Welcome to the page that discusses Put Options

I want to start this blog by telling you that I have no 1-800 number, I am not trying to sell you any newsletter with the next great stock idea. I am not inviting you to come to my house and view a cleaning agent. I will not try to sell you plastic bowls or any other ‘can’t miss’ ideas. I do not have any life changing secrets and I cannot promise you a flat stomach.



I am going to share with you my daily option moves and the reasons behind them. My way of trading options are of course not the only way to utilize Put Options. This is a way that I have found to be simple and easy and not as complicated as some make this business. My hope is that you can develop a steady stream of income and continue to enjoy your life.











Sunday, October 31, 2010

tough week coming

Hi traders, I have spent an hour or two looking for good positions for the coming week or month. So here goes with some thoughts.
Of course the wild card is the election. There Is talk that the (our) government is running a Ponzi scheme with our U.S. Bonds. If you read my book or some of my post you know that i try to somewhat ignore all the static and just go with good stocks that have decent premiums in the option market. But this coming week could be one of the bigger ones in recent history. I am certainly no 'chartists' but adding fuel to the fire is that a lot of informed people think the market is ready for a significant correction?
I don't run scared but i do try to keep my ear to the ground. So my advice is to be pretty cautious this week.
I now have positions with GOOG. I have over 90 points of cushion so i feel pretty safe there. I also have some NFLX monthly that also have a good cushion. But I will wait until after Thursday morning before I open new ones. That will give Tuesday election results time to be digested.
Protecting capital and not pushing the envelope is the plan this week. Lets see how it all shakes out before we leap in.
Positions that i like except for the week ahead are... In no special order.
MOS trading around 72.5 maybe the monthlies with the 57.5 strike it gives around 2.7% return for 3 weeks
POT trading near 145 selling the monthlies at the 120 strike it gives a good return of 3.6 plus 25pt of cushion and a recent good earnings report.
AMZN trading around 163 sell the monthlies at the strike of 135 for a return in three weeks of 2% and good cushion.
But again, I am going to be very careful this week..It is hard for me to sit and watch and not jump in and make a trade or two, but I will give it my best.
Good safe trading all

Friday, October 29, 2010

Friday night update

Well my AMZN puts expired today and I averaged a little over 1% with them. Of course the good news is that it is over 1% in a week. If I can average that per year that is around 60% annual. Again, demonstrating the power of crumbs. We just keep picking up little crumbs and damned if we don't get rich together.
For next week, the ones I am looking at now are listed below, but Sunday will be the real decision day..
NFLX (net-flix) Trading around 174.5
The weeklies look good maybe the 150 strike that gets around 1.5% for the week. Of course what I like is the 25 points of cushion. Do you think NFLX can drop 25 points in a week..neither do I! But on Sunday I will go through my stocks and see what I pick for the coming week.
So another good week for the put sellers.
More on Sunday night.
Good trading all

Thursday, October 28, 2010

Private letters I have received

Hi traders, Tonight I want to get a little personal and discuss some thoughts from private emails and letters I have received. It becomes obvious that many traders are looking for ways to make money and incorporate some safety into their option trades. Many want to, but have not yet opened an account to trade options.
There is much fear expressed from people that want to trade these options, but between the stigma and rumors there is certainly a misunderstandings and fear that keeps future traders from jumping in and doing it.
My goal here and in my book is to explain and let what is affectionately called 'new-be's' get both a basic understanding of options and a way to trade them and how relatively simple they can be. This is not rocket science. It really is easy and just takes a very little work or (my book) to understand them. Regarding my book, not to burst any bubbles but i make very little from any sales. I make more in any given day trading options than I will make in months of book sales. I sell the book hoping to just make back the cost of having a professional editor and someone to proof read my spelling and grammar. The book is filled with my experience and some humor yet hopefully insightful points. I mention the book hoping that you take a look as it will give you a full history of my trading and ways that you can learn from my mistakes.
Also I am hoping this blog gives some idea of what a professional trader does and goes through daily. I often get asked "How much time does it take to be a professional trader" First of all i hope you do not go through what I did 10 years ago. To lose a million plus dollars and more in 18 months is not fun. It probably builds character but destroys what little brain cells I had.
As I have said in my book and on other blogs, " there was a time when I was getting Industrial size 55 gallon drums of Pepto Bismol delivered to my personal loading dock. Whew, what a time. But it is funny now...I guess...
So my goal is to spare you the anguish and pain of dreading to see the market the next day. 10-- 15 or 100K per day drain out of your account and no end or remedy in sight. So as I said, I want to spare you this charter-building experience.
So follow my trades or buy my book or best of all do both. We will make money together and try our best to avoid the bad times. I will do my best to help you and we will travel this option road together.
Jerry

