options-advanced strategies

[clavocat]

anyone here use the more advanced strategies for options, after watching options boot camp from investor flix, basic call and puts are way too risky and things like bull call spread, or strangles and even some ways to lock in profits without actually selling the option are pretty neat and less of a risk and its cool to buy a call- make money then sell a call and the premium will cost nothing if you buy then sell at the money...another cool thing is you buy a call and if your real bullish on a stock, sell the put naked and your call will be free...so many options with options that are far more intense than basic calls...just wondering cuz i dont hear anyone using these things on this forum...definately an awesome DVD- set of 4.

[aiki14]

I have often thought about a more serious options strategy topic here. The negatives are many as are the positives.
Consider the Cramer demographic, avg age of viewer 28, with a skew towards college students and new investors. On average these are not folks who should be in options generally. If the forum is consistant with these figures the same applies.
When these folks who solicit me to sell far out of the money options (a strategy that can work and make you money until you get killed) finally get down to brass tacks they require a minimum of $100k on deposit or more. Merrill lynch requires me to be an accredited investor to sell any uncovered options positions. (That's the same qualification as hedge fund access or limited partnerships). Most young folks or new investors aren't going to be eligible.
For spreads and straddles and what can be termed intermediate options strategies, I don't see a problem for most investors as long as they have a good understanding of the concepts, the risks, and the range of outcomes.
I routinely take straddle positions going into earnings, and see this as a good hedge position. But I have taken losses when the stock price stays flat. I have also made big wins from the put side on a downside surprise on a stock I was sure would go up (that will teach you to hedge).

Good luck to those who dabble, but go in with your head on straight or don't go in.

[clavocat]

i refuse to touch options until i have about a solid year with trading stocks and a good understanding of trading...i will then nibble at options and see where they take me after i get a full understanding of them...so you cant sell naked options unless you have 100k in cash??? that would be a problem for me for now but by the time i trade options i should be ok. i understand what you mean about young investors doing this and gettin burned but i think its safer than your regular call/put options as there is limited down side on some types.

[clavocat]

question for you option traders (aiki)- in this DVD im talking about he talks about condor spreads, heres the example he used

Corn was at 323- ya its mostly on commodities but the strategies are the same for stock i imagine

He bought 5 330 calls, sold 5 340 calls, sold 5 350 calls and then bought 5 360 calls

now right away hes down 313 in premium, but his max gain is 2188- thats crazy

now my question is, he then talked about selling more than he bought and the option graph look like this...it was flat at a profit then went up, then flat lined then went down as the price went up because he was losing money on the options he sold naked...now thats some intense stuff if the market moves down he makes his premiums, if it stays the same he makes money and if it goes up he makes money BUT if it goes up more than 360 he starts going down to where he has unlimited upside risk.

Is that how these option trades work if your real good at em?? cuz this stuff is fascinating!! thanks, and for anyone who doesnt understand what im talkin about just ignore me lol. Thanks!!

[aiki14]

You can work out spreads where you have nearly any max down or up risk. I would find out from your broker what you'll need to have in assets to sell options before getting to far into this. They tend to be tight lipped about this. Also there are three levels of options permissions, there are different requirements for each. I can't remember exactly but it's about like this:
Level 1- Buy calls and puts
Level 2- The above plus Sell covered calls and puts (selling options in positions in which you hold the underlying stock)
Level 3- Sell uncovered (naked) calls and puts

Only in level 3 do you have potential for unlimited risk. Level 2 is for hedge positions.

When you talk about options, use this format
for example for Chevron february calls with a strike price of 75 trading at $1 you can use
CVX feb 75 call 1.00
Then remember they are leveraged 100 to 1 so the price you pay is $100 per position.

[OptionPundit]

anyone here use the more advanced strategies for options, after watching options boot camp from investor flix, basic call and puts are way too risky and things like bull call spread, or strangles and even some ways to lock in profits without actually selling the option are pretty neat and less of a risk and its cool to buy a call- make money then sell a call and the premium will cost nothing if you buy then sell at the money...another cool thing is you buy a call and if your real bullish on a stock, sell the put naked and your call will be free...so many options with options that are far more intense than basic calls...just wondering cuz i dont hear anyone using these things on this forum...definately an awesome DVD- set of 4.

Hi Clavocat,

You are welcome to visit my blog which is dedicated to options trading only. You'll find most trades there i.e. condors, DD, flies, spreads,etc. It's free for likeminded people. I have collected tons of tools as well which normally folks charge fortune (but these are available for free).

Do drop by and enjoy the browsing,
Profitable trading,
OptionPundit

[InvestingMoron]

I'm 27 and think I am what the demographics target. Middle-class, makes enough money to put some on the side, and always looking for an easy buck. What better than for someone on TV to tell you what to buy?

We're always looking for short-term gains on long stocks, especially around the 1-2-5 range. Why? They're cheap, we can have more, and it just looks better when you gain 15% off a $2 stock.

Shorting is alright to understand, but you gotta have a margin acct (I believe) to perform this....most of us aren't willing to lose more than we put in our accounts. After all, we're turning that 500 into 10000 by year's end following Cramer's advice.

Commodities move too damn slow.

Options are crazy things we don't understand, and we would have to do a helluvalot of homework. More than we're willing to do. Just tell us what to go long on, and we'll throw our 500 at it.

[robvia]

I'm 43 and trade options, but only because my father opened the account with me, and he's the expert. We buy calls a few months out in the money.

Cramer briefly mentions options here and there, it's more of a slip when he does.

