Whoops some typos. Corrected in caps and an additional thought.
Louis,
Nobody said that buy-write are not cash and spreads margin no matter what software is used. That is not the issue. Rather you indicated below frustration in not being able to enter spreads because the software would not allow such transactions and they are being carried as cash in IRAs. As I noted below this is not correct. The website and Option Pro BOTH allow choosing cash or MARGIN for OPTION trades in an IRA. Active Trader Pro will have this option in the next upgrade. Bottom line is that there is no problem doing spreads in IRAs online via the website or Option Pro. I do it all of the time.
Bill
P.S. Final thought. If you do not see "Trade Type" on the website option order page (and something similar in Option Pro) when you try to enter an option trade then
(1) you IRA is not approved for spread trading in which case download and submit the necessary paperwork
(2) your IRA has been approved but not classified properly so "Trade Type" is not visible (ask broker to correct)
(3) you are not looking but not seeing the "Trade Type" line (ask broker to walk you through the form).
----- Original Message -----From: wavemechanicSent: July 05, 2010 7:56 AMSubject: Re: [ConservativeOptionStrategies] Re: VVUS again Louis,Nobody said that buy-write are not cash and spreads margin no matter what software is used. That is not the issue. Rather you indicated below frustration in not being able to enter spreads because the software would not allow such transactions and they are being carried as cash in IRAs. As I noted below this is not correct. The website and Option Pro all allow choosing cash or spread for any trade in an IRA. Active Trader Pro will have this option in the next upgrade. Bottom line is that there is no problem doing spreads in IRAs online via the website or Option Pro. I do it all of the time.Bill----- Original Message -----From: LouisSent: July 04, 2010 9:35 PMSubject: [ConservativeOptionStrategies] Re: VVUS again Bill,
Actually, buy writes can only be entered as cash and spread trades only as margin. It's the same whether you use OptionPro or the Fidelity web page. At least as of Friday. As Pete mentioned it's a software issue.
Lou
--- In ConservativeOptionStrategies@ , "wavemechanic" <olesmithy@..yahoogroups. com .> wrote:
>
> Louis,
>
> You can now specify Cash or Margin in a Fidelity IRA on their order webpage or in Option Pro but not yet in Active Trader Pro. So, except for ATP "margin" type trades can be entered online.
>
> Bill
>
>
> ----- Original Message -----
> From: Louis
> To: ConservativeOptionStrategies@ yahoogroups. com
> Sent: July 02, 2010 1:00 PM
> Subject: [ConservativeOptionStrategies] Re: VVUS again
>
>
> Ken,
> You're correct about the 'margin' trades in an IRA. I didn't bring it up, but it is an occasional irritation that I understand but don't want to understand when it gets in my way.
> For instance, I'll do a buy write and it's a cash deal. I later decide to roll out the call, but can't do it online since the rollover is a spread trade which requires 'margin' and the software won't allow closing the CC, because it was classified as a 'cash' transaction.
> Fortunately the Fidelity phone reps are quite good and will put the trade through as two separate transactions but with one commission.
> Lou
>
> --- In ConservativeOptionStrategies@ , "Kenneth Ginsberg" <ken_ginsberg@> wrote:yahoogroups. com
> >
> > Lou:
> >
> >
> >
> > Actually, in this case, margin and max loss are substitutable for each
> > other. I also believe that if you check carefully, even though you are doing
> > it in an IRA, it is actually being done "inside" of a margin account in your
> > IRA. Even though you are not borrowing money from your broker, certain types
> > of transactions are required by securities law to be done inside a margin
> > account even in an IRA. For example, a cash secured naked put, even though
> > you have 100% of the cash in your account, nevertheless it is being done on
> > "margin", selling short any option (even if part of a spread with defined
> > risk) must happen in a margin account as opposed to the purchase of an
> > option which may take place in a "cash" account. The major difference
> > between a margin account in an IRA and a non-IRA margin account, is that in
> > a IRA margin account, you will not have had to sign any hypothecation
> > agreement or any loan agreement since there cannot be any moneys borrowed.
> > In other words, you are doing these transactions in a margin account, but
> > doing it at 100% margin at all times (in the IRA margin account).
> >
> >
> >
> > SO getting back to your original question, in my mind profit percent would
> > be premium received / max loss (which is in fact how much cash you need to
> > tie up to secure the position at your broker).
