Hi,
I am looking forward to getting up to speed and contributing.
I use TOS and IB to trade.
Thanks.
Hank
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Tuesday, December 1, 2009
[ConservativeOptionStrategies] My first post
[ConservativeOptionStrategies] Re: rolling
john,,,,rolling your leaps up and when the new leaps become available up and out is fine. i usually don't roll up until i roll out. i know people who roll up as the stock goes up to take money off the table.....i trade only indexes and the spreads on the leaps are bad but i usually put limit orders in and usually get an OK fill. drjoe
--- In ConservativeOptionS
>
> Dr Joe
>
> I used the forum a bit early this year and dropped it. I have matured a lot since then and know a lot more. Not enough, but a lot more. Over this last year, anyone with an ounce of brains could be sucessful in options. I worry about the next few years. Your conservative approach takes a lot less time than my more aggressive approach, can I maintain the discipline!?
>
> I notice that you prudently always plan to roll out I did not see a plan to roll up but rather a plan to STC on the leaps to cover the stock going up in value and hurting you on the short calls. Since, due to gamma, as the stock goes up, the delta of the leap goes up, you could roll all the leaps to a higher leap, reap some additional premium and use that to cover the purchase of the SC and/or reduce your overall investment. Is there a reason why you chose to not do so? I fear this concept is beyond a lot of your readers and might even be dangerous.
>
> My basic understanding of using leaps for premium collection is write, write, write and roll, roll roll!!!.. I am fortunate in that I do not need a lot of income and I now have a number of positions that have 10 leaps with deltas greater than 0.75 and positive investment. I both roll up and out.
>
> I hate the 2 year leaps because of the spread and low open interest -- one easily gives up 20%. Perhaps not so much on the ones you use, but on the ones I play -- AXP, ABX, etc, its ugly! So I am sorta forced to be a 10 to 15 month guy. I guess it becomes more of a calendar spread than a leap spread, but Schwab is now letting me do those in an IRA.
>
> Thanks
>
> John
>
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[ConservativeOptionStrategies] Re: DLS questions - note Newbies on this site
bobw....i don't have a formal paper...when i get a chance i will post my general guidelines for managing short puts....drjoe
--- In ConservativeOptionS
>
> Dr. Joe,
>
> Can you publish your trading plans for short puts with covered calls for us?
>
> Thanks,
>
> BobW
>
> --- On Mon, 11/30/09, joe & leigh <gass20@...> wrote:
>
>
> From: joe & leigh <gass20@...>
> Subject: [ConservativeOption
> To: ConservativeOptionS
> Date: Monday, November 30, 2009, 12:08 PM
>
>
>
>
>
>
> lee, i do hope people read...read. ..my paper before they ask questions... .and i do more than dls.....i have trading plans for short puts with covered calls....drjoe
>
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[ConservativeOptionStrategies] Re: DLS questions - note Newbies on this site
greg, several points....no where in the paper is the mention of easy money nor have i ever posted that online. i spend the whole first part of the paper advocating building a portfolio of a buy and hold that you would have even if you knew nothing of the dls. then use dls equal to what a buy and hold would be invested. dls is less risk than buy and hold since you are generating monthly income even in a down market. as you said yourself, if you cut corners, leverage, etc you will get burnt by any option strategy. i still like dls and have not dropped it. i've traded short puts way before i developed the dls. its been one of the first strategies i've traded. i think i have always had at least one or two open short puts positions over the last 15 years...drjoe
--- In ConservativeOptionS
>
> I warn the newbies to not dive into DLS. i was eager to make the easy money,
> got involved back in 2007 and lost a BUNCH. I cut corners, as i did not have
> the $100,000 account dr joe says you need. nevertheless, i believe that
> everybody who traded this by the rules (and is still around) is still under
> water...
>
> don't you also think it's a very big clue that dr joe has just recently said
> that he thinks there are better ways to make money (such as selling puts)?
> Didn't his long absence mean anything?
>
> I know when there is uncertainty, we tend to look for leaders to show us the
> way. But to direct newbies to check out this system without a heavy warning,
> seems iresponsible, so pardon me for the friendly warning. i paid my dues.
>
> I am very grateful to Dr Joe for sharing his system development, and for
> this forum. And maybe the market conditions will favor a person starting the
> strategy now, but be warned, there is significant risk of loss of
> significant capital. I am recalling that there is no "stoploss" principle to
> this system. Please correct me if I am wrong. maybe a newbie will tweak the
> system and make it better. i sure don't want to prevent that from
> happening!
>
> just be careful, newbies. be careful. ~greg
>
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Re: [TheOptionClub.com] Open Interest [was GOOG [was Re: Basic Calendar Question]]
mcatolico wrote:
>
> What I'm describing here is the force at work that drives a stock to
> pin. Generally if there is a large open interest at a strike these
> options have been delta hedged to a large degree. By that I mean they
> have been pretty much converted into synthetic straddles (i.e.
