Last week I talked about using options as a protection in times
where there is significant market moving news on the horizon.
Did anyone buy an cheap call options on Tuesday when the
market was down? One could have picked up Nov 4th 127 call
options (expire on Friday) for about 7 cents on Tuesday, it's now
trading at 0.40 - 0.42 cents! 30 of these call options would
have only costs about $350 and now these call options would be
worth $2000. Again cheap insurance. So did anyone buy
some?
As we know, the market always has some kind of news in the works
over the last 17 years of the system history. HOWEVER you
have to admit that since July, the news has been extra ordinary.
In late July we were all waiting for a possible S&P down
grade of the US Debt, first time in history! So buying some
protective puts for insurance against the long trade, especially on
Friday's before the weekend, made sense. And of course last week
and this week, we have this European deal waiting, so buying some
cheap call options made sense.
On Tuesday's pullback, the multi entry SPY system was actually
up by about 1.5% at one point near the lows on Tuesday, the average
price of the multi entry system is $123.15, the low on Tuesday was
$121.55! I said if you were nervous and couldn't sleep, you
could have covered or bought some cheap call options that expire on
Friday tomorrow for protection of the short position.
Now going forward, eventually I think we'll get out of this news
overhang and the market will start trading in a little more linear
fashion. Sure there will always be news, but it will be the
standard economic news, vs the history making news.
and going forward, consider some option strategies, I will be
posting suggestions when they arise.
As an amateur still learning, I'm not really very comfortable
buying options, as I can't tell like you can when they are
cheap/expensive, good bets/lousy bets. Next time when you
post (and thank you for doing so), I will try to investigate it and
maybe also p.m. you about it.
totally agree . was not my plan to use options as still learning
as well but have to adjust. other option is to buy vix
protection ( vxx or tvix)in opposite direction of trade. sure wish
I did that in summer. live and learn.
Could also keep it simpler and reduce total $$ at risk (but not
%) by using call/put options for the trade from the start -- what
happened to our friend that was tracking that?
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Discussion, call options and current trade
Posted by matt on 3rd of Nov 2011 at 02:15 pm
Last week I talked about using options as a protection in times where there is significant market moving news on the horizon. Did anyone buy an cheap call options on Tuesday when the market was down? One could have picked up Nov 4th 127 call options (expire on Friday) for about 7 cents on Tuesday, it's now trading at 0.40 - 0.42 cents! 30 of these call options would have only costs about $350 and now these call options would be worth $2000. Again cheap insurance. So did anyone buy some?
As we know, the market always has some kind of news in the works over the last 17 years of the system history. HOWEVER you have to admit that since July, the news has been extra ordinary. In late July we were all waiting for a possible S&P down grade of the US Debt, first time in history! So buying some protective puts for insurance against the long trade, especially on Friday's before the weekend, made sense. And of course last week and this week, we have this European deal waiting, so buying some cheap call options made sense.
On Tuesday's pullback, the multi entry SPY system was actually up by about 1.5% at one point near the lows on Tuesday, the average price of the multi entry system is $123.15, the low on Tuesday was $121.55! I said if you were nervous and couldn't sleep, you could have covered or bought some cheap call options that expire on Friday tomorrow for protection of the short position.
Now going forward, eventually I think we'll get out of this news overhang and the market will start trading in a little more linear fashion. Sure there will always be news, but it will be the standard economic news, vs the history making news.
and going forward, consider some option strategies, I will be posting suggestions when they arise.
As an amateur still learning,
Posted by frtaylor on 3rd of Nov 2011 at 09:01 pm
As an amateur still learning, I'm not really very comfortable buying options, as I can't tell like you can when they are cheap/expensive, good bets/lousy bets. Next time when you post (and thank you for doing so), I will try to investigate it and maybe also p.m. you about it.
Thanks Matt,
FRT
totally agree . was not
Posted by dom4411 on 4th of Nov 2011 at 09:42 am
totally agree . was not my plan to use options as still learning as well but have to adjust. other option is to buy vix protection ( vxx or tvix)in opposite direction of trade. sure wish I did that in summer. live and learn.
Could also keep it simpler
Posted by bkout3 on 4th of Nov 2011 at 10:20 am
Could also keep it simpler and reduce total $$ at risk (but not %) by using call/put options for the trade from the start -- what happened to our friend that was tracking that?