Hi all, the blog seemed to have derailed. I do not know what is up with that but I hope it gets back on line and squared away soon.
Looking at next weeks options, I have to say, it is possible to wait until even Wednesday and get one percent returns using spreads with weekly options with stocks like PCLN. The stock is trading around 530 and on Wednesday and maybe Thursday morning, you should be able to sell a put 40 points below the existing stock price. To do the spread you then buy the next strike below that. You will end up with maybe the stock trading at 530 and you selling the 500 strike and buying the 495 strike. The goal is to take in from .03 to .05 cents. As the maintenance will be 5 for each opition, which equals for a two day trade could give you a return on investment (ROI) of from .06 to 1%. And that is in a one-day or two-day trade. AAPL and NFLX etc may prove to have some like opportunities. If you get a .06% ROI in a week that is over 2% a month and that is more than except able in these times. Do not risk your capital on risky plays. Take the easy money (crumbs). There really is easy money out there but many traders refuse to see or to take advantage of the opportunity.
75 comments:
I am curious if anyone has portfolio margining enabled in their account and, if so, how that affects the system. Since the margin requirements would be less for most positions do you have a correspondingly greater upward threshold for returns; i.e. do you stick with the same cushion that we normally talk about here and simply embrace the greater ROI or do you go for a bigger cushion?
Fulgore - Re SPX margin/maint requirements. Other than the .35 fee (OH is still waiving fees), I don't think my margin req are any different?!?!?
Anybody else see higher maint req for SPX. My $5 spreads (1295/1300) are $500/contract... I think...
rick
Oh.... maybe you thought I was trading the whole SPX contract. No No!! The OPTIONS!!!
The 1295/1300 put spread requires $500/contract and Friday was getting about .30 cents. Maybe too juicy considering the market was in freefall. Maybe the 1285/1290 will get 2-3% tomorrow. Because the Index is not as volitile as a single stock, I have felt safe with 40-50pts cush for 4-5 days. That's not as big a % as we normally use on PCLN, AMZN, etc.. Maybe I've just been lucky, but 2-3% ROI has been a given even on Tuesdays.
40-50pts on SPX is similar to 500pts on the DOW....which is good 99%. The last 1%, however, is a doozy :-)
rick
Well the next week of trading will start tomorrow and I will begin looking hard at options for the coming week. Last week i waited until Thursday to open some spreads with PCLN. I still had big cushion and only 1.5 days left in the period. A 1% gain in less than two days feels good. Don't rush and don't get greedy with the strikes used. think crumbs...
Jerry
I have Portfolio Margin enabled and it allows me to sell much further away from the market in general.
@Phantom, can you explain the portfolio Margin for a newb in lamens terms?
Also All, the market is down accross the board today. I am going to wait to make any moves to see how everything plays out.
Please let me know if anyone makes any trades so i can scope em out.
Also Jerry, can you list your trades for this week / month?
Also why does the SPX show only 3 days of trading for this week ??
Hey All,
No one answered yet and I wanted to take advantage of the money on the table. I took the following:
SPX - Put Vertical - 1230 / 1225 For 1.2% Return for 3 days??? it says 3 days lol not sure why.
So this is 104.67 points of cushion for 3 days? are you kidding me? I think this is easy money. Say something if you think im crazy haha.
Fulgore,
It only shows 3 days because this week’s SPX options are the normal May monthly option contracts and those are AM settled. The weeklys are PM settled. So, the last day to trade this week’s May options is Thursday as they settle based on Friday's opening print. There is that subtle difference between the normal SPX monthly options and the SPX weeklys. That's why this week is a good week to sell SPX option premium because we do not have to worry about any price action throughout Friday as they are AM settled on Friday’s opening print. The weeklys are PM settled and the monthly options are AM settled.
Dave G
ahhh ok thanks Dave for explaining, it makes sense now.
10 more TTWO, this time May $16 for .35.
4 more TTWO May $16 for .35, I think I'm done trading May puts, I need to step away from the computer.
