Hi all, I hope this finds all of you counting you win money and not adding up losses. I had one trade that seemed to be heading south and I closed it at a loss (PCLN 445/450) I would have been safe but I was leaving the computer so I bit the bullet. First loss in a while but all the others were great.
If looking for a trade next week check out AAPL 290/285 put spread. 30 pts of cush with a week to go. AAPL would have to drop an average of 6 pt a day. Not likely.
Plenty of other trades to ponder this weekend.
Good trading all
140 comments:
The SPX is testing the 200 dma, I think it'll act as good support for a bounce. So some put spreads again next week for me.
Well everyone likes to hear a good horror story so here is mine:
Since I have been doing this stuff for the last 10 odd weeks it has been great. Had a couple of scares here and there but this week finally had to pull the trigger on a position that ended up costing me the whole month's progress.
The culprit was a NFLX 245/240 put spread, opened up Wed, when it was still trading near 260. This was the 2nd half of an IC (the call spread was 275/280 and had been safe for awhile)
Well as most of you know NFLX got savaged by the bear on Thursday. I saw what was going down and said to self "OK, this looks bad, sell if it gets to 248." 248 comes by, and what do I do......NOT sell. Instead I say "well it should come back up, wait a bit." Nuh-uh. Nothing doing. Even so it was holding steady somewhere in the 247ish zone. 2pm rolls around and the afternoon Mama Bear comes out to play. Drops to 246.....sweat, panic......245....Many expletives and protestations as to the unfairness of it all......wait another minute....dipping BELOW 245. *Blam* Trigger pulled. Much sadness. (and the relief that comes with that despite everything)
Well, fortunately the rest of my earnings were mostly able to cover that hole. So it was not so much a matter of having to give back my last month's paycheck, as not really earning one for this month.
Moral of the story:
1) I love ICs but should not *always* use them. In a heavy bear cycle/market just stick with calls. (And obviously the converse applies)
2) Don't 2nd guess a prudent exit point. Sure the loss at 248 wouldn't have been great but probably would have been about a third of loss at 245.
3) Maybe 245/240 was too close to begin with? It was only a lousy .04 premium so it really didn't seem that outlandish that far into the weekly......so not sure about that.
4) (and this point undercuts all the others but I have to mention it anyhow) If I am going to engage in brinkmanship, maybe I need to have bigger cojones. NFLX ended up coming back up to 249 on Thursday and ended the after-hour trading on Friday at 245.5. (So would have been "fine", though might have developed an ulcer.)
Of course it is easy to say something like 4) in hindsight. I realize it is a bit of BS but obviously I can't help but thinking it a bit.
So where did I go wrong here? Was I greedy, or stupid or both? I will not be offended by any criticism. I am just laying it out here because you are the only folks I can talk to about this stuff!
I am almost thinking of putting stop losses into place that close out positions at the good ole double premium spot that Jerry talks about in his book. Seems heavy-handed but obviously is a way of strictly enforcing discipline.
Anyway thanks for reading my blathering pathetic story.
hey Gremjum - thanks for the story - i have trouble with discipline - following my rules I have laid out all the time - I think the best take away from the experience is to follow the rules you have established.
A lot of the same stories told (including my own) are ones when people decide to forego their established rules that got them where they are in the first place.
Good luck next week/month.
As for myself, I leave for a 16 day vacation over in MT, WY, SD & ND visiting friends, family and a little sightseeing.
Positions currently open with stops in place are:
VECO 40
FCX 40
Have a great weekend.
Gremjun your story hits home to all traders as we have all suffered the same fate. It goes to show the importance of trading rules and discipline, which i seem to lack. I too had some losses this week made worse by the fact I went from profit to loss by getting too greedy. I am a long term subscriber to Investors Business Daily if you are not familiar with them they have a hard rule, on a stock trade close out if it falls 7-8% from your buy price. obviously you can't do that with options but Jerry's rule of double prem. makes a lot of sense. In my own experience most of my losses have come by staying in the trade too long and watching profit fade away to a loss. I guess we all need to tighten up our rules and stick to them, again it was a great post and I'm sure all who read it have been in the same place.
@Gremjun - Thanks for sharing this with us. One of the problems I find with spreads is setting proper stop orders upfront. This doubling rule exit is easy to apply on direct put sells, where you can apply this discipline with a stop order upfront as soon as a put is sold.
Because the variation of the premiums is non-linear (for lack of better term), the only way to properly close the spread is monitoring the price closely and this leads I believe to a situation like what you described above.
Nevertheless, most people would do the same like what you did above hoping for a come back. This reinforces one to act correctly in that kind of a situation still taking a loss early.