Trading frustrations

One of the frustrating parts of option trading is dealing with other traders and their over estimation of reality.
An example is as follows.. I have 25 puts for AMZN (Amazon) The puts are for the 150 strike and AMZN is now trading around 166. There is only today and tomorrow left in these puts before they expire. These puts are now selling for between .08 / .10
So the reality is that AMZN will have to fall below 150 for these to have any value, or over 16 points in a day and a half. At this time the put is all extrinsic value and not any intrinsic value. So how it effects me as a trader, is that I have a lot of maintenance funds tied up with these and they should be selling around .01 /.02. I could then buy them and sell another position and make a little more in the last two days of this week.
Of course when I make trades that are over-inflated it is good trading, but when other try the same tactics it is 'greed & unreasonable' lol
The result is that sometimes you just have to either bite the bullet and pay the 'going rate' or as I am doing this week, say, to heck with them and just let them expire tomorrow afternoon.

Tuesday, October 26, 2010

position update

G'morning traders.
A quick update on the positions I now hold and my current thoughts.
1. 2 GOOG 520 strike for JAN 2011 GOOG trading around 614.50 now.
I will try to hold for a while as I have a lot of cushion and GOOG
has so much going for it. If held a while it gives an average of 3%
per month ( my goal)
2.AMZN trading around 168
I have 10 of the weeklies at the strike of 155 These are working out nice with 3.5 days to go
I Have 25 of the 150 strike for the weeklies also. These look good with
19 pt of cushion with 3.5 days to go.
NFLX today around 171 and headed up some
I have 30 of the Nov monthlies at the strike of 125. So around 46 pt of cushion and 3.5 weeks to go.

These positions are all making 3% or better per month and going as expected. Goog is down a little today, however, the premium is falling also. That is the beauty of lots of cushion. The time factor starts eating at the premium quickly if the stock doesn't start dropping rapidly.
So, if nothing drastic happens today I will hold these and watch. As you know if things go off track I have no hesitation to close or make a move even if it involves taking a loss.
Good trading all.
Jerry

Monday, October 25, 2010

Some mid- day GOOG puts

I had some money sitting on the side-lines and made an unusual move for my style. I sold 2 puts for GOOG for the Jan 2011 520 strike. This gives me around 98 points of cushion. The return was $1,053. It takes 11,522 maintenance. So this is a return of (1053 div by 11522) = 9.14% return. If held until maturity that is a little better than 3% per month. If you have followed my trading you know that I have a hard time sitting on my hands for nearly 3 months, but I will give it a good try as 3% a month are my long term goals. GOOG with its Android interest should have a long run before much profit taking.

New AMZN positions, closed the AAPL puts

G'morning all,
This morning I made a few option moves with one of my favorite stocks.
With AMZN trading around 171 and 4+ days to go...
1. I sold 20 of the weeklies for AMZN at the strike of 150. Net income of 426. This needed 38,175. of maintenance which = a return of 1.1%
2. I sold 10 of the weeklies for AMZN at the strike of 155 net income of
287. This position required a maintenance of 20,186 = a return of 1.4%

Reasons for the moves...
1. With a little less than 5 days to go and over 21 point of cushion I like this move. Only 1.1 % gain but that is for a week.
2. Also less than 5 days to go but only 16 point of cushion. I lowered my volume to just 10 puts for safety. The gain is better than the 150 strike but the risk go up.

