier task of figuring out where the crack will happen.

Assumptions are a blind spot. It's not the thing we look for that gets us, its the thing we aren't looking for.

WinLoseOrDraw Free

09/25/05 10:52 PM

Post #57

Re: #56: @Bernard Ng - Does it mean it's very hard to make

For the strategy to work, volatility has to come into the market. It didn't happen in time. Ultimately, you have to bet on *something* to make money.

Bernard Ng Grandfathered

09/25/05 9:02 PM

Post #56

Re: #55: @WinLoseOrDraw - Both legs exprired worthless, the net loss was

Does it mean it's very hard to make money with this strategy? Or the timing is just off? What makes this experiment a losing one? Thanks!

WinLoseOrDraw Free

09/25/05 7:28 PM

Post #55

Re: #54: @Bernard Ng - So what was the final result of this experiment?

Both legs exprired worthless, the net loss was original price ($1.00) less the hedging profit (~$0.30).

Bernard Ng Grandfathered

09/25/05 4:42 PM

Post #54

Re: #49: @WinLoseOrDraw - Last of the QQQQ hedge gone, another nickel

So what was the final result of this experiment?

QuickTrade Free

09/23/05 6:58 PM

Post #53

Re: #4: @IRISHBULL - I trade options.. I don't get into all

double post.

QuickTrade Free

09/23/05 6:58 PM

Post #52

Re: #4: @IRISHBULL - I trade options.. I don't get into all

That's very interesing. Something I should get into.

WinLoseOrDraw Free

09/06/05 10:01 PM

Post #51

Re: #50: @Bernard Ng - Hi WLD, if the market didn't bounce back

What the position wants is to be as far from 39.50 as possible - in either direction. If the extension happens very quickly, it is probably a bit more profitable if the move is downwards, but the difference isn't huge. Especially this close to expiration.

Time is running out for a profitable exit. What we really need here is one of those 3% intraday romp-o-ramas. :)

Bernard Ng Grandfathered

09/06/05 9:13 PM

Post #50

Re: #49: @WinLoseOrDraw - Last of the QQQQ hedge gone, another nickel

Hi WLD, if the market didn't bounce back and keep falling, would this experiment become more or less profitable?

Thanks. I'm still watching, and would probably ask more questions when this hedge kitty stops jumping. LOL

WinLoseOrDraw Free

09/06/05 11:16 AM

Post #49

Re: #48: @WinLoseOrDraw - It ain' exciting, but the cost basis keeps

Last of the QQQQ hedge gone, another nickel shaved away.

 
 + 1    QQQQ Sep 40C @ -0.50 
 + 1    QQQQ Sep 39P @ -0.50 
  
 + 0.28 in the hedge kitty

WinLoseOrDraw Free

08/31/05 3:14 PM

Post #48

Re: #47: @WinLoseOrDraw - Adding it back at 38.35, with 38.85 as

It ain' exciting, but the cost basis keeps dropping and dropping.

 
 + 1    QQQQ Sep 40C @ -0.50 
 + 1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.70, limit exit @ 39.20 
  
 + 0.23 in the hedge kitty

WinLoseOrDraw Free

08/30/05 12:05 PM

Post #47

Re: #46: @WinLoseOrDraw - Dropping half the hedge @ 38.80 for another

Adding it back at 38.35, with 38.85 as the exit target. With theta being shed, the payoff curve gets steeper and its helpful to claw back a little more at a time.

 
 + 1    QQQQ Sep 40C @ -0.50 
 + 1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.70, limit exit @ 39.20 
 +10    QQQQ @ 38.35, limit exit @ 38.85 
  
 + 0.18 in the hedge kitty

WinLoseOrDraw Free

08/29/05 2:06 PM

Post #46

Re: #42: @WinLoseOrDraw - And take another dose here at 38.30.

Dropping half the hedge @ 38.80 for another nickel in the kitty. Extending the limit exit on the remainder slightly...