@Nicky, Wow you are aggressive :) $16 is waaaay to close for my blood. I would be careful with that strike price. But I think you said that you don't mind owning this stock so.
Exactly, New game hits shelves tommorow, pre orders looking good, already #1(PS3) and #2(XBOX) spots on Amazon.
http://www.amazon.com/gp/bestsellers/videogames/
I'm so tempted to go for 10 more, but I can't seeing that MSFT has gone below $25, I have 10 $25 May puts open, so it looks like I'll have to buy 1000 shares of that, also have 5 TER May $16s open, and thats trading at $15.93, it will be an interesting expiration Friday.
I said I was done with trading May puts, I meant it! I went to June and sold 10 TTWO $14 puts for .25.
Need TradeKing Opinion/Help
I have spent two hours trying to sell two put spreads and cannot get a fill, even at bid/ask. One problem is the status screens have to manually be "refreshed". WTF?!?!? I *MUST* be missing something. The quotes appear to be delayed as well...
CHAT help advertised as M-F 6am-6pm, but was "off" this morning. Long hold by phone, then no help.
My last action was to WITHDRAW all funds....
- rick
I feel your pain Rick. Nothing irks me more than an order entry problem. Wish I could help.
BTW, does anyone have an opinion on Optionshouse and the quality of trade execution? Just wondering because the trade fee looks pretty darn reasonable.
RK, I recently (3-4 weeks) moved to Option House from E*Trade. The fees are very low, and the platform is very decent. Not as cool as TOS or ET, but it *IS* in real-time!!!! I had heard alot about TK so I thought I'd give 'em a try. Bad idea. TradeMonster is another I want to try. Their platform is a little more robust, as are their fees, but not much more. TM is really geared for option traders.
Cheers!!
rick
Anyone looking at brokerages, and wondering about commissions, if you're not aware, Think-or-Swim offers to match any brokerage out there for new customers. I opened my TOS account a few years back when Trade King seemed to have the best commissions at the time ($4.95 per leg w/ .65 per contract). That's where I still am. But, if I were new, there are other brokerages with better, and I'd use those as comparison to open a TOS account and have the lowest possible commissions. I've heard from many, and I'm of the opinion as well, the TOS platform ROCKS!! Just passing on the info...(no I don't work for or get kickbacks from TOS) :)
I've had no problems with Tradeking, I also use Optionshouse, today I entered an order on Optionshouse, then went to Tradeking and entered the same order, I entered a sell price between bid and ask, the order went through immediately on Tradeking, I went back to Optionshouse to see if the order went through, but it did not, even though it was the same order as I entered on Tradeking, that went through immediately, the only difference was I had AON checked on Optionshouse, but now my sell price was the bid, I don't get why AON makes a difference, if my price is the bid price it should go through.
As far as reloading the status manually on Tradeking, I use Firefox with the extension "ReloadEvery" it reloads automatically at an interval you select, 5 sec, 10 sec, 30 sec, 1 minute, etc..
So no one joined me on the SPX at the 1230 / 1225. Wow I thought this was almost a gimme.
Ouch, I just got a margin call on AAPL. Interestingly it is not due until end May 18th, so perhaps I should wait a little for a pullback since I still have profit.
Nicky, since AON means all or nothing perhaps it was hard to find a buyer for the whole block?
Nicky,
You need to look at the BID size to be sure there is enough buying interest in order to sell all of your puts. You can customize OptionsHouse to show bid and ask sizes. I'm not sure about TradeKing's L2 support. I haven't used them for a few months.
Fulgore, you must got it at a very good time because the Spx put spread of 1230/1225 seems to be no profit at all. So, if you can get 1% or even .5% take it! With that much cushion, you should be very very safe. I wish I have that trade available for me.
@TK, I posted as soon as I made the trade. Sometimes these index's are odd because the strike below and above like almost no profit for me. All I did was choose a vertical on all the strikes to see what they were giving and I found this one. I had to jump on it just to see if it would go through and it did :)
I will post any others I see for this or next week. I probably won't post any until next week because I am basically done trading until Monday.