I closed the AAPL puts at a very small profit of $21.
I had opened them for 360 and closed them 341. The position was eating up to much maintenance and my account went up 353 by moving into the AMZN. Plus I have some maintenance left over to use on another position as the week progresses.

Sunday, October 24, 2010

Expanding on my way of trading

For those that have not read my book, I will give a quick summation of how I figure my profits.
I trade Put Options. I sell them, and I keep it simple (KISS)
I try to leave as much cushion as possible and still get an acceptable return. Returns are hard to figure when you don't actually put out any money. However, I calculate my returns by what my account was at the beginning of the month and what it is at the close of the month. How much simpler can it get? When selling put options, you will have to set aside part of your account to back up your trade. This is called 'MAINTENANCE'
If you have to set aside $10 for a position and you make .30, you made 3%
So, often you will read that I made 3% etc on a trade. That is how it is figured.
If you have a 10,000. account and you made 300, it is a 3% gain that month. Often you might think, Wow he only made 300 or whatever on a trade but it continually adds up. That is what I try to impress to newer traders (and experienced ones) The little profits add up and keep risk to a manageable level. There will always be risk, if you want to be in the options business risk is part of the business. But to manage them and be satisfied with smaller but consistent gains it how I trade them. I've been doing it for 14 years now and have seen traders come and go. Being able to maintain consistent returns even small ones seems to be the holy grail.
Good trading all.

Friday, October 22, 2010

Some thoughts on Option evaluations

If you are new to options trading you will bump up against some terms that might mystify you. Below are some of these terms. If you find them useful, more power to you. I find them useless! If you have read my book you already know my thoughts regarding most of these, but for people new to my way of trading, please put up with my rant...
There are Delta's for an options
There are Greeks
There is 'implied volatility'
Put to Call ratio
Black-Scholes Model
There are probably many other methods of evaluating the potential return and possibility of success. Besides my book (of course) any option trader should have McMillan's book 'Options as a strategic investment'
But for me,I have lost all faith in the predictive value of any of the normal option valuation tools. Resistance levels, up-side or down-side. You constantly hear "oh xxx broke resistance etc..Then it wasn't very resistant... The Greeks and the Romans can still fight over Troy but don't tell you squat about the next day or week. I know many traders swear by them (many swear at them) As a broker told me years ago when I asked for the delta of an options "Why in the world would you want or care about that" 10 years later and Hundreds of thousands of trades and I still don't have an answer. I can see the reasons for some of the spreads that people set up. There is comfort and some good ideas behind the protection of a good spread. But (to me and you don't need to justify your reasons) the ideas of all of these things that traders throw into the equations just make it harder than it is. When I say an outlandish thing such as I try to average 3% a month, I see post that 'it isn't about returns etc" Excuse me, I am doing this for the returns!
But we all do it different and that is the beauty of Options, I just thank God that there are guys on the other side of my trades.
I hope readers enjoy my simple way of trading these options.
Ps; I shot a great score in golf today! Now that is important.

Todays moves and the why.

This morning I sold some puts on two different stocks and each with a different expiration date
1. with NFLX (Net-flix) trading around 169 I sold 30 of the Nov. 19, 125 strike I received 1195 for a return of a little over 3%
2. I also sold some AAPL (apple) puts with an expiration in one week
10-29-2010. With AAPL trading around 307 I sold 20 of the 280 strike. I received 340.
Rational behind the moves.
1. With NFLX trading around 169 I sold the 125 puts. These expire in a month so there is some waiting with this position. My plan is to roll up (move to a higher strike) as the time factor withers away. I feel with NFLX just reporting great earnings, they won't fall 44 points during the month.
2.With the AAPL puts, the return isn't super but I can do that (or better) each week all year. With AAPL trading around 307 and just reporting great earnings, I don't think that it will fall 27points during the coming week.
On Monday when the weekend shakes out, I will try to find some more moves that both bring in some income and let me sleep at night (or day)
Good trading all