> regardless of whether the options themselves are calls or puts) by
> expiration. What I described in the simple example is the straight
> call delta hedge that drives the stock back toward the strike as price
> rises. The same force is at work on the put side as well.
>
Having seen open interest at work in close detail, I buy it and don't
buy it. For the last three months the open interest did indeed pin the
stock. In other words had you bought puts you would have lost your money
for the most part. Though looking at those open interest levels it was
more or less obvious that the stock market would not drop.
>
> What I'm describing here is the force at work that drives a stock to
> pin. Generally if there is a large open interest at a strike these
> options have been delta hedged to a large degree. By that I mean they
> have been pretty much converted into synthetic straddles (i.e.
> regardless of whether the options themselves are calls or puts) by
> expiration. What I described in the simple example is the straight
> call delta hedge that drives the stock back toward the strike as price
> rises. The same force is at work on the put side as well.
>
Having seen open interest at work in close detail, I buy it and don't
buy it. For the last three months the open interest did indeed pin the
stock. In other words had you bought puts you would have lost your money
for the most part. Though looking at those open interest levels it was
more or less obvious that the stock market would not drop.
Though the month before the past 3 months did have its open interest
blown away, and that rise in prices I do attribute to delta hedging.
There I saw the market move higher and higher and saw that for the most
part those selling premium just bought the underlying outright.
Christian Gross
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RE: [TheOptionClub.com] GOOG [was Re: Basic Calendar Question]
Dear mc, very useful comments..! thanks can u please advise me something more for day of expiration stratagy. I usually buy both call and put in same quantity (at the money strikes) hoping that as market moves any one side significantly. can you please advise some other way to optimise my trade ...I dont wish to short the options.. it demands lot of money which I dont have. mehta --- On Tue, 1/12/09, mcatolico <mcatolico@mindsprin
|
The INTERNET now has a personality. YOURS! See your Yahoo! Homepage.
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The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading. All messages and postings, and any materials circulated are provided for discussion and educational purposes only. No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice. All investors are encouraged to consult a qualified professional before trading in any security. Stock and option trading involves risk and is not suitable for most people. There is no guarantee that any information provided is accurate and, may in fact, be wrong. It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student. As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.
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[TheOptionClub.com] Re: GOOG [was Re: Basic Calendar Question]
--- In OptionClub@yahoogro
> [...probably the clearest explanation I've yet seen for pinning]
> Perhaps a third trading strategy would be to buy at DITM gut strangle
early
> on Friday morning. Then you can sell the short ATM straddle legs
against
> the long DITM legs as the stock oscillates. Thanks very much, in
advance,
> for your comments....
>
> Mc - like your previous example you would be generating a lot of
premium for
> the market makers. And you would likely be making the wrong trades in
the
> sequence. The premium is going to be the greatest on the straddle at
or near
> the open so if you are going to sell it, that's the time.
In fact, I tried something very much like this last exp. Friday: sold
the GOOG 570 straddle for about 1.50, a couple of hours after the open,
then sat there all day and watched the stock proceed to pin only four
cents from the strike, at 569.96. That Jeff Augen book just earned its
keep, many times over!
The premium is certainly highest near the open: I could have gotten
perhaps 1.90 for the straddle earlier in the day. But GOOG bounced
around a lot at first, so it seemed better to wait until things settled.
After about 10:30, it never touched 569 or 571 again.
> That strangle is
> meaningless except as disaster protection in the event that somehow
during
> the trading day the underlying flies outside the bounds of the
strangle.
Well, that, and it also brings down the margin requirement enormously,
at least for those of us trading smaller accounts that don't qualify for
portfolio margining. At the same time as selling the above straddle, I
bought the 560p/580c "wings" for 0.03 each, which reduced the required
margin from well over $10k per contract to $1000. Yes, I know the IV on
those things is exorbitant, so I probably bought a nice lunch for some
lucky market maker, but it was well worth it.
A similar trade did very well last month, too, when GOOG ended up at
549.85, again just pennies from the strike.
Of course, this won't always work. On Aug. 21 it opened and closed
around 465, midway between strikes, with very little movement intraday.
A 450-460-470-
premium received for the short legs wouldn't have been nearly as high.
Also, GOOG is certainly capable of jumping one or more strikes -- though
I think it's significant that, if you look back at the charts, that
doesn't seem to happen very often on expiration day. Still, I make sure
to use alerts and/or contingent orders (and to stay glued to the screen)
in order to limit the risk.
Maybe I'm "picking up nickels in front of steamrollers"
I'm certainly not recommending this approach to anyone! But given the
large open interest on the GOOG ATM options, and the resultant hedging
that Michael described, it does seem to work well.
Martin
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The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading. All messages and postings, and any materials circulated are provided for discussion and educational purposes only. No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice. All investors are encouraged to consult a qualified professional before trading in any security. Stock and option trading involves risk and is not suitable for most people. There is no guarantee that any information provided is accurate and, may in fact, be wrong. It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student. As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.
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