Man the Nasdaq got hit hard with AAPL, PCLN, AMZN, NFLX, GOOG. All the techs took a hit. I am glad I took the SPX for this week. I got lucky.
Fulgore,
I grabbed a 1265/1260 spread for .25 cents!! The SPX spreads are soooo wide, the 'bid' on the sell leg is more than the 'ask' on the buy leg...so the default price was a DEBIT. I found the midpoint and went UP another 5 cents. OH gave me an insta-fill while TK rejected the offer. Nicky must know somebody at TK :-)
JimN - I'm gonna give TOS a call about their price match policy. I hope the'll let me open the account with $10k and not have to ACAT my option house acct. I'm not ready to jump ship with them.
Thanks for the tip!!
- rick
Holy Cannoli, the NAZ fell out of a tree today. My 40pt cush in PCLN was cut in half. Sometimes buying Monday morning is good. Today, very bad.
It looks like PCLN has some support at $500, which is psychological only (but I'll take it)...Next chart level of support might be as low as $470. Yikes!!
We might find some juicy premiums in PCLN, NFLX and GOOG tomorrow after todays big drops. All the OTM puts are up HUGE.
Cheers all,
rick
Question,
Does anyone use TK? And if so, can you trade your margin for options spreads?
Thanks!
By the way opened some NFLX calls this morning, didnt think it would drop this far but I have 20+ points of cushion for 4 days.
Harley, I'm thinking of moving from TOS to OH. I was thinking of using wire transfer, is there an advantage to ACAT?
Jerry,
Your risk management rule (or rule of thumb)to close a position when the premium doubles is excellent advice but I would think that many option sellers would, unfortunately, ignore or break the rule. How often have you ignored this rule over the years?
Nic,
The only advantage of ACAT is they move your positions. On the downside, it can take two weeks!! I guess most of us here are weekly option players, so a wire trx would work better. I have a few stocks I hold and write covered calls on. Although it took 2 weeks to move from E*Trade, there was only one day that I could not trade. You will be pleased with OH, but I'd like to here more about leaving TOS. Is it because of the high fees? I was thinking of opening a 2nd acct at TOS. JimN (above) said TOS will take new accounts and match fees. TradeKing & OptionHouse are about tied for lowest fees as best as I can tell. But after one day at TK, I've seen all I need to see. The platform looked pretty sweet, but the order entry is crazy slow. Delayed quotes, no tick-by-tick data or charts.
TradeMonster has a little better platform than OH, but there fees are higher...but way less than TOS (street prices).
Good hunting,
rick
DR3Z,
You said you opened some NFLX 'calls'?? The downward price move today would give you MORE cushion. Maybe you meant put spreads. Despite the name of this BLOG, I do use call spreads once in awhile...but the cushion is ABOVE the strike price.
I hope you meant calls, cuz you are making some easy $$$ this week :-) On the other hand, I'm sitting on some really ugly NFLX put spreads...but not nearly as ugly as my PCLN put spreads :-o
The last two Monday mornings treated me very well. I shoulda stayed in bed this morning.
- rick
Thanks Harley, that makes sense, I assume you're holding long term positions that will be in the 15% tax bracket. I don't have any of those left so I guess in my case it is as easy to liquidate and do a wire trx.
I'm really only leaving TOS for the high fees. I'm paying $1.50 per contract so a spread is $3 per contract and that eats to much crumbs, which I have become very fond of. As for plattform I'm jumping into the dark as I have no experience of OH, but they have a new version that looks ok so I'm hoping for the best.
TOS has been great, but I doubt they will match $.15 per contract, and if they do it will likely be over an introductory period or with similar stipulations. The platform has been great, it's fast, sophisticated, lots of customizations and handy tools. I'm sure I will miss it, but it is just to messy for me to be on two plattforms in parallell.
Thanks Furgone & Harley for sharing the unusual trade on spx 1230/1225 & 1265/1260 spread. I am going to look out for something like that in the future. Spx closed at 1329.5. Amazing amount of cushion with great premium!