Thursday, October 21, 2010

Darn, but part of the trading

Good Morning, Well Tuesday I took a small loss on a rather large AMZN position. I guess I will have to take the rear-view mirror and turn it around and look forward!
You will get this feeling often trading options. They are so powerful with the leverage factor that you can not risk letting a small loss turn into a disaster. That was the rational of me closing a position even though I had lots of cushion. I was sure it was safe but as the sign taped to my monitor says " DISCIPLINE TRUMPS CONVICTION" The obvious meaning of that saying is, to not let what you want to be true obscure what is really happening.
Of course AMZN is up today in anticipation of good earnings. So my 200 or so loss would probably be looking pretty good right now. Try to avoid falling into the trap of thinking "next time I am holding the position longer." When option prices are dropping, it is easy to tell yourself "OK, just a little more and it might turn around" It becomes very hard to pull the trigger on a loss. Use my rules or your own, but have rules and follow them. DISCIPLINE TRUMPS CONVICTION...

Wednesday, October 20, 2010

Can't win them all

Hi all, I was away on various commitments yesterday and only had enough time to take quick looks at the market and especially AAPL and AMZN..
I of course was happy to see AAPL delivered such great numbers and as I’ve seen over and over it is what the ‘street ‘ wants and not what is actually delivered. I was surprised that AMZN followed suit with AAPL dropping.
OK, the bad news for me. MY 135 puts went up in cost and my position was immediately underwater. It wasn’t drastic enough for me to close, however it did raise my blood pressure. I took a peek as often as I could. I still had what I felt was enough cushion to ride out the storm. Eventually my AMZN puts leveled off and even got back to even. When the stock turned down again I decided to close the position and not go through the worry and anxiety, as I was not able to keep a close watch on the stock. Therefore, the bottom line is I took a small loss and will now wait until after the earnings are reported. Maybe and that is a big maybe... I will make a move on Friday. I do not believe that I have ever taken a loss on a position when I have nearly 25 points of cushion and only 3½ days to go. However, when I have a losing position, I try to not let the losses run away from me.
Opened on Monday. 2024 [75 puts]
Closed the position 2271
Loss of 247
I kept the position opened even though it was a losing one for a while thinking that ---
a. I had plenty of cushion
b. I could roll into the next weeks at a much lower strike and either break even or possibly make money.
However, the final call was made on the belief and experience telling me, just close it and breath easier. Not every position will make money. Just do not let those become the norm. In hind sight, mistakes I made were.
a. rolling into the 135’s from the 130’s
b. no patience with what was a nearly sure winner. (a continuing problem I have)
c. opening a new position during heavy earnings week.
My lesson to share today. Just wait out earnings week.

Monday, October 18, 2010

Todays trades

Hi all, I should start today's trade activity by telling that these trades might not be for all traders. These are my trades and the reasons behind them. They are not recommendations just my trades.
10/18 With AMZN dropping a small amount i decided to roll my 60 of the 130 strike puts that expire on this Friday, into the 135's. Here are the numbers..
Sold 60 puts on 10/15 Friday for + $1450
bought to close today (Monday) for - 890
One day profit of + 560
10/18 (Monday) I sold to open 60 135 puts
for + 1635
later this morn I sold 15 more of the 135's for - + 389
Net result in the account today is + 2024
These puts expire on Friday. So that is a little over 404 per day for these. But I should again point out that Thursday after trading hours AMZN reports their earnings for this QTR. I have not decided on what actual number I will use for a trip wire to close or keep open these puts.
Generally I do not keep a position open during a earnings report. Buttt, and a big one is that I might have lots of cushion between the current stock price and the strike i am using (135). The rational is that with the 135's and lets assume that AMZN is trading round 160. That means with one day of trading left after the report AMZN would have to drop over 25 points. Very unlikely. But it can and has happened. So I will have a plan that will have a high probability of success, meaning that they expire worthless on Friday night. If you have been reading these post you now know that I do not hesitate to either take profits or a loss if that is what make me feel comfty... If you have read my book you know that I went through the wringer 9 years ago. Losing over a million dollars by putting my head into the sand. I do not want to experience that nightmare again. Take profits--take losses but have a plan. It is easy to be the deer in the headlights when Ca-Ca hits the fan.