 
 + 1    QQQQ Sep 40C @ -0.50 
 + 1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.70, limit exit @ 39.20 
  
 + 0.18 in the hedge kitty

WinLoseOrDraw Free

08/28/05 9:02 PM

Post #45

Overnight futures are significantly red, reaction to Katrina, I'm presuming. If this gets deep enough, I will lock deltas with NQ futures and shut the QQQQ position down tomorrow.

WinLoseOrDraw Free

08/27/05 6:23 PM

Post #44

Re: #43: @Parz - I'm new to the options arena....I hold 500

Sure. Here's a brief discussion on covered/calls:

http://www.valueline.com/edu_options/rep4.html

What are you hoping to accomplish with this strategy?

Parz

08/26/05 4:13 PM

Post #43

I'm new to the options arena....I hold 500 shares of DELL and would like to get some info on covered calls...Is this the right board?

WinLoseOrDraw Free

08/26/05 10:23 AM

Post #42

Re: #41: @WinLoseOrDraw - And in again at 38.70...

And take another dose here at 38.30.

 
 + 1    QQQQ Sep 40C @ -0.50 
 + 1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.70, limit exit @ 39.10 
 +10    QQQQ @ 38.30, limit exit @ 38.70 
  
 + 0.13 in the hedge kitty

If it goes under 38 today (not likely, but you never know) the option of closing out the position starts becoming a reality.

WinLoseOrDraw Free

08/24/05 3:45 PM

Post #41

Re: #40: @WinLoseOrDraw - And exiting the hedge as scheduled, another 0.04

And in again at 38.70...

 
 + 1    QQQQ Sep 40C @ -0.50 
 + 1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.70, limit exit @ 39.10 
  
 + 0.13 in the hedge kitty

WinLoseOrDraw Free

08/24/05 1:10 PM

Post #40

Re: #36: @WinLoseOrDraw - Churn churn churn: this time the entry is

And exiting the hedge as scheduled, another 0.04 in the pot.

 
  +1    QQQQ Sep 40C @ -0.50 
  +1    QQQQ Sep 39P @ -0.50 
  
  +0.13 in the hedge kitty

nlightn

08/22/05 5:08 PM

Post #39

Re: #38: @WinLoseOrDraw - I'm assuming you wanted to bet on a

yes,...still working with that downward move from last weeks verdict.

i did quite well with the Aug $30 puts so based on the future possibility of MRK and Vioxx and the upcoming trials in Sept. and the federal cases in November,...the volitality is worth the hedge.

i'm going to watch it and might take a deeper position, as in a spread as you have suggested.

appreciate your assistance.

WinLoseOrDraw Free

08/22/05 4:53 PM

Post #38

Re: #37: @nlightn - Win - can you assist me with this

I'm assuming you wanted to bet on a downward move, which in this case didn't happen (at least not yet). I might have looked at selling a put at 27.50 and buying the one at 30. If the stock wasn't sporting significant volatility, it would be the other way 'round: buying the 27.5 and selling the 25 (or lower).

In general, when volatility is high, a spread should put the short leg At The Money (ATM). When volatility is low, you want the long leg to be ATM.

nlightn

08/22/05 4:18 PM

Post #37

Win - can you assist me with this option trade.

i'm looking at the MRK (MRKUE) Sept $25 put.

the morning priced the option it at .50-55 on the ask.

as the day progressed the underlying security moved from the 27.00-27.99 range ,..of course affecting the option price. it moved from .20 - .60

as the day came to the close it ended up at .30 for the put option.

now my inquiry,..with this backtest information,...how would you have played this one if you were interested in entering the option?

TIA

WinLoseOrDraw Free

08/22/05 12:48 PM

Post #36

Re: #35: @WinLoseOrDraw - And the hedge is dumped at 39.10 as

Churn churn churn: this time the entry is at 38.70, same exit target.