I will have to constantly remind me of situations like this and also Jerry's discipline in closing the PCLN puts earlier this week when it was getting closer to his strike, though at the end it never got there and closed well above the strike later. I guess that discipline is what needs to be built in the long run for successful trading.
Forgive me especially since I've only been into the selling of options for 8 months now. But why sell puts in this market? The news with Greece and other European markets is scary and will affect ours. The market sentiment is bearish to the point that even the smallest bad news will send a stock spiraling down (nflx, goog).
I have to ask, in this market, why puts?
HI all, DR, I agree but.. often there is such cushion offered that selling puts even in bear mkt is ok...sort-of and only with quality stocks. A stock like RIMM that is losing market share and sliding downhill fast is not a good play! But my overweight is towards calls until I see a reversal of trends. The mental gymnastics required to change a thought process is difficult to achieve.
Also, all traders must come to terms with the fact that you can make a very safe, smart trade and it just falls apart and losses happen. I try to recognize this early (discipline) and adjust my positions. I usually have 50 puts/calls in each trade and letting those run very far off line and it can and will be a major loss. The point is some trades will lose! Don't let them become a disaster.
Jerry
Thanks for the sage advice Jerry. I had a bad week last, mainly due to OEX put spreads. I managed to close at the low point on Thurs... of course the market rebounded sharply from there. But the decline could have accelerated so I can't second guess. Should have opened with more cushion and lower return! The AAPL 290/285 put spread gives 9.5% cushion for 5 days @ $0.14. It'll probably drop on Monday but that's a pretty good deal.
Gremjun,
Good story, that will happen to everyone one day or another. We as traders always have this belief that when a stock is dropping to our max pain point it will go back up so we will not have to sell for a loss. That is trader psychology. Those are the types of things we have to overcome, along with greed and emotions. NFLX along with others (PCLN, GOOD, APPL and a host of other) is a volatile stock; it will go up and down quick. There are not too many days where NFLX is stagnant.
Now something you could have done in that instance was to buy back your negative side of the spread and leave your positive side open and let the stock run. Example: you have a 240/245 put spread, 245 you buy back and keep the 240 because that is a positive and will make your money back as the stock continues to drop. The only problem is that if you are holding a weekly then you better hope it drops quickly and then take your profits and close out. The weekly options move and lose steam quick. Again just as everyone says give some cushion, watch the put spreads in a down market, and look at a chart to see what is going on with the stock before you jump in. I hope I was able to give a bit of insight.
BTW- I did suffer a loss this week. My TV decided to pass away! Time to buy a new flat panel. I must give a shout out to the many people that gave me some easy money over the past year or so. Thank you, because you just paid for it!!
Chris
I set conditional or advanced orders that will exit the position entirely if need be.....even if I am away. Do you also set conditional orders? If not...you should really consider doing it next time.
I had the same NFLX trade going but waited it out.
I agree with the move to get out especially if you are starting to panic a bit.....simply move on. Fight another day. Protection is paramount or you could get taken to the woodshed.
I'm 100% cash and will be looking for some good trades. Mon, Tue, Wed.
good luck
Grem,
Whoops...sorry. I did not have the same trade...sorry. I had the 240/235's. My mistake.
Just a thought on Iron Condor vs put/call spread (or naked put). When you have done your homework and decided to do a deep out-of-money credit call or put spread, you have a 80% odd of winning or 4/5 winning chance. Stock can move only 5 ways: 1-stay the same, 2- up a little, 3- up a lot, 4 down a little, 5- down a lot. When you decide to go with either nake put, vertical call spread or put spread, you chance of winning is 4 out of 5. If you are doing Iron Condor, your chance of winning actually decreases to 3/5 or 60%. You are betting that the stock will not move up or down a lot. it must be either staying the same or move up or down a little. If you are sure that it will not move a lot, then spend a little more time decide one way or another to do either call spread, put spread or naked put which will give you 80% winning chance. If you are not sure which way to go, then maybe you should not do the trade. The commission saving from trading iron condor should not be a major factor since if one of options is under the water, the winning side's "crumb" profit is not going to help you much. It is better that you don't have a losing trade in the first place. The goal of doing either vertical call or put spread is to have the option expired worthless. Naked put has an advantage of being able to get out before expiration with more profit than spread, but require more margin.
That's my 2 cents on this topic. I hope it will help those who are new to option trading.
@TK, Thanks for the probability description, it helps to put things in perspective.
Tk, I don't totally agree with your probability formula. If each leg of a condor has a 90% probability for success than the total probability for success of the condor is 80%. Remember we are doing way OTM trades with a delta of approximately .10 or less.