@Rick,
Yup calls, it was nice to be right for a change. haha! Right now I have a pretty good cushion. I was kind of worried going in because right after I made the trade I read about nflx getting approved to provide miramax content. Looks like the MM's were taking profits today.
I had a terrible time getting my OptionsHouse account open, you put your info in online but have to sign and mail, it took over a month to get my account open, the only good thing was the initial free trades and the quick reimbursement on the transfer fee, Tradeking's opening process was a breeze, everything is done online, no need to mail anything, initial wire transfer fee is reimbursed, you can do business by e-mail rather than fax which I like, I even got a copy of their options book for free, I found Jerry on Tradeking, which inspired me to trade puts, which allowed me to cut back from working 5 days to 4 days, now options pay my rent and bills, and my paycheck is used for savings/extra spending cash. Sorry for the long post.
@Nicky
No need to be sorry, that was a great read. I especially love the "options pay my rent and bills, and my paycheck is used for savings/extra spending cash" part. That's exactly what I'm striving for. I'm not there yet but getting "better". The hardest part for a noobie is controlling the greed. Especially when you don't have much starting capital. I'd be looking at a nice .08 crumb and see the .19 one strike closer, and go for that one!! That lead to me stressing out on Fridays. I like the crumb approach better (less stress).
All,
I'm looking at the PCLN 460/465 put, I think I'll be able to get in at .07-.08 that's a good pull for 4 days and 61 points of cushion. Williams %R is saying that it is oversold (-80) and the 3 month shows that the price pierced below the bottom of the bollinger band today, im looking for a bounce up soon.
Just my 2 cents. Good trading all!!!
@Fulgore - The best way to explain Portfolio Margin is that they take the value of the complete position into account when calculating margin and it is figured based on a theoretical loss. So for instance without PM, my broker requires $10k margin for each SPX option traded. With PM they require $1700 for each SPX option, but that amount will change, sometimes dramatically with the daily SPX fluctuations. In addition, if I were to sell a call, they would not require any additional margin as PM looks at a potential loss and only one side can lose at expiration.
Hope that answers your question.
Hi all, Wow, some good trades and some...well, trades...
Dr, Those PCLN with 60 pts of cush.. you gotta love those. Also the whole mkt seems over sold but the mkt is what the mkt is... When you start guessing and trying to hit the bottom is when you usually start losing serious money. Be careful and let the mkt tell you what did happen, This is a no guessing zone..
Sig, yes I have all to often broke the rule and very seldom am i glad. I send myself to the corner but I am still slow to learn my own lesson. CUT YOUR LOSSES AND LIVE TO TRADE AGAIN!!!
don't let a damn, turn into OMG...
Jerry
Jerry,
Can you elaborate more about "This is no guessing zone"? Don't we have to use educated guess most of the times, based on the market behavior, stock price movement, its history and recent news? Each time that we place a put/call spread or covered put/call, are we not using our estimated "guess" that we would be outside the the bottom or the top of what the stock will move to, so the our options would expire worthless? I am just not sure that we can take the guessing element out completely,that's all. I do agree that we need to minimize it as much as we can.
Can you give some examples of what you have in mind on "this is no guessing zone"?
Thanks Jerry.
@Phantom, Thanks for the explaination. I wonder how you would aquire these PMs? I wonder if they have something like that in Canada. It would be good to know for when I am a larger player.
Trades that look good right now:
PCLN - 498.47
Vertical - 440 /435
Premium - .10 Before comm
SPX - 1324.92
Vertical - 1215 /1210
Premium - .15 Before comm
This may be incorrect but ToS is showing me this premium. I would jump on this fast!!! if you can get it to go through.
PCLN ($495.35, -$8.17) and I got a fill at TK on 455/450 for .22. Despite cheapo platform, I'm happy today.
Tough market again today...
"When you get to the end of your rope, tie a knot and HANG ON." ~ FDR
rick
@Bald - 8% cush for 3 days of trading with a return of 4% before comm is nice - I actually need $5.5 for each instead of $5. For example for 10 contracts the maint is 5k showing but when i put a trade trough with a $5 spread it ends up being 5.5k. That is why i say 4% return.