 
  +1    QQQQ Sep 40C @ -0.50 
  +1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.70, limit exit at 39.10 
  
  +0.09 in the hedge kitty

WinLoseOrDraw Free

08/22/05 10:57 AM

Post #35

Re: #30: @WinLoseOrDraw - And in again at 38.80.

And the hedge is dumped at 39.10 as promised. With this many bounces, it does bode well for some decent upside movement...

 
  +1    QQQQ Sep 40C @ -0.50 
  +1    QQQQ Sep 39P @ -0.50 
  
  +0.09 in the hedge kitty

WinLoseOrDraw Free

08/19/05 1:54 AM

Post #34

Re: #33: @Bernard Ng - Thanks WLD, hoadley.net is definitely a site to keep.

For the days to expiration used, did you count the trading days only?

Trading days only, but you could count lunar cycles if you really wanted to, as long as you were consistent.

How do you come up with the 39P and 40C to do the spread?

QQQQ was bang-on 39.50 at the time, and there was no volatility skew so the puts and calls were identically priced.

Why playing the September options, but not October and November?

Simplicity. Absolutely no reason not to run Sept and Oct and Nov seperately or all at the same time. In fact, given the traditional rambuciosness of early fall, it's not at all a bad idea to do a batch for each month. They'll all hedge at different times and prices due to differences in theta burn, so it is more things to keep track of.

How do you determine the volatility is low enough to start this demonstration? How low is enough?

No way to know. That's the risk this position takes: market could simply refuse to move at all.

Nothing dumb about any of those questions! :)

Bernard Ng Grandfathered

08/19/05 12:06 AM

Post #33

Re: #32: @WinLoseOrDraw - Hoadley has some useful tools, some free Excel add-ins.

Thanks WLD, hoadley.net is definitely a site to keep.

When you were doing the delta calculation, did you analyze it by stock price?

For the days to expiration used, did you count the trading days only? Just to make sure.

How do you come up with the 39P and 40C to do the spread? Why playing the September options, but not October and November?

How do you determine the volatility is low enough to start this demonstration? How low is enough?

Now you know why this thread is called "Options for Dummies" LOL.

WinLoseOrDraw Free

08/18/05 7:24 PM

Post #32

Re: #31: @Bernard Ng - Hi WLD, where is a good place to

Hoadley has some useful tools, some free Excel add-ins.

http://www.hoadley.net/options/optiongraphs.aspx?

The number of shares to hedge is just the difference between the put and call deltas, rounded to a convenient number. If the excess deltas are negative, you add long, if positive, you short.

There are a billion zillion assumptions and tweaks to options pricing models. It is more important to use one model consistently than to worry about the exact risk-free interest rate or binomial tree calculations or GARCHing volatility or etc etc etc. Because this is essentially a spread most of the details cancel out - which is exactly why spreads are so useful.

Bernard Ng Grandfathered

08/18/05 7:19 PM

Post #31

Re: #29: @WinLoseOrDraw - O Fortuna! It hit 39.10 on the nose.

Hi WLD, where is a good place to find out the delta of the options?

How did you come up with the number of shares of QQQQ to hedge the strangle?

Thanks for running the demonstration.

WinLoseOrDraw Free

08/18/05 7:18 PM

Post #30

Re: #29: @WinLoseOrDraw - O Fortuna! It hit 39.10 on the nose.

And in again at 38.80.

 
  +1    QQQQ Sep 40C @ -0.50 
  +1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.80 
  
  +0.06 in the hedge kitty

After the weekend, enough theta should have burned that the entry point can be adjusted. Because the delta curves get steeper the closer expiry gets, the effect is to pull the entry points closer to the mid-point of the spread.

WinLoseOrDraw Free

08/18/05 4:00 PM

Post #29

Re: #28: @WinLoseOrDraw - Reloading the underlying at the same price as earlier.

O Fortuna! It hit 39.10 on the nose.