I like iron condors because they are easier to adjust to avoid or minimize loss if done right. Netflix has been tough to pin to the markets lately. It has been rallying when the market was declining and declining when the market was rallying. I like to get to know just a few charts and get familiar with how they move and behave. Netflix had a big up move the last month to set a new high. I think the market makers were trying to pin the stock to certain area by expiration day. Be interesting to see how Netflix behaves in the beginning of a new expiration month. I think Neflix might drop as low as 240 before going back up some. I will be prepared to adjust if Netflix goes lower.
The NFLX drop was less about market makers and more about bad news for the company. This week Sony pulled its entire movie catalog from NFLX. This is something that NO technical analysis can account for.
Other company's have the same issue. I can bet that bad news about the health of Steve Jobs
will send AAPL down a few % points someday. And that worries me. Cushion IS king.
A little bit of bad news in this market will send a stock down. Really bad news such as this will send a stock tanking.
This next week I'll be focusing on calls as there seem to be few put trades. Look at this weeks Google chain for instance.
Having said this. I do like Jerry's APPL put. Its the best brand name in the world and to see it lose 30 points in a week seems very unlikely.
DR3Z,
I don't think technical analysis is the end all to be all. I'm aware about the news regarding Sony and Netflix that came out on Friday. Thursday was over a 10 point drop while Friday was less than 4 point drop. I do think NFLX is overpriced, but it is a media darling. One can still evaluate price targets with technical analysis. Netflix was do for a correction after a new high. Between 240 and 245 is a key fibonacci retracement level that I will be watching carefully. Even if NFLX is heading lower, I expect and hope for a bounce. The market is always right and will humble us all. I just use technical analysis to try to gain a little edge. I'm not married to NFLX and will abandon my position in a heartbeat if warranted. Hope everyone has a great upcoming trading week.
I don't think TA is the end all also. I once read a good line about TA, "its a guide, not the rule" and I've seen in that way ever since.
The thing about the NFLX drop is there was no news on Thurs that would have made it drop 10+ ponits. And then the next day, Sony pulls out?? Hmmmmmm.....
I gotta say I just don't have a good feeling about this market. I hope im wrong since I do have other investments, via TROWE Price and company 401k that would make me think otherwise. And even though indicators such as the Williams %R (which I love) and the 70 day moving average say that most of my stocks are oversold. I'm still going to sell call spreads until I see that pop that everyone seems to be waiting for.
Either way, cushion is king.
Good luck to all this week!!
It is a good week to wait before you open ANY investments. I am not opening call or put spreads until maybe Wednesday or Thursday at the earliest. In a market like this, never assume that it is oversold or due for a bounce etc. The market does what it does. It does not need to make sense. It is a good market to fool you into getting whip-sawed. You get in, then out then in etc and usually on the wrong side.
So keep your powder dry, when a market is this unpredictable, don’t guess.
Jerry
NFLX has been going down. I might sell call spread on NFLX 265/270.
AAPL has dropped over 6 points as I am writing this..
ya, I gonna wait until Wednesday to decide get in or not.
We need to give the MM's time to open up some add'l strike prices. e.g. The lowest AAPL vert put is 285/290. and trading at $313 and FALLING is no cush!!
AAPL is getting crushed, does anyone know why?
Hello fellow CRUMB traders!
I forgot to post on Friday that I opened on Friday weekly SPX put spread 1195/1190 for .1 = 2% ROI before commissions, which is what I always aim for but I find later in the week (Tues/Wed)I can only get .05 (1%) and probably the same with calls. I'm still happy with 1% ROI but depending how much you're investing, commissions will determine how close you get to 1% ROI.
Unlike Jerry, I seem to find SPX a much safer play than individual stock. On this trade I have easily more than 70pts cushion. That's just over 5% for the market to go down in a week. Possible, yes, unlikely, no, given we have already gone down 6 weeks in a row already. In the 4 week period just gone when the market was tanking, SPX only went down 40pts, and I have 70pts cushion for just 5 days! I have been selling SPX puts for 6 weeks now with all comfortable winners. I also find that sometimes waiting to trade on Tues/Wed/Thurs can be even riskier than on the Friday before or Monday as you maybe taking a much less of a cushion for the same or even less return. Sometimes, I still feel less comfortbale with 50pts of cushion with 3 days to go than 70-8-pts cushion with 5 days to go. Especially in this current market environment.....just my .02
Be safe! :)
If there's no news on AAPL as to why it's falling, then I think people are just liquidating stock where they've made good returns to take advantage of better opportunities in other stock to get greater returns on a shoot up in the market. Then sell again and buy APPL later as AAPL won't shoot up like other stock. That's what I think.