@Bald, ToS shows me a .12 prem on the 455 / 450 it is now 10:22am EST. I wonder if it dropped that much or did you play with the number to get a higher prem?
clarification needed. Re pcln. Are you buying the 450's and selling the 455's.....same number of contracts? Also, are you expecting both contracts to expire worthless? thank you
@Roadking, Bald did the trade BUT yes he is selling the 455 and buying the 450. He is looking for them both to expire because there are only 3 days left. He may correct me though
I just did a little higher with PCLN, bought the 465/sold the 460 for .10 My thought are "can pcln drop over 10pts per day". I don't think so! But time will tell.
Roadking, yes the idea is for them to expire worthless. You get to keep the .10 (minus commish) Each option cost you 5 of maintenance so my trade made about 1.9 in 3+ days. But now it is hang on time.
Fulgore, normally the 5 maint between the strike is REDUCED some as the intake premium reduces the amount needed for maint?
Jerry
@ All, well I think i am a bit red faced as I was doing 11 contracts haha. So right now I have 12 SPX contract and the maint is 6k. That makes sense if it is $5 per X 12 = 60. Correct?
I never have one spread trade getting through at TDA, yet.
Hmm fishy.
May be TDA keeps all good premium to themselves...just wonder.
Hi Han, i just put one through at tda for the aapl 310/305 and received .16 Hmmm
The god part is i asked for .10 so they got it through and upped my return?
Jerry
My advice is to hardly ever do an AON (all or none) if you did that?
When setting the trade up I usually split the middle of the ask and the bid and that helps it go through.
@Jerry, you must have got a good prem because i am showing .05 for the AAPL 310 / 305
This strike is kind of close for me. AAPL must not have much volitility this week, the prems drop off after 310
Beginner question. When it says a demand of 50 on an AAPL strike, is that in thousands of contracts?
I read somewhere that AAPL trades around 70,000 contracts a normal Friday but I can imagine that the people on this blog alone could trade 700 contracts, can we really represent 1% of the option market on a $300B company?
Am I utterly confused as usual?
TTWO taking off, up 6%, So I thought I'd get back into May options, put an order in to sell put options on the options exchange - CBOE May $28 puts, currently I'm at the ask price of .40 the bid is only .25, I might lower my ask as the day goes on.
Damn, I wish I sold more TTWO! up 10% New 52 WK high!
Was watching TTWO, left that CBOE order open, it went thorough at .40, stock down to 27.82, 3 trading days left after today, spin that wheel!
http://www.youtube.com/watch?v=gFC8sDTXlng
Nick - You are one brave SOB. I gotta hand it to you... You know stock!!
Nic/Fulgore/Jerry/RoadKing - My PCLN premium was a split between the midpoint and ask. So I essentially split the split in my favor. That only works on the equities/Indexes with BIG spreads.
Re using AON. I'm using it on the big spreads like above. I just hate it when 2 of 10, or 4 of 25 contracts get filled. If I go in and change the order, it becomes a new order with a 2nd commission. I'd rather get ZERO fills. This may be poor advice, but when I'm going for the SCORE I just hate to get teased with 1-2 contracts. I'd rather tease the MM by moving my price by .05 cents.
Cheers all!!
rick
Nicky - CNBC just had a blurb about TTWO getting upgraded. Up 8% today... Waygo dude!!
@Nicky Gratz on the call for the game release. I wonder if Blizzard spikes with new WOW releases etc..
Praying for you that it stay level now for the expireations!
On a side note PCLN & SPX are keeping stable. Expire time soon haha
TDA good news (didn't know it ever had one lol)
"Nickel Buy-back
You can now buy back short option positions – for both calls and puts – without any commissions or contract fees if the price is a nickel or less."
Wow both commission and contract fees!
Fulgore - I'm right there with you on PCLN & SPX. It was scary for awhile today, then they both came back strong.
Nicky - You have reminded me of something I've read in several investing books; invest in what you KNOW(!!). Selling spreads with no cush is crazy...unless you have followed the company so well, for so long, that you know the biz and the way it trades. Nothing is guaranteed in the market, but you have shown us the value of knowledge. It pays!!
