what kind of strategy do you use?

[wallstreetsedge]

i use a lot of option trades personally, on average each one of my positions is about $10k and i always buy in the money but i was wondering what are some strategies that everyone on this board uses?

the way i use my strategy is i always buy 1-3 strikes down if im buying calls or 1-3 strikes up if im buying puts, the number of strikes also depends on how far out im going especially if im betting on earnings

i also use spreads 20% of the time if im only going out one month

and how i go about in picking is i go strictly by candle sticks when it comes to option trades. such as lets say GD is at about 90, and i expect it to go to 95+ in the next 30 days, i would buy jan or feb 85 or 90 calls. in some cases, i might even sell the 100 calls

another one is im expecting BZH to go to $2 in the next 2 months so i bought the march 10 calls. since theres a short restriction on it, im not bothering to use spreads.

on avg im making 20-30%+ per month


other times i make a lot of gambes such as over the summer in july, i was buying the august 10 calls on nfi at 5¢ and cashing out at 10-15¢ when the stock barely moved. do a lot of you guys gamble on volatility or do you mainly use a strategy like ive been using involving candle sticks?

[netwrangler]

Originally Posted by kthomllc

i use a lot of option trades personally, on average each one of my positions is about $10k and i always buy in the money but i was wondering what are some strategies that everyone on this board uses?

the way i use my strategy is i always buy 1-3 strikes down if im buying calls or 1-3 strikes up if im buying puts, the number of strikes also depends on how far out im going especially if im betting on earnings

i also use spreads 20% of the time if im only going out one month

and how i go about in picking is i go strictly by candle sticks when it comes to option trades. such as lets say GD is at about 90, and i expect it to go to 95+ in the next 30 days, i would buy jan or feb 85 or 90 calls. in some cases, i might even sell the 100 calls

another one is im expecting BZH to go to $2 in the next 2 months so i bought the march 10 calls. since theres a short restriction on it, im not bothering to use spreads.

on avg im making 20-30%+ per month


other times i make a lot of gambes such as over the summer in july, i was buying the august 10 calls on nfi at 5¢ and cashing out at 10-15¢ when the stock barely moved. do a lot of you guys gamble on volatility or do you mainly use a strategy like ive been using involving candle sticks?

Wow, that sounds really aggressive.

Do you have any open positions now so we could follow along?

Also, it sounds like your positions involved trading options, and not the underlying stock. Did I get that right?

TIA

[aiki14]

Originally Posted by kthomllc

i use a lot of option trades personally, on average each one of my positions is about $10k and i always buy in the money but i was wondering what are some strategies that everyone on this board uses?

the way i use my strategy is i always buy 1-3 strikes down if im buying calls or 1-3 strikes up if im buying puts, the number of strikes also depends on how far out im going especially if im betting on earnings

i also use spreads 20% of the time if im only going out one month

and how i go about in picking is i go strictly by candle sticks when it comes to option trades. such as lets say GD is at about 90, and i expect it to go to 95+ in the next 30 days, i would buy jan or feb 85 or 90 calls. in some cases, i might even sell the 100 calls

another one is im expecting BZH to go to $2 in the next 2 months so i bought the march 10 calls. since theres a short restriction on it, im not bothering to use spreads.

on avg im making 20-30%+ per month


other times i make a lot of gambes such as over the summer in july, i was buying the august 10 calls on nfi at 5¢ and cashing out at 10-15¢ when the stock barely moved. do a lot of you guys gamble on volatility or do you mainly use a strategy like ive been using involving candle sticks?

Forgive me but this is gonna come across as belligerent.

Taking your last statement first, in July the Aug 10 calls never traded near .05, in fact they were in the money until the 31st, when the underlying moved down from 12.56 to 9.64. so they opened up the 31st at 2.85 and closed at .80. And there were no 10k positions moved on the Aug 10 calls any time in July or August. Not even close.

That said, I'll address your "strategy" of using 1-3 strikes in the money positions. Your surrendering any delta by doing this, and if you're not holding the underlying, therefore not a hedge position, I don't see any benefit in taking the option position versus the stock. In fact you are increasing your risk with no upside. Just the opposite of good options strategy.

I'd love to hear the reason for 20% spreads if you're going out one month, why not 100%. One month out seems capping your upside and taking a risk reduction position would be a better play.

