man, I do very little with options, but I scaled into some IWM
and SPY puts earlier this week........up 80% when I sold them today
around noon. They were meant as swing trades but I'm sitting
here watching the charts and it seemed silly to hold them through
the up move that was starting.
I bought March puts about 8 - 10% out of the money, but I'm just
making it up, I really don't know what I'm doing.
Can anyone here offer some insight about how to choose options
to serve as a proxy for stock for a short-term swing trade?
Well... it depends on your goal. You profit is
capped in both instances. If your trying to
create a instance with downside protection selling June
In the money calls have about 1.10 in premium out of the 1.55 +-
you will receive for the call... That give you 1.10 of downside
over 5 months. Personally the 8.00
calls also give you about 80 cents of premium and some
upside. However, I like the Feb or March
calls better. I wouldn't cap my whole position
with calls.. LNG can take off at any time and you will
be regrading it... unless you plan on adding to your position when
it reaches 8.00 . Some people like to ladder
their positions that way and keep selling covered calls as they
go... You can also roll your calls up and out... but
June has NOWHERE to roll to right now. .. Thats another
reason to stay away from June Options on LNG
Posted by fixdgear on 21st of Jan 2011 at 07:49 am
what was asked for was a simple general over view.. dont
confuse the issue here by formulating a more complicated
situation.
besides for me i disagree on which options to buy
and why...i wanted more time on LNG as it can be very volatile....i
wanted to be long and just added a few calls to my stock position
to pizaz it up with very little risk....if LNG takes off lets
say...ill could sell my june 6 calls for a profit plus a free ride
on the jan 8 calls....i do not want to write any calls against my
stock position. another note i am in the black on both these
options as i bought them when the stock was lower...so....im ok
here...cheers!
The best way to lower your risk is sell the stock and buy In the
money calls for June. You can use the
left over money for other trades. A simple stock
substitution strategy. I like the 5.00 strike
better than the 6.00 because you have a higher delta.
Posted by fixdgear on 21st of Jan 2011 at 09:47 am
i want to be long....i do not want to short the stock...my loss
is unlimited....the stock will always move in greater tandem than
the option...the option time premium will run out as well....i may
need to hold the stock a little longer than anticipated while
option time premium runs out....like i said i just wanted to add a
little to my long position with virtually little risk of
capital....if i want to short a stock ill buy puts.
Posted by fixdgear on 20th of Jan 2011 at 07:57 pm
no essay needed....in the money means the option has intrinsic
value so therefore will move more in tandem with the stock. out of
the money is time premium meaning you are buying a cheaper option
but based on future movements further out and therefore has less
movement near term or until the option becomes in the money
IF youre right...the %age gain can be greater if the stock moves
sooner rather than later but the risk is time errosion. eassy comes
into play when you put on on flying condors and naked
options; writing options ...etc..
also of note: if the stock is volatile it will have a greater
premium and spread price structure.
and yes puts calls come into the same scenario..one bet is the
stock rises the other is it goes lower..one thing with
options...you know immed the most you can risk..or
loose...lol..
how to choose options?
Posted by Michael on 20th of Jan 2011 at 07:01 pm
man, I do very little with options, but I scaled into some IWM and SPY puts earlier this week........up 80% when I sold them today around noon. They were meant as swing trades but I'm sitting here watching the charts and it seemed silly to hold them through the up move that was starting.
I bought March puts about 8 - 10% out of the money, but I'm just making it up, I really don't know what I'm doing.
Can anyone here offer some insight about how to choose options to serve as a proxy for stock for a short-term swing trade?
Thanks --
in the money is the way to go if its SHORT TERM..
Posted by fixdgear on 20th of Jan 2011 at 07:03 pm
right now for example longer term im long july 6 and july 8 calls on LNG....i have 6 months....1/2 in the $ 1/2 out...ok?..
LNG options
Posted by zach06 on 20th of Jan 2011 at 08:34 pm
Well... it depends on your goal. You profit is capped in both instances. If your trying to create a instance with downside protection selling June In the money calls have about 1.10 in premium out of the 1.55 +- you will receive for the call... That give you 1.10 of downside over 5 months. Personally the 8.00 calls also give you about 80 cents of premium and some upside. However, I like the Feb or March calls better. I wouldn't cap my whole position with calls.. LNG can take off at any time and you will be regrading it... unless you plan on adding to your position when it reaches 8.00 . Some people like to ladder their positions that way and keep selling covered calls as they go... You can also roll your calls up and out... but June has NOWHERE to roll to right now. .. Thats another reason to stay away from June Options on LNG
options
Posted by fixdgear on 21st of Jan 2011 at 07:49 am
what was asked for was a simple general over view.. dont confuse the issue here by formulating a more complicated situation.
besides for me i disagree on which options to buy and why...i wanted more time on LNG as it can be very volatile....i wanted to be long and just added a few calls to my stock position to pizaz it up with very little risk....if LNG takes off lets say...ill could sell my june 6 calls for a profit plus a free ride on the jan 8 calls....i do not want to write any calls against my stock position. another note i am in the black on both these options as i bought them when the stock was lower...so....im ok here...cheers!
take off risk
Posted by zach06 on 21st of Jan 2011 at 08:35 am
The best way to lower your risk is sell the stock and buy In the money calls for June. You can use the left over money for other trades. A simple stock substitution strategy. I like the 5.00 strike better than the 6.00 because you have a higher delta.
why would i do that?
Posted by fixdgear on 21st of Jan 2011 at 09:47 am
i want to be long....i do not want to short the stock...my loss is unlimited....the stock will always move in greater tandem than the option...the option time premium will run out as well....i may need to hold the stock a little longer than anticipated while option time premium runs out....like i said i just wanted to add a little to my long position with virtually little risk of capital....if i want to short a stock ill buy puts.
thanks -- not to ask
Posted by Michael on 20th of Jan 2011 at 07:08 pm
thanks -- not to ask you to write an essay - but can you tell me why in the money? And is it the same for puts and calls?
options
Posted by zach06 on 20th of Jan 2011 at 08:26 pm
If you google Options or Options Strategies... you can find plenty of stuff on the net.
options
Posted by fixdgear on 20th of Jan 2011 at 07:57 pm
no essay needed....in the money means the option has intrinsic value so therefore will move more in tandem with the stock. out of the money is time premium meaning you are buying a cheaper option but based on future movements further out and therefore has less movement near term or until the option becomes in the money IF youre right...the %age gain can be greater if the stock moves sooner rather than later but the risk is time errosion. eassy comes into play when you put on on flying condors and naked options; writing options ...etc..
also of note: if the stock is volatile it will have a greater premium and spread price structure.
and yes puts calls come into the same scenario..one bet is the stock rises the other is it goes lower..one thing with options...you know immed the most you can risk..or loose...lol..
Michael - I generally pay
Posted by matt on 20th of Jan 2011 at 09:32 pm
Michael - I generally pay options like fixdgear goes, I buy options near the money instead of way out of the money.
great explanation, thanks fixdgear! Options
Posted by frtaylor on 20th of Jan 2011 at 08:04 pm
great explanation, thanks fixdgear! Options are complicated, w/ all those Greeks....