The average joe would need to have a brokerage account open before being allowed to trade options. Agree that most of the viewers followng Cramer are in their 20s-40s and have an online stock account. Cramer won't give options advice because it's too dangerous. He said that in his book.

[clavocat]

I'm 27 and think I am what the demographics target. Middle-class, makes enough money to put some on the side, and always looking for an easy buck. What better than for someone on TV to tell you what to buy?

We're always looking for short-term gains on long stocks, especially around the 1-2-5 range. Why? They're cheap, we can have more, and it just looks better when you gain 15% off a $2 stock.

Shorting is alright to understand, but you gotta have a margin acct (I believe) to perform this....most of us aren't willing to lose more than we put in our accounts. After all, we're turning that 500 into 10000 by year's end following Cramer's advice.

Commodities move too damn slow.

Options are crazy things we don't understand, and we would have to do a helluvalot of homework. More than we're willing to do. Just tell us what to go long on, and we'll throw our 500 at it.


is that directed towards option pundit?? or just a statement

[clavocat]

I'm 43 and trade options, but only because my father opened the account with me, and he's the expert. We buy calls a few months out in the money.

Cramer briefly mentions options here and there, it's more of a slip when he does.

The average joe would need to have a brokerage account open before being allowed to trade options. Agree that most of the viewers followng Cramer are in their 20s-40s and have an online stock account. Cramer won't give options advice because it's too dangerous. He said that in his book.

what has he done to be a so called expert? how long he been doin it for and how profitable have you been?

[robvia]

what has he done to be a so called expert? how long he been doin it for and how profitable have you been?
My father's been trading for years, he's 68 right now. He was allowed to buy stock options and took out a huge loan to buy. It paid off because the stock went up and he made some money. He's still working as a consultant to this day. He has 40 stocks at this time, he's a mutual fund if you want to look at it that way. My father is the rich neighbor next door you wouldn't even know about if you saw him on the street.

With options, he does what's called nibbling. He takes a piece here and there. The most advanced thing we'll do is what's called a straddle, where you buy a call and put at the same time.

Me? I'm fairly new to this. I've made about 3k profit so far, but some of my options are getting killed at this time and I need them to come back. The market is supposed to crash in February, not now. So I'd say I'm even at this point if some of my options expire out of the money.

I'd call my father a value investor, he's more along the lines of Buffett, where you buy and hold. The advice my father gives is from being around for so long. No one can predict the future, but he has many stories from the past. You need someone to bounce ideas off of before pulling the trigger.

[InvestingMoron]

I was just rambling about how mid-20s white men think.

[bahroor]

it just looks better when you gain 15% off a $2 stock
as opposed to how bad it looks when you gain 15% off a $90 stock??

Shorting is alright to understand, but you gotta have a margin acct (I believe) to perform this....most of us aren't willing to lose more than we put in our accounts
yes you must have margin to short.
and Margin does NOT mean you have to lose more than you put in.

Options are crazy things we don't understand, and we would have to do a helluvalot of homework
Options can be a great tool to use as "insurance" along with a stock position; and what does "helluvalot" mean?

I was just rambling about how mid-20s white men think.
you're white?!?!?!?

[clavocat]

im kinda confused...we got off topic...im talking about advanced options and how good they are with little risk if you play them right, i know what shorting is and margin trust me, im talkin options with unlimited risk, you know the kind where you pockey 1000 dollars and the market tanks and you end up losing 10k, thats the kind of risk im talkin and talkin bout how if you use certain spreads your risk can be small and your upside can be big whether the market moves up/down/sideways...i KNOW most people dont know and dont use options properly...im not a fan on calls and puts alone...too risky (too bullish or bearish) i like combos. too expensive and too much of a chance youll walk away with 100% loss.

[OptionPundit]

im kinda confused...we got off topic...im talking about advanced options and how good they are with little risk if you play them right, i know what shorting is and margin trust me, im talkin options with unlimited risk, you know the kind where you pockey 1000 dollars and the market tanks and you end up losing 10k, thats the kind of risk im talkin and talkin bout how if you use certain spreads your risk can be small and your upside can be big whether the market moves up/down/sideways...i KNOW most people dont know and dont use options properly...im not a fan on calls and puts alone...too risky (too bullish or bearish) i like combos. too expensive and too much of a chance youll walk away with 100% loss.

Not to say that options are the best investments one can buy, I am a big lover of Options. They are so much fascinating and once you understand those, you will find that risks in options is MUCH lesser than stocks. One needs to understand the mechanism on how does it work. If someone is willing to learn and spend time to dive in (I don't think you need to spend thousands to learn that, it's available for free. And those good with numbers and scenario analysis can create their own way to trade). Jim has recommended options last year, specially on the banks/brokerage. if someone needs, you can check out his last year articles in "Real money.com".

One needs to understand the greeks, and then create scenarios on how to use for your advantage. For instance, when I was so sure of my analysis on PPDI last year before earnings annoucement, I made 1200%!!! But I was naive, when I look back, I will not do that again even if I am very sure. Because I played a simple call, theta, gamma, working against me. And if the stock falls, I will lose all the investment. Will I do that to risk my overall portfolio....no way !!!!

Value investing is a different way of investing. Not that one is bad and the other is good. It's a personal style. The difference is in leverage. Treating options in a way that create a nice mix of returns for your portfolio, in my opionin is a good way. For instance, my asset allocation involves Cash, Fixed deposits, endowment plans, stocks, bonds, gold, property and options. Options are to protect as well as to accelerate the returns of overall portfolio.

Just my thoughts, to be continued :)

Profitable trading folks,
OptionPundit

[gotcramer?]

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