Maybe you could elaborate on using candlestick analysis for options trading, are you plotting the underlying or the options? And what pattern or patterns are you looking for to trigger your trades? Your GD is a curious example, notwithstanding the fact that it doesn't say anything about candlestick analysis, using a stock with a .90 beta as an options example is odd at best.

Speaking of odd, BZH 10 calls? The underlying is 7.11, you expect the price to go to 2, you buy the Mar 10 CALLS? That indicates a complete lack of understanding of the concepts, or a typo. And again no way you could play 10k positions in this, on either side, at any strike, there isn't near that kind of open interest. (although if you were really buying 10k of mar 10 calls there would be a line to sell them to you, I'd write them myself in a heartbeat)

You're averaging 20-30%+ per month.

I'll just let that sit out there by itself.

[madcowdisease]

Originally Posted by netwrangler

Wow, that sounds really aggressive.

I'm with you, Net. Wow! You're much more of a risk taker than I, my friend. I won't touch a front month contract on any option plays. I am always 6 months out or more and don't like to hold anything that is 90 days or less until expiration as time value decreases significntly at that point.

Good luck to you though.

[netwrangler]

Originally Posted by madcowdisease

I'm with you, Net. Wow! You're much more of a risk taker than I, my friend. I won't touch a front month contract on any option plays. I am always 6 months out or more and don't like to hold anything that is 90 days or less until expiration as time value decreases significntly at that point.

Good luck to you though.

Hey, MCD, thanks for your support.

In fact, most of the expiry dates for the options I buy or sell are 2-6 weeks out.
Most of the time, these options are connected to a long position I am holding.

If I can toot my own horn, check out the thread "Option Strategy — aka (DD)²".

I believe that option strategy requires knowing the DD of both the underlying security and the option itself.
Knowing both is easier if you start with a long term stock position.
[The assumption is that you have done the DD on that long term position.]

Without the DD of both the stock and the option, a one-month expiry in an option is a real crap-shoot — with odds that are less favorable than you would get at a craps table in Vegas.

With DD on both, options can be a very attractive investment.
Of course, you have to have faith that your DD is on target.

[wallstreetsedge]

akai, i dont want to sound rude but the stock was trading roughly around 7.50 to 8 at the time. youre getting your prices post-split and post symbol change. the stock did a 1:4 split at the end of july. if anything, ill pull up my statements to find the buy date and sell date.

i dont follow delta in my purchases. instead, i look more at my cost for time value. there are also a lot more benefits in my opinion when it comes to buying in the money. lets say rimm for example, when the stock was sitting at 99-100 a couple of weeks ago.

i had the march 86.6 which cost me roughly 18-19 and the march 116.6 which cost me roughly 8. after earnings, i sold out my options and cashed out of my march 85's for roughly 33 and my march 116.6 for roughly 13.25

i take the option position rather than stock because of leverage. why control 100 shares of rimm when i can control 500 shares for a limited time period at the same cost with a higher percentage returns? id take options over day trading and margin any time. i made almost 100% on my rimm

the day after rimm reported (options expiration date), i was also playing the dec 115, got in as low as 3.30 and as high as 4, got out at 4.8. i had 20 3.30's, 10 3.40's, 10 3.80's, and 20 4's

also by 20% spreads, i mean to say i only use spreads 20% of the time. lets say for some reason i like EMC at 18.3, i think it goes to 24 but not by jan exp, then what i would do is i would probably buy the EMC may 15 at 4 or 16 at 3.2 right now, making my breakeven about 19 or 19.2 by may exp and sell the jan 19 or 20 as it climbs

my open option positions right now in expir order are...

long 20 nfi jan 35 calls (sucks! i never managed to sell all of them)
long 20 wu jan 17.5 calls
long 20 wu jan 20 calls
long 10 wu jan 22.5 calls
long 5 mer jan 65 calls (sucks!)
long 10 mer jan 62.5 calls (sucks more!)
long 10 rimm jan 86.6 calls
long 10 rsh jan 15 calls
long 10 bcsi jan 25 calls
long 10 cmi jan 130 calls
long 10 gd jan 90 calls
long 10 nyx jan 90 calls
long 10 cmg 85 calls (owned for 6+ mo)
long 10 cmg 90 calls (owned for 6+ mo)
long 10 cmg 100 calls (owned for 6+ mo)
long 10 aapl april 230 puts
long 25 mtg jan 22.5 puts
short 10 bcsi 35 calls
short 10 calm jan 30 calls
short 20 calm jan 35 calls
short 10 amzn jan 105 calls
short 10 rimm jan 145 calls
short 10 axp jan 50 puts