I've never even used PCLN, but I've traded it long enuf to know how it trades, and that has allowed me to push the envelope a bit and get some 5% or even 10% weeklies on a few occasions. It was a big risk, but educated. NOTE - I have been burned a few times (rarely on PCLN)...but that just adds to the education.
All in all, a great day!!
rick
Hannah does the no commission buy back include TOS, a subsidiary of TDA?
Thanks,
George
Jerry,
It seems like you are moving more and more towards weeklys. And within the weeklies you are moving to shorter time frames, 2 and 3 days.
Is this because of the market uncertainty or do you see the reduced time as safer even if there was a better trend.
Lastly, have you looked at 1 day pinning trades?
Thanks,
George
Lastly, give us a heads up if you see good stuff tomorrow and Thursday.
Jerry,
TDA improving your price is awesome!! That has not happened to me since the early days with Schwab. I thought "Price Improvement" was long gone... So, speaking of brokers, you mentioned a new one you are using, and by the description I think it is TK. If you prefer to keep this stuff to yourself, don't reply. But if you do have experience with TK and would like to opine...please do. As I've stated recently, I'm very underwhelmed. Inasmuch as they've trapped my $10k deposit for 10 days (what a rip-off) I have forced myself to use it to eek out my needed ROI. As much as you trade, you are forced to find the best commissions, but then I guess you also have to balance that with the efficiency and power of the platform. No?
I've read your book 3x, and greatly appreciate your insight...and this blog.
Cheers!!
Rick
Hi all, yes the increase is always great. Yes i am using TK mainly for the better price in spreads. TDA was charging for both sides and TK only one side. It was a pain setting up this account. My daughter set up one and I signed on and all hell broke lose. Letters back and forth and notarized letter saying i promise not to sign on again etc and it took two weeks to get it going. But finally squared away. I like many thing about TDA better, but I will adapt. I still keep an account at TDA.
For all other info, I do now trade mostly weeklies as I like the time evaporation. I have found with weekly that i can open a trade on tue--thur and still find strikes that offer .05 or .04 with a day or two to go. I have always thought of time as my biggest enemy. Some trader love to go out far and sell the time and then as it evaporates move to another position. But i like to control time and weeklies are in my wheelhouse.
It is possible to wait until late in the week and still get .04 / .05 and make great returns.
Some great comments and I want to thank all of you for supporting other traders and pointing out way to improve. this is a great bunch of trader all trying to get ahead and make money and have fun. Good people. This was my hope when starting this blog and book etc.
Jerry
Hi jerry and others
i just sold sina 80 june put for 0.90.I was wondering if anyone knows why the premium is so high.The strike price is well below 20% of current price around 112.Is there any news or announcement scheduled to come up which i am missing.
thanks
@doctorali
I have been following SINA for a while.
March 2 it hit $74.22 when I sold $65 put.
It just about doubled on 4/19 = 147.12. Then it dropped more than $40 last 4 weeks.
So much talk on China inflation, internet bubbles, lack of earnings....and China Bashing. So you be the judge.
@Kiteman
George,
I looked for same offer with TOS - didn't find any info so far. If TOS has such, I believe you'll get an-email just as I did from TDA?? Write to ask them!!
TDA clients access to all TOS tools and platform. I finally negotiated $8.00 per trade for margin account but not IRA. Still thinking if IRA should be at TK --- Kind of scare of the pain dealing with TK though the fee is very attractive.lol
Anyone else watching AAPL? Looking to sell a put soon.....AAPL could drop short term into the 320's.
Tried a .10 put for APPL for May yesterday, strikes 300/295. It didn't go through. Will try again later.
@Kiteman and Hannah - Yes, TOS removes commission charges when buying back sold calls/puts at .05 or below. Actually they have done this for a long time now, and I believe that is where TDA came up with it (i.e. when they bought TOS).
about time for a new post..
Jerry
Jim, TDA clients got the free commission for covering with a nickel or less the first time yesterday - about 2 years after it bought TOS.
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