I have not made any moves yet. I am waiting it out right now. I do see a trade on the SPX I like but they open int is only 20 and one rule is it but bee min 100. I will keep you all posted.
SPX 1185 / 1180
I do have an order in right now for SPX 1195 / 1190 but i put the premium at 0.15 and it is only at .10. If it goes through good, if not then i will wait for something better.
As of writing I now have 85pts of cushion (6.6% cushion for the market to fall this amount in 5 days). I also forgot to mention why I chose 1195 strike. There's a mental trade (resistance) to buy or sell at 1250, but a mucher safer one is at 1200. If it happened to tank to this level in 5 days, it's more likely to hit (or go just below, but not all the way to 1195) and bounce up off this level as triggers come in to buy.
Fulgore, at .1 premium (2% ROI) is great! I would take it, it's more likely you won't get this return for that amount of cushion!
@Chelski, yes i know i agree and i did move my premium to 0.10 and it did go through.
What sucks is the return changes from 2% to 1.2% after commissions.
So my trade did go through.
So for this week Fulgore has:
SPX - Put Spread - 1195 / 1190. ROI = 1.24%
Cushion - 83.5
Don't believe AAPL will be below 290 on Friday. Opened 290/285 for .2
If anything, I believe AAPL will get caught in a bear/bull battle right at $300. (huge psychological level)
Likely that big money will step in at $300.
Used 1/6 of my margin and will add to the position later this week if possible. Otherwise....small loss.
Risky? Everyone has to decide for themselves. I'm willing to take this risk/reward trade.
RoadKing2, I like AAPL at 290 too! and wouldn't mind getting assigned at this price. However, IMO, if you don't want to get assigned, it is still risky, as with so little cushion available (same frustration as Bald Harley as to limited chain), all it takes for news on Job's deterioration in health on any given day to push past your strike price!
Fulgore,
Looks like open interest on the SPX is better at the 25 increment levels. ie: 1175, 1150 etc.
Poor liquidity with other strike prices.
Not sure about index trades. Seems to really cut into margin.
good luck, RK
@Roadking, ya there was no open int. Yes the lower strikes have more open int but like you said it is 25 points for the spread.
I am happy with my 1195 right now. I can't get too greedy.
Going into today, I had open, naked put positions in SPX @ the 1075 and 1050 strikes that I entered Thursday morning @ .25 and .20 fills. I closed all my naked put positions (BTC @ .05) within an hour of the market open this morning. What is not to like about this strategy (other than the margin money)? I'm entering these trades on Thursday (sometimes also on Fridays) and BTC for .05 on Monday morning (sometimes Tuesday morning, but mostly Monday). The money is now safely banked away (two-day trade) and the risk is taken off-the-table. Since this is becoming so consistent and easy to do (STO Thursday/Friday, BTC Monday/Tuesday), I'm looking to modify the GIGO on SPX to increasing the number of contracts I STO on Thursday/Friday (with 175-225 or more points of cushion) and be done trading SPX (for that batch of weeklys options) when I BTC them on Monday/Tuesday for .05. Then I will have all my margin money returned to me in plenty of time to do it all over again when the new batch of weeklys come out the next Thursday. I'm also doing the "10-cent SPX trade" where I'm selling (as far out as I can go) 10-cent SPX puts on Thursday and hold them into expiration the next day on Friday. That trade is also working out very well. I just love trading the SPX baby!!! So, now I'm currently flat the SPX (I have no open positions). If the markets head south, I'll sell more puts at them strikes, if not, I'll wait for Thursday (new batch of weeklys) to enter the STO Thursday/Friday and BTC Monday/Tuesday trade and also the “10-cent SPX trade” on the weeklys that expire the next day.
BTW, for anyone who trades the SPX, the CBOE is going to be conducting a webinar tomorrow (06/21 from 1530-1630 CST) titled: When to Upgrade: Transitioning from ETFs to CBOE Indexes. In this webinar they will be discussing the various benefits of trading CBOE indexes like SPX and OEX over traditional ETFs. I will be attending as the SPX is now my favorite underlying to sell puts against.
Hi all, I went for Jerry's suggestion on AAPL and got in this morning with a put spread at 290/285. It didn't seem much cushion but it was half day gone and about 22.5 cushion with AAPL trading at 312.5. I feel better now with the market on the positive side even though volume is thin. I've read Jerry's book and I have been learning a lot with all of you by reading this blog daily now.
Dave G - Nice GIGO's. Suuwweeet !!
RoadKing2 - I like your AAPL trade. Yeah, the cushion is small, but I have to believe it has major support at $300. To my knowledge, no one has downgraded, and targets for 2011 are still $450-$500!!! New products and OS should give a bounce in the next few weeks.