Sunday, October 17, 2010

Possible Monday moves

It is hard finding a 'safe' (if there is such a thing) put play. I still like AMZN for several reasons.
1. Earns come on Thurs night This gives you time to let the option premium drop down.
2. There seems to be no decent plays that work during this volatile week. More on this later.
Worrisome is some parts of AMZN. It is in an up mode. But I don't like the PE of AMZN 68. That is getting high! A comparison is AAPL which is 23 but NFLX is 63, BIDU is 102... Goog is 24. So you can see that with a DOW average PE over the years and years of around 14. this gives you come idea if a stock is 'off the chart'.
AAPL reports on Monday night so there might be some good plays on Tues morn? I would stick with the newer weekly's until things settle down some (earnings)
I have to admit that I am really liking the weeklies. The quick time decay is great. Some problems you have to adjust and live with are lower volumes (open interest) But to work around items such as earnings, they work well. So the plays i like are AMZN (have a plan regarding the Thur earns) I now have 60 of the 125's. I will either let them go until
Thursday or maybe if AMZN continues up on Monday i might roll into the 130's or 135's. Right now the 125's = about .06% return. The 130's = 1% and the 135's = 1.5%... Never forgetting the difference between us (winners) and many other traders is they would be going for the 145's etc. Baby steps and soon you will be running. So good trading and I will post my next plan on Monday during trading hours.

Saturday, October 16, 2010

Monday moves

HI all, Tomorrow I will check my list of stocks that i use for some good positions for next week. As you know it is earnings season and most of my stocks will be reporting. I try to never hold a position over those volatile times. But,like the AMZN position i just opened, if i do, i will plan to close them before the REPORT DAY.
I will post the results of my search and let you know what my Monday moves might be. Never push the envelope. It is pretty easy to make a good living if you use some care and thought.
Jerry

Friday, October 15, 2010

Mark's comment

It seems like you go in and out of various stock positions fairly often. Based on your book, I would have thought you bought and held until the premium doubled or hit the strike price.

Normally Mark, I would stick with a position longer. This is a unique time in the option world as the period is/did come to an end today. Also with the weeklies for AMZN having so much premium today I am expecting quite a bit of time decay coming Monday or Tuesday. Other than the report of earn's on Thur. the stock has to drop over 6 points a day and AMZN just does not do that... So the move did cost me a few dollars but I anticipate making that quickly in the Monday time decay. There of course no 'perfect' way to do these and each move is a judgment call.
Thanks for the comment
Jerry

Todays moves

I found it hard to just sit on my hands and watch the time value eat up the last of my premium. So I made the following moves minutes ago.
I bought to close the 55, NFLX 140 puts that expire tonight. Cost of 159, sold 3 days ago for 889 = +730
I sold 60 of the AMZN 130 next week puts for  1450.
REASONS
With AMZN trading above 160 and only a week to go, I feel good about these puts. AMZN does report earnings on Thursday night So i will close before that itme unless there is a lot more cushion between the existing then price and the strike price of 130. If I can let them expire it will be a profit of 2180 in about 8 days of trading.

Rolling up on the last day

With nflx trading up in pre-mkt i might roll the 55 puts at the 140 strike into the 145. make a dime or so and it will be another 500+ in the last day.
I will look at the open mkt for a min or two first.

Thursday, October 14, 2010

My AMZN move today

With AMZN trading up about .64 to 155.90 I just sold 11 of the 120 strike for next week. +$273.
They expire on Friday. But and a bigggg buttt is that AMZN reports after the bell on Friday. However, with over 30 points of cushion and only 6.5 trading days to go i felt pretty good. But at the least hint of trouble i will close.
I hope this demonstrates how I just keep taking some money here and there and keep picking up the crumbs around the table. To make your fortune you don't have to pick one position and refi the house and bet it all on one play.

closing positions

As you can see I had 9 of the NFLX 145's
I had sold for $285. Today with NFLX failing some I closed for -237 So I netted $+48. Not much and I could probably stay with the position but the extra 237 is not worth me worrying about. The lesson is, when things get your attention  (NFLX FALLING) give it your attention. It is a tough week coming up with earnings be reported in most of the stocks I have been using lately. It will take some work this weekend to find good positions.