> >
> >
> >
> > Ken
> >
> >
> >
> >
> >
> > From: ConservativeOptionStrategies@ yahoogroups. com
> > [mailto:ConservativeOptionStrategie s@yahoogroups. com] On Behalf Of Louis
> > Sent: Friday, July 02, 2010 12:29 AM
> > To: ConservativeOptionStrategies@ yahoogroups. com
> > Subject: [ConservativeOptionStrategies] Re: VVUS again
> >
> >
> >
> >
> >
> > Ken,Dave,
> > Thanks for all the information. It's quite helpful.
> > I trade out of my IRA account so there's no actual margin involved, but the
> > P&L is basically spread less premium/results at expiration or whenever
> > position is closed. Since the spread less the premium is the same as the max
> > loss then would it be correct when using unequal wings (which I had
> > considered) to also use the proceeds divided by max loss?
> > I am trying to make an option methodology the basis of an overall strategy,
> > so I have a couple of other ideas I'd like to bounce off the group, but I'll
> > open a new topic for that.
> > Lou
> >
> > --- In ConservativeOptionStrategies@ yahoogroups. com
> > <mailto:ConservativeOptionStrategies > , "Kenneth Ginsberg"%40yahoogroups. com
> > <ken_ginsberg@> wrote:
> > >
> > > There will be many differences of opinion but I do condors every month and
> > > the way I figure profit is that I take the margin required to put the
> > spread
> > > on, (margin should only be required on one side of the condor but there
> > are
> > > some brokers that take it on both, if yours hits you for double margin you
> > > should consider another broker) and divide into that the premium received
> > > and that is my max profit percent. When the trade is done I use the actual
> > > premium kept / margin to get the final figure. Margin should be spread
> > > between the short and long of one of the pairs - premium received, since
> > > this is your max loss at expiration (if it is truly an IC and is balanced
> > on
> > > both wings). In your case the margin required would be $100 (spread
> > between
> > > short and long call - $60 (premium taken in) - $40 margin (and max loss)
> > and
> > > max profit % would be 60/40 = 150%. This is HIGHLY unusual for an IC to
> > > show a potential return of that size and it is due to what everyone on the
> > > boards has been discussing about VVUS, the FDA committee's pending
> > > recommendation. Your profit range at the prices you quoted are from $5.40
> > to
> > > $15.60. You keep all the premium you took in between $6 and $15 and max
> > loss
> > > is under %5 or over $16.
> > >
> > >
> > >
> > > One of the major factors, other than price that affects IC's is
> > volatility,
> > > so large volatility swings will also affect your "interim" profit and
> > loss,
> > > but at expiration, all vol is 0, so if VVUS is still between the strikes
> > you
> > > keep everything. Just the pain of waiting until expiration may get more or
> > > less depending on vol and also gamma changes as price nears one or the
> > other
> > > short strikes. Remember, max loss and max profit is ONLY an expiration
> > > number.
> > >
> > >
> > >
> > > Hope this helps.
> > >
> > >
> > >
> > > Ken
> > >
> > >
> > >
> > >
> > >
> > > From: ConservativeOptionStrategies@ yahoogroups. com
> > <mailto:ConservativeOptionStrategies >%40yahoogroups. com
> > > [mailto:ConservativeOptionStrategie s@yahoogroups. com
> > <mailto:ConservativeOptionStrategies > ] On Behalf Of Louis%40yahoogroups. com
> > > Sent: Wednesday, June 30, 2010 12:18 AM
> > > To: ConservativeOptionStrategies@ yahoogroups. com
> > <mailto:ConservativeOptionStrategies >%40yahoogroups. com
> > > Subject: [ConservativeOptionStrategies] VVUS again
> > >
> > >
> > >
> > >
> > >
> > > I finally took a little bite and entered an order for a couple of
> > contracts
> > > on a condor. This is my first condor so I just want to get my feet wet
> > > without getting nervous.
> > > The details (all July): long put @ 5, short put @ 6, short call @ 15, long
> > > call @ 16. Net credit if filled .60 (between bid/ask).
> > > Max profit 60 between 6 and 15; max loss 40 below 5 or above 16;
> > breakevens
> > > at 5.40 and 15.60. It appears to be a fairly conservative position.
> > > Two questions I have:
> > > First, how do I figure profit? I'm guessing something like the difference
> > > between the short strike exposures (900) divided by the profit or loss, so
> > > that if I made the max profit of 60, the profit would be 60/900 or 7%?
> > > Somehow that doesn't seem correct. It would intuitively seem to me to be
> > > 100%, but if that were the case, how would I figure a $30 profit, or a $20
> > > loss?
> > > Second, what surprises should I be watching for (other than the obvious
> > > possible major price swing)?
> > > Lou
> > >
> >
>
>
>
>
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