I'm waiting on tomorrow.
Cheers all,
rick
Rick, thank you. BTW, your FSLR trade from last week...very, very impressive. Congrats and job well done on that trade and also to JimN, he took the same trade.
I'm currently short AAPL 285 puts from last Thursday. I agree with Rick on major support @ 300 on AAPL. The average AAPL price target is currently around $458. Don't know if any analyst will be so bold as to downgrade AAPL going forward, but there will probably be some projected price targets coming out soon on AAPL that will be lower than where they currently stand. Don't see any real reason for the sell-off today. If AAPL can hold 315 going into the close for today, that would be 30 points for 4 days...I'd feel pretty good about that.
First Looks for Tomorrow:
PCLN ($459) IC 430/435/490/495 .35
NFLX ($246) IC 215/220/275/280 .13
GOOG ($485) IC lowest put is 475/470 :-( Danger, Danger!!
SPX ($1278)IC 1215/1220/1320/1325 .20
PCLN is a bit rich, but that is the lowest put spread...and I think 25pts on the downside (on Tues PM) might be OK. REMEMBER IC's can dbbl your credit premium, with ZERO add'l margin required....however, you do have TWO targets on your back!!
Good Hunting,
rick
I tried to get filled for .25 on SPX 315/320 on TDA Think or Swim. While waiting I also tried OptionsXpress. I got an instant .25 cent fill. I tried dropping to .20 and still did not get filled. Has anyone else experienced better and faster fills with OptionsXpress?
Jeffrey, I was wondering the same with Optionshouse having slow or low fill rates. I was under the impression that TOS was pretty fast as well though. Given Optionxpress and TOS higher commission ($1.25 and $1.50 compared to Optionshouse .15) I'm staring to wonder if they act as a middle hand, executing fast by buying it themself and then trading with the added commission?
I have the AAPL 290/285 as well, and agree that there will be massive support at the 300 level. I was very suprised that it closed below 320 and will be even more surprised if it closes under 310. Passing 310 though I think we have to brace ourself for a very violent 300 test with short dips down to 280, I remember the 200 level all too well. Hopefully we'll never have to see that since we're approaching earnings runup and rumors of the new phone. Last June was similar to this ride as well.
Nic,
I have an account with Optionshouse, TDA, and OptionsXpress. To date, OptionsXpress has given me quicker and better fills. On some trades when going for more than .05 on the SPX I feel it is worth the extra commission for the better fill. I use Optionshouse for low credit trades.
What has been others on this blog experience with brokers?
Hannah, I was so focused on the weeklys that I did not realize that there are quarterlys that expire next week. Thank you for astutely pointing that out to me. Yes, the June quarterlys expire PM next Thursday. What I do not know is if there will be any regular weeklys (posted this Thursday) to be traded also. I will call the CBOE tomorrow morning to find out.
Bald,
I would leave GOOG alone, The stock had a close to 15 pt drop on friday. I wouldn't trust that stock at all right now.
Chris
Jeffery,
I have sat on an open order all day with TOS and had the same order filled within minutes on OptionsXpress. I asked TOS why my order did not get filled when it got fill at there competitor, there reasoning was there must have been a buyer or seller at the right time. They all go through the same systems to send order, or so they say. With that being said, do you really get better fills when you pay a higher commission? I have no clue. I will add my OptionsXpress acct has been open for over 10 years and I trade through it on a regular basis, while my TOS acct has been open for a year. So maybe tenure has something to do with it as well. Who knows....
Chris
AAPl up on pre-market and cushion looks okay with 4 days to go. However, this Greek tragedy deal still hovers the market. Anyone nervous?
Here is a list of the available weeklys.
http://www.cboe.com/micro/weeklys/availableweeklys.aspx
I'll be looking for the free money!
RK
The first AAPL price target change (as a result of its recent decline in share price), that I have seen, came out this morning as Oppenheimer rates AAPL as Outperform and lowered their price target from 450 to 420. AAPL is indeed up in pre-market trading (probably the Oppenheimer analyst buying AAPL shares pre-market to help get it up to 420).
in TOS platform, why the premium of 435/440 put spread is higher than that of 440/445?
Hmm, difficult day. Not much premium to be had that I can find, but still too many days of the week left to see a direction. Anybody with crumbs to share?
Ying, it may be that the trade you expected to be higher happened more recently if you are looking at the last price.
Market is way up today. I am glad I didn't take that IC for SPX this week. I knew there was something I didn't like about it. I choose safety over greed and went with the put spread. I am loving it right now.
SPX - Almost 98 points of cushion for 3.5 days haha amazing!
closed out AAPL for .02 (in for .20 yesterday)
Nic, I'm not finding anything today.