long 20 calm march 22.50 calls
long 10 calm march 25 calls
long 40 bzh march 10 puts
long 10 cmed march 50 puts
long 10 fslr march 320 calls

long 10 mrx april 35 puts
long 15 ebay april 30 calls
long 15 msft april 30 calls

long 10 july amzn 85 calls
long 10 july xom 95 calls


recently closed option trades, i lost $ on only wnr, cwst, and gs 240 calls

long 5 rmbs dec 30 puts
long 10 wnr dec 25 calls (sucks, i bought them when the stock was around 35)
long 10 ma dec 150 calls
long 15 ma dec 155 calls
long 5 ma dec 160 calls
long 10 avav dec 22.5 calls
long 20 pss dec 15 calls
long 10 cwst dec 12.5 calls
long 10 etfc dec 12.5 puts
long 5 abk dec 35 puts
long 15 nile dec 105 puts
long 10 nile dec 100 puts
long 10 tlb dec 17.5 puts
short 20 hoku 12.5 calls

long 6 goog 630 calls (played it twice with 3 calls each, so i listed as 6)
long 10 ma 200 calls
long 20 hoku 7.5 calls
long 8 grmn jan 90 calls
long 5 grmn jan 95 calls
long 10 lcc jan 25 puts
long 20 gs 230 puts
long 5 gs 240 puts
long 5 ma jan 200 calls
long 10 hpq jan 50 calls
long 5 rimm jan 95 calls
long 5 rimm jan 100 calls
long 10 rimm jan 106.6 calls
long 10 rimm jan 116.6 calls
long 20 rht jan 20 calls
long 10 orcl jan 20 calls
long 30 aapl jan 95 calls (owned 6+ mos)
long 10 aapl jan 190 calls
long 10 mo jan 70 calls (sitting in this since summer?)
long 10 msft jan 32.5 calls (sitting in this since spring?)
long 20 msft jan 25 calls (sitting in these since summer of last year)
long 40 mtg jan 22.5 puts
long 20 cfc jan 17.5 puts
long 25 gs jan 205 calls (nice move bought them same day they announced earnings and came down and sold when stock went to about 215)
long 10 gs jan 240 calls (sucked! bought them after stock popped above 230)
long 7 mbi jan 45 puts
long 10 frpt jan 20 puts
long 20 peix jan 2.5 calls
long 15 ed jan 45 calls

long 10 rimm march 85 calls
long 10 rimm march 100 calls
long 10 rimm march 106.6 calls
long 20 rimm march 116.6 calls
long 30 fslr march 320 calls


watching to buy calls on
emc
more calm on weakness
more amzn on weakness
more cmi on weakness, further out
more gd on weakness, further out
drys
xom

looking to buy puts on
nvda
moc
trow
crox

possible earnings long calls...
sonc
bbby
cit
edu
ebay (already own)
msft (already own)
crel
rmbs (tough call, will probably lose but raise guidance)
jnj
unh
qcom (tough call)
ryl
wdc
cmi

possible earnings long puts...
kbh
apol (already mentioned)
mtg (already have some)
mtb
c
wm
cal
rmbs (tough call, will probably lose but raise guidance)
cof
xjt
ori (will hit this one hard!)
etfc
aapl (already own)

wow that took a long time to write up. i was actually thinking of going into the office today that was around 9, its 1050 now lol

as for candlesticks, im not plotting them for the options themselves. im plotting them for the stock itself. ie, lets take gd and go back i expect to go to 95-98 by early jan, the beginning of the month when i first saw this, i decide my if jan exp is far enough out or if i should hit feb. then i figure out my degree of risk and what the cost avg would be compared to the stock.

for simple math lets say at the time, gd was 90, and the jan 85's go for 6, i figure my break even is 91, assuming it takes till exp to hit 95, my profit is 4 with a risk of 6. i always assume the stock will go the exact opposite and consider which strike i want, how far out i want to go, and how much capital im willing to risk. just because im willing to risk say 20k on rimm doesnt mean id be willing to risk 20k on aapl.

as for 20-30% mo, thats off the top of my head based off of what was made for the year (excluding what i made on rimm). i dont base everything on candlesticks, sometimes i just go with if i think a stock came down way too much like when grmn went from 115 to 85.


you know what, i read your post and i made a typo. i meant to say i own the BZH 10 puts going out to march

i was in a rush and probably wasnt thinking straight

Originally Posted by aiki14

Forgive me but this is gonna come across as belligerent.