 
  +1    QQQQ Sep 40C @ -0.50 
  +1    QQQQ Sep 39P @ -0.50 
  
  +0.06 in the hedge kitty

WinLoseOrDraw Free

08/18/05 10:56 AM

Post #28

Re: #26: @WinLoseOrDraw - Nice dip into EOD. Ok, this is where

Reloading the underlying at the same price as earlier.

 
  +1    QQQQ Sep 40C @ -0.50 
  +1    QQQQ Sep 39P @ -0.50 
 +10    QQQQ @ 38.80, limit sell order @ 39.10 
  
  +0.03 in the hedge kitty

WinLoseOrDraw Free

08/17/05 4:04 PM

Post #27

Re: #26: @WinLoseOrDraw - Nice dip into EOD. Ok, this is where

The long QQQQ is gone, strangle remains in place, net effect from the overnight hold is the cost basis is reduced by 3%. Going forward, rinse lather repeat making the position as "free" as possible, unless one of the moves becomes something more substantial and the position gets closed out for a gain.

WinLoseOrDraw Free

08/16/05 3:33 PM

Post #26

Nice dip into EOD. Ok, this is where the position is now at with QQQQ @ 38.80 30 minutes before the bell:

 
 QQQQ Sep 39P carrying -51 deltas 
 QQQQ Sep 40C carrying +27 deltas

That's a big enough difference that we can adjust by adding 10 QQQQ. Position now stands at...

 +1 QQQQ Sep 40C @ -0.50 
  +1 QQQQ Sep 39P @ -0.50 
 +10 QQQQ @ 38.80, limit sell order @ 39.10

Note: underlying quantities are in shares (not lots), options quantities are in contracts.

WinLoseOrDraw Free

08/16/05 1:10 PM

Post #25

Re: #23: @WinLoseOrDraw - Close enough, let the experiment begin.

Getting close to a change: another 20 cents or so downwards on QQQQ and I'll hedge some deltas by going long a little QQQQ. But not just quite yet...

WinLoseOrDraw Free

08/15/05 5:11 PM

Post #24

Re: #23: @WinLoseOrDraw - Close enough, let the experiment begin.

No changes yet.

 
 Aug 15 +1 QQQQ Sept 39 P @ -0.50 
  -""-  +1 QQQQ Sept 40 C @ -0.50 
  -""-  +0 QQQQ underlying

WinLoseOrDraw Free

08/15/05 1:24 PM

Post #23

Close enough, let the experiment begin.

QQQQ at 39.50, buying Sept 39P @ -0.50 and Sept 40C @ -0.50. The deltas are roughly +45 on the calls, -45 on the puts, so the net position is delta neutral.

To keep this from getting out of hand, I'll keep the hedging to 10-20 delta increments, otherwise this thread will turn into a friggin' novel. Since we're long volty rather than short it, it gives us a lot more leeway since any explosion in price in either direction will work for us, not against us.

WinLoseOrDraw Free

08/12/05 6:38 PM

Post #22

Re: #21: @nlightn - most definitely.thanks!

OK! As soon as volatility settles down a little, I'll start it up.

nlightn

08/12/05 7:55 AM

Post #21

Re: #19: @WinLoseOrDraw - Would anyone find it useful to watch a

most definitely.thanks!

Older

Options for Dummies

Followers	11	Posters	17
Posts (Today)	0	Posts (Total)	70
Created	08/09/05	Type	Premium
Moderators WinLoseOrDraw

I've recently become interested in options trading. Have never dipped my toes in the water, but it looks very interesting. I don't even understand the very basic principles of it all, but want to learn. WLD has agreed to host this forum in a Q&A fashion.

Board Info

Posts Today	0
Posts (Total)	70
Posters	17
Moderators	WinLoseOrDraw

New Post

Volume
Day Range:
Bid Price
Ask Price
Last Trade Time:

Boards:

Quotes:

Boards

News

Market Data

Markets

Discover

Discover

Boards:

Quotes:

Options for Dummies

Options for Dummies

Join the InvestorsHub Community

Options for Dummies

Board Info