Still have some time left this week to search for good premiums. Not gonna force anything. I sure as heck will not bind up my margin when we still have Wed and Thur to go.
RK
Market way up 'cause of the Greeks, for Gosh sakes? Low premiums at strikes too close to the market. Still 3.5 days til expiration, too long. Bored but safe. Gotta learn to golf like Jerry does, to bide time for better trades.
Great day to write calls, put in my orders, hopefully they go through, good trading day all.
Hey Fulgore, imagine if you had that IC on, you'd be going hysterical and might start rioting in the streets like those Canucks hooligans! LOL :P....I'm English and don't follow hockey....I'm bored too, lets get that Greek decision now and make that market volatile to juice up the premiums!
Not getting filled today on anything. But the AAPL trade (in for .20 yesterday also) couldn't have gone better. Thanks Jerry!
I think call spreads are good only when the VIX is really high. That way you get more premium and more cushion. In another 2 hours or so, the greeks will vote on some confidence thing. Maybe this well determine how the market trends for the rest of the week. Hope they pass it!
was able to get 1210/1205 filled right before close.
1200/1195 did not go through all afternoon.
SPX fees are essentially a double commission!
Did anyone do any call spreads yesterday or this morning on PCLN... looks like the shorts were burning up. Up 28pts! WOW.
Im still holding out on trades right now, nothing excites me.
Chris
2 of 3 covered call orders went through, just 1 more to go, then I'll sit back and wait to see where the Wheel Of Fortune stops.
Yihaa !
SINA is up 18% yesterday !! I was starting to get really nervous with my position as had already rolled it down once and it was still going down... now I can relax a bit for a while.. If it keeps safe, June/July would would have been the best month of the year so far for puts with the high volatility..
Morning fellow crumbs, well it's morning for me....I have to tell you guys my dream (more a nightmare! when I woke up this morning). Here's the story.....I saw the market tanking on a TV screen but couldn't get near a computer; the SPX was just dropping and dropping (probably what the flash crask felt like) and was nearing my strike price of 1195 (which in reality I do have on this week, a SPX spread 1195/1190). I said to other people around me that were also glued to the TV, that I'm sure it will hit 1200 and bounce right back up....and it did exactly that and my trade was safe as it didn't go to my strike price of 1195. Well, when I eventually got back to my computer after the market close to check on my trades, to my horror, my portfolio account balance was down by half!!!!!I looked in detail what had happened and I realized I didn't have the 1195 strike price but the 1200!!! and I was assigned and therefore lost all my money on this trade. I had a few of these trades at 1195(I don't know why) and had lost 50% of my portfolio......It had sunk in of my loss and had a sick feeling in my stomach.....and then I woke up!!!! and realized it was all a dream......but just to make sure I checked the S&P futures market at 4:30am this morning!! LOL
BTW, my SPX 1240/1235 got filled late yesterday for .10 = 2% ROI and no commissions!!! I love OH, I asked for 20 commission-free trades, they gave me 100!...That's close to $2,500 savings in commissions!
@Chelski, haha yes I would have been sweating it!!! NOTE: always choose safety over greedy :)
I just have to keep this course and I can retire in 5 years!!
Has anyone thought about trading SPY? It's similar to SPX, but it differs by a factor of ten. Just curious...
Thanks Fulgore for the reminder! As in all the strikes I choose I have good justification for it.
Like Fulgore, my goal is to retire (from working for someone else!) in 5 years, but on my travels there I forsee I will need to trade contracts in the 50-100 range per trade.....Does anyone feel it difficult to get trades completely filled i.e. AON at this volume?
Good question Chelski. I am curious as well.
Chelski, I quickly gave up on AON when I saw that my trades for 100 or more were filled like 17, 43, and then 50. It seems like it is hard to get filled as it is without AON. I have a fix cost of $12.50 but after that it is all linear, and I really don't think about it. My pet thieve is closing trades early although I'm starting to more and more feel that the day to open new trades is the Thursday or Friday the week before. Perhaps just because many lets them expire there seems to be better premiums and supply these two days. I seldom trade on Tuesdays and Wednesdays nowadays.
Henry, I looked at SPY, and at OH there is much lower commission on those, but the volume and premiums seems much lower as well.
Thanks Nic, I'm not too worried about the commissions, more about getting my trades filled and what I gather from you is that you are getting trades filled at 100+ contracts with no problems, of course volume and OI helps.
I too now see opening new trades the Thurs and Fri the week before in getting a decent premium with the cushion you want.
Henry, I agree with Nic, a few times I've looked at SPY, the premium and volume wasn't there. If it was, then I would definitely trade the SPY as there isn't an exchange fee of 35c per contract (and ALL brokers pass this on to us!) like trading the SPX has.