Taking your last statement first, in July the Aug 10 calls never traded near .05, in fact they were in the money until the 31st, when the underlying moved down from 12.56 to 9.64. so they opened up the 31st at 2.85 and closed at .80. And there were no 10k positions moved on the Aug 10 calls any time in July or August. Not even close.

That said, I'll address your "strategy" of using 1-3 strikes in the money positions. Your surrendering any delta by doing this, and if you're not holding the underlying, therefore not a hedge position, I don't see any benefit in taking the option position versus the stock. In fact you are increasing your risk with no upside. Just the opposite of good options strategy.

I'd love to hear the reason for 20% spreads if you're going out one month, why not 100%. One month out seems capping your upside and taking a risk reduction position would be a better play.

Maybe you could elaborate on using candlestick analysis for options trading, are you plotting the underlying or the options? And what pattern or patterns are you looking for to trigger your trades? Your GD is a curious example, notwithstanding the fact that it doesn't say anything about candlestick analysis, using a stock with a .90 beta as an options example is odd at best.

Speaking of odd, BZH 10 calls? The underlying is 7.11, you expect the price to go to 2, you buy the Mar 10 CALLS? That indicates a complete lack of understanding of the concepts, or a typo. And again no way you could play 10k positions in this, on either side, at any strike, there isn't near that kind of open interest. (although if you were really buying 10k of mar 10 calls there would be a line to sell them to you, I'd write them myself in a heartbeat)

You're averaging 20-30%+ per month.

I'll just let that sit out there by itself.

[wallstreetsedge]

since i made a typo in my original post about owning calls instead of puts.. i may have put a few typos in my reply as well :O if something looks odd let me know but ill try to check on it briefly

[wallstreetsedge]

yeah i caught a ew typos in the listings post but i think i fixed them all

i also reread some posts, i dont follow delta, i look more at time value vs. margin interest rates thats also my reasoning for buying in the money because since theyll move dollar for dollar if they stay in the money

remembered i had closed out puts ive been holding onto since summer on mgi (moneygram) but the post wont let me add it

[Albert0373]

Lovely thread, thanks for the posts kthomllc.

[netwrangler]

Originally Posted by netwrangler

Do you have any open positions now so we could follow along?

TIA

Originally Posted by kthomllc

watching to buy calls on
emc
more calm on weakness

more amzn on weakness
more cmi on weakness, further out
more gd on weakness, further out
drys
xom

looking to buy puts on
nvda
moc
trow
crox

possible earnings long calls...
sonc
bbby
cit
edu
ebay (already own)
msft (already own)
crel
rmbs (tough call, will probably lose but raise guidance)
jnj
unh
qcom (tough call)
ryl
wdc
cmi

possible earnings long puts...
kbh
apol (already mentioned)
mtg (already have some)
mtb
c
wm
cal
rmbs (tough call, will probably lose but raise guidance)
cof
xjt
ori (will hit this one hard!)
etfc
aapl (already own)

Looks we are both swing trading with options, with a couple of key differences in tactics.
By swing trading I mean that we follow a "list" of stocks and:

• When a stock on our list is "up" we sell the call and/or buy the put;
• When a stock on our list is "down" we buy the call and/or sell the put.

[I'm using the term "list" conceptually here. You posted a list, but I'll bet your list changes month to month as mine does.]

The differences in tactics are:

• I usually own the underlying security.
• I never sell a naked call. (Is that a difference?)

Owning the underlying security gives me a bias to seek stocks for my "list" where I am bullish long term. That has worked well for me during the bull market of the last few years. If the market softens in 2008, I expect I will be entering into more short sales and more pure option plays, and the nature of my list will change.

I created two new watch-lists based on your post — "Kens Calls", and "Kens Puts". I want to spend some time working on some questions:

Are the stocks on the right list? You have RMBS as both a possible long earnings call and earnings put. I like that. Makes it an obvious candidate for a long straddle or strangle if the premiums aren't too high.

What are the swing points that I see for stocks on the list? I like to plan ahead for a possible move. That way, if the move comes about, I can react quickly.

What stocks would I add to each list? What stocks might I remove?

I'll post my thoughts and reasoning in these areas. Maybe by sharing some thoughts and strategies, we will both be better off. [I figure that was the implied intent of your OP for this thread.]