More APOL lessons

Hi all, I see that APOL is now down a little over $12. Another lesson is the correlation between 'like' stocks. When APOL announced all of the other education stocks dropped. Even though they have not reported yet. In the earning season alway pay attention to other stocks in 'like' companies. An example of this might be PCLN. They have been just going up and up. But if one of the travel / booking type compaines report traffic falling off, it will probably hit all of the 'like' companies. People that lose in this business usually fail to do their home work.

Wednesday, October 13, 2010

The dangers of put selling at earnings time...

Hi friends. Tonight I wanted to mention the dangers of selling puts at or around earning season. I saw yesterday where a fellow put seller wrote that he was selling puts on APOL. These were to be for Nov. He mentioned that with the stock around 49 he was selling the 38 &39 strike. A couple of danger signs flashed for me and I wrote him regarding my concerns.
1. Earnings were to be reported next day (today)
2. The return he was getting was way too high (around 10%)
3. There were 5 1/2 weeks to go and many companies were going to report their earnings
All of these are mentioned as a learning tool. Each one is a flashing light of danger. In order...
1. Earnings are always to be avoided ..Period! Tonight APOL reported and it was not good. They opened today around 49.98 and dropped after the close to 42.10..-7.88--- Folks, Avoid earnings they are trouble!...
2. Any return of over 6% should get your attention. Period! I try to open a position with returns of around 3% and if all is going well then roll up at a later time as the time-decay eats up the premium.
3. This is a long period. Five and half weeks are a long time and add in earnings season and that spells trouble. Never push the time envelope. Time is our biggest enemy. Well I guess you can add in greed. Both are controllable.
Good night.

Trades I have made in the last two days. 10/12/2010 & 10/13/2010

Today I am starting my blog after being asked many times by other traders for a posting that tracks my trades. I am not going to go back over the complete month, I will just start my trades as of Tuesday 10-12-2010. After entering the trades I will give a brief 'reason' behind the why's..

This trading month is winding down and on Tuesday 10-12 I closed some positions and opened others. The plan is to take advantage of the decaying time value. This Friday the current month of options expires so this leaves only 3-4 days for my positions to expire and vanish. The numbers below are after commission and are the net results.

Position       EXPIR/STRIKE   Date/ opened        Closed           Results            $$
20 AMZN   10/16 -140           10/11    .17         10/12   .13      +  .04              80.
20 NFLX    10/16 -130           10/08    .27         10/11  .08        + .19             385.
20 NFLX    10/16 -135           10/11    .25         10/11 .12         + .13             265.
15 WHR     10/16 -75             10/11    .17           ACTIVE                              254.
55 NFLX    10/16 - 140          10/13    .16          ACTIVE                               889.
9 NFLX      10/16 - 145          10/13    .33          ACTIVE                               285.

In the first AMZN trade I closed it to move into other trades. You are never wrong to take profits!
In the second trade I opened and closed in three days and took a quick $385 profit.
In the third trade I closed these to roll into the 140 NFLX puts for a profit of $265.
In the fourth trade with WHR (which are still open) there was a paper profit of $254.
In the fifth trade I opened 55 NFLX puts with the stock around 155 I feel safe with 15 points of cushion and 3 days to go.
In the sixth trade I opened the 145 puts as NFLX is moving up and I now have 10 points of cushion with 2.5 days left.

As you can see I go for just the crumbs around the table. Many other traders ignore these small amounts but they do add up.

I have used some abbreviations and other terms in the above posting for a more detailed explanation of these terms you can reference my book for more information. My style of trading and goals of trading are fully explained in the book. It can be purchased at Amazon through the following link:
http://www.amazon.com/Selling-Put-Options-Way-ebook/dp/B00408A6AC/ref=sr_1_1?ie=UTF8&m=AG56TWVU5XWC2&s=books&qid=1286991042&sr=1-1