HI all. Well today I am trying to roll up from the NOV 150 amzn put to the 155 nov, amzn put. If it works it will be a credit of .08 when the dust settles. The order is in and now waiting for results.
The idea and reason behind is that with around 162+ this still will give me me over 7 pts of cushion and only one day left. I have 46 of these so the bump up is only 350 or so. But these crumbs just keep adding up. I also am never one to refuse 350 for a two day profit. I will keep you posted if it all works.
ps; when doing these trades I always put the trade as AON. This is a all-or-none trade. It instructs the brokerage to do AON as i do not want just 3 or 4 to go through and then you lose some with the cost of trading figured in.
5 comments:
Hey welcome back,
I have been following your blog for a month or so now and a couple of months ago I read your book. I am very very new to the stock market and to options.
After following the market for a year or so but not trading or getting to know any of the technical terms I am still wet behind the ears with everything.
Many of my co-workers and people I know have lost money by buying and selling stock and so I did not like the concept.
From your book the concept of options and giving an approx 20% cushion on monthly's was very interesting. I am now using a platform and using paper money to get some experience. (with monthly’s and weekly’s)
A quick question I have is, what would you recommend for someone of my experience and funds. My funds are $0.00 right now lol but I was looking at starting with approx $5000 (probably in about 1 year). Would this be enough to make profit? What stock would I focus on?
In your book you write that you should stay above stock of $50. With my limited cash (when im ready) I'm not sure I can pull a profit with the stocks available to me at the maintenance costs and the trading costs (trade cost and per contract cost). What are your thoughts?
Fulgore
Hi Fulgore, Good for you... Learning the ropes and picking up tips and pointers.
One point is, you will need to know if your brokerage has a minimum account balance before you can trade naked puts. I think TK has a 2k limit? Some require 10K? Another problem for new traders is that most brokerages require some experience before allowing naked selling.
So that said, regarding your question of stock pricing that I like. There are many stocks that trade lower than the 50 minimum that I like. I like the higher priced ones (but not to high as maintenance is so much) as it allows me to go way below the current price. I also am liking the weeklies more and more.
So the first hurdle is to get an account. Get approval for trading naked. You might have to do different types of trades such as spreads or cover calls in the beginning.
Keep me posted and don't hesitate to ask questions. Keep paper trading until you learn to judge risk vrs reward. A general rule regarding paper trading is to add a penny to each side of any trade, such as if the premium is .15 you would net approx .14. That of course applies to both selling and buying.
Jerry
Hi Jerry,
Thanks for the advice, I am currently working with an individual who lent me your book to is showing me the ropes.
I am currently using the Think or Swim platform. Some platforms are not available in Canada and so sometimes the choices are limited. I will double check the min trading about which I believe to be 5k.
So you mentioned I may have to reduce the 20% factor for smaller stocks such are F etc.. Did I understand correctly?
Thanks for your quick reply and I hope to follow you along with my paper trades to gain experience. I need more experience with a vertical spread, as I am only doing nakeds right now.
Thanks,
Fulgore
Fulgore - doing a bit of margin math, if you wanted to sell a $40 strike price put option on a $50 stock (20% cushion), with a $0.20 premium, your margin req w/b about $420 per contract.
This calc is 10% of the strike price plus the premium ((40*.10+.20)*100). The return w/b 4.8% (20/420).
With $5K you could sell 11 of these contracts (11*420=4620) and receive a credit of $220. But this is assuming you qualify for naked puts. As Jerry says, you may not and so you could do a put credit spread where you sell, for instance, the 40 and buy the 37.5 or 35. The net credit to you will be much lower but your risk is limited.
Hi,
Thanks for all the information it is sooooo helpful!
I contacted the platform company and it looks like it is 20% of the underlying stock + the premium - however much i am out of the money.
So i will have to have this calculation at the ready.
I will keep follwing you all and wishing you well in your profits. I appreciate any help you send with calculations like this. It may seem trivial for you guys but it really helps me in my next trades etc..
Fulgore
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