Please correct me if I'm wrong, but it's not feasible to close out, say a SPX put spread, because if you opened the trade receiving a net .10 premium, to close it out the net premium you would want to pay is .01, but it seems the lowest you would realistically have to pay is .05 and therefore giving up 50% of your premium, which you wouldn't do and therefore wait til it expires?.....I believe this is on the cons in spreads?
@nic & chelski:
Thanks for the info guys! Maybe SPY might be good for trading naked put options, but probably not good for credit spreads.
That's a great point about closing SPX, Chelski. I've never done it because I didn't want to pay the exchange fees again, but another reason is that you would have to give up .05, a nice little crumb.
Chelski, you made the following comment "If it was, then I would definitely trade the SPY as there isn't an exchange fee of 35c per contract (and ALL brokers pass this on to us!) like trading the SPX has." The "ALL" part of that statement is in dispute here. You put it in caps to further emphasize your point. My broker DOES NOT charge this 35-cent/contract fee for trading SPX that you and others have referred to from time-to-time. I do not even know what this fee is as I have never paid it before and if not for this blog, I would have never known about it. So, to state that "ALL" brokers pass this fee on to us is incorrect. I’m thankful that my broker does not charge this fee as I’m really into trading the SPX. They do have other ways of nickel-and-diming money out of us, but the SPX fee is not one of them…yet.
Regardless of additional exchange fees, minimum closing for SPX will be .05. In terms of crumb, this will still shave off a significant portion of return on credit spreads.
Do we have weeklys tomorrow? As we also have quarterlys pending for next week.
Dave, who is your broker? I don't remember paying this at TOS but since their commission was $1.50 maybe they absorbed the cost?
avid_kris, I was told by the CBOE and the Options Help Desk that because the quarterlys and the new weeklys will expire on different days (quarterlys next Thursday (6/30) and weeklys next Friday (7/1)), that there will be new weeklys published tomorrow for the SPX. Neither one of them sounded 100% positive, but I would say based on that line of reasoning that there will indeed be new SPX weeklys published tomorrow. We do not have long to wait to find out for sure though.
Nic, my broker is TradeStation. I do not pay a ticket price on my trades or that SPX fee, but they do charge fees for other things that many other brokers probably do not charge for. The brokers are going to get their money one way or another. It's just a business expense that we as traders have to deal with.
Hi all,
Re SPX Index fees of .35/c is a CBOE fee that is collected on every trade. Many folks pay as much as $1.5/c and the broker may or may not add an additional .35 Index charge.
I use Options House. They only charge .15/c, so they have to add the additional .35. But on non-index options, .15/c might as well be free. btw - letting the option expire does NOT incur any commission...
Yes, Bald you're correct, the 35c fee per contract has to be paid to the CBOE and if you think you don't pay it, then it's built into the brokers commission rate.
@Bald,
I recently moved to OH, are you sure they charge .15/c, I thought they charge .35/c as other brokers?
Kenny, I'm with OH too. Depending on how many contracts you trade, but at our level, it is $12.50 for spreads + 15c per contract. You are charged an additional 35c per contract if you trade SPX.
Thanks Dave. I just checked TOS and they have new Jun5 weeklys opened up this morning.
SPX is going to go down atleast 20 points today I guess because of fed assessment of economy and other factors today!
@All, TOS does not charge the additional fee for trading the SPX BUT the cost is 1.50/c like you all stated. This fee is very high but being in Canada I do not have many options. Many brokers require a large maintenance to even start trading. Once I gain some more time / trades with TOS i will ask for a price reduction. TOS is very new to Canada, like 4-5 months.
SPX can drop 20 points today if it wants I'm at 1195 for my put :)
Opened 50 SPX put 1215/1225 @.15
Hopefully the market is settled down somewhere above 1250 by the end of tomorrow.
@Fulgore/All - First Fulgore definitely request a commissions change if you're with TOS...I too am with TOS and although still high in my mind, I pay $4.95 base ticket price, and $0.65 per contract. So, for a 10 (per leg, 40 per IC) contract Iron Condor it cost me $45.80. Compared to your $1.50/c which would cost $60. So, a slight savings, but in the world of crumbs every little bit counts. I am still working on them to try to get even lower commissions. As well, it is the same every time I trade, no matter what underlying. I've never seen the extra fee for trading the index options (SPX, RUT, OEX) either. In any event, like DaveG mentioned, I'm sure they are getting their nickels & dimes from us some how though.
Kenny,
OH charges .15/c for all equity options. For certain index options (SPX, OEX) they charge an additional .35 CBOE fee. Keep in mind, if you hold options to expiry, there is NO additional fees. Considering the additional juice in the SPX, its insignificant.
btw - Using SPY options is not advised. Very low liquidity. SPY is an ETF of the S&P 500.
@Bald,
Thanks for the clarification! I know index options like SPX are subject to special tax rules so we pay less tax on the capital gain, but .35 CBOE fee
is too much... nothing much we can do about it...
Anyone else having trouble getting filled at Optionhouse today?
I was asking .25 for the SPX 1235/1230, which had a last mark of .40. Half an hour later I had still not been filled but the last mark changed to .35, implying that someone got filled at .35 while I was offering .25. None of my OH trades have gone through today.
@Nic,
I had SPX opened this morning without any problem. Hope this helps
@Kenny, That is a nice trade, if I had some maintenance left I would join you on that. Over 40pts of cush for 1.5 days left of trading and .15 prem I think that is a good trade.
@Jimn, I will be harassing TOS until they come down in commissions, but i am unsure how they will feel about it because there is not as much competition in Canada as there is in USA for them to bring their fees down.
Ok, for those interested I called OH to chat about my low fill rate, and one thing that may be good to know is that their 'mark' is really just the middle of the spread. Compare this to TOS (which I'm starting to miss more and more), which shows the actual last executed value. I'm now keeping my old TOS account screens up in parallel.
@Jerry, you've been quiet this week, what trades do you having going right now?
@Nic, good to know.
It's interesting that TOS, OH, TK, TM, and MANY others all use Penson Financial for clearing. I could be wrong, but I would assume each (Penson) broker's orders would go to the same market makers?!?!?
Thoughts/Comments??
I still have an unfunded TOS account, but their platform, while cool, looks hard to use.
Thoughts / Comments??
~rick
Jerry, are you on vacation?
I got filled this morning on the following naked-put SPX positions:
1165 @ .10 - expires tomorrow PM (will hold these into expiration)
1075 @ .15 - quarterlys that expire next Thursday (6/30) PM (looking at a 2-day trade on these...buy back Monday morning @ .05)
Trying to get filled on the 07/01 weeklys 1050 @ .15, but no luck so far. Kenny, that is one sweet trade. I'm going to nominate you for this blog's "Trader of the Week" for this week if SPX holds 1225 by market close tomorrow. Last week’s "Trader of the Week" has to go to Rick with his FSLR trades. I'm root'n for you Kenny...because, I know if your trade is safe, my naked 1165's are also.
Earnings season starts 07/11 with AA reporting that day AMC.
Another advantage of trading SPX as apposed to individual stocks, is we can still trade in earnings season and don't have to worry about hit or misses in individual stocks, as we still get decent premiums and cushion with SPX!
Chelski, I'm with you dude...you're speaking a language I can understand. No single stock risk...I like it!
@Chelski, I'm with you too. That's why I do SPX. No need to worry about Steve Job's health!
@Dave G, Thank you for the nomination! I hope the market is cooperative with us by tomorrow close.
Another advantage with SPX is it has very strong resistance levels. See how the market (S&P) bounced off a few points off the 1260 level (200 DMA) for the second time in the short-term. If we do go pass 1260 today, it will have to be capitulation level for it do so and then there's another but somewhat weaker resistance or psycological level at 1250. IMO, it won't go there by end of this week and that's all I care about this week. Next week, will be a different assessment.
Notice how the Nasdaq is almost even, clear sign of sector rotation, or rotate out of everything under the sun to Tech!
I forgot to point out that stocks don't have VERY strong resistance levels like SPX.
JimN - Thanks for the info on TOS commissions. I talked to them recently as well and asked them to match TK. They said they could only do 0.65 with 4.95 ticket charge on all legs of a spread.
Planning to talk to them again to see if they will match Interactive Brokers 0.95 cents with no ticket charge on any legs.
My account is low value, so not sure if they will agree, but still will give it a try.
@avid_kris - Someone posted a few weeks back with the email addresses for two big-dogs of TOS. They advised to go directly to these two, rather than deal with the standard customer service guys. That's who my next email is going to, but I've got to go back and dig up the addresses.
JimN, here are the addresses for TOS:
scott@thinkorswim.com
tom@thinkorswim.com
Jerry or other bloggers,
I was wondering if you could share your total account goals per week....ie: 0.5% gain per week or??
Seems to me that any gains over 1% involves a MUCH higher level of risk taking.
I tried to look through past posts but could not find anything.
thank you, RK
My goal and I think the majority of truly crumb traders that trade weeklys try to aim for at least 1% and we can even get 2-3% on a trade without taking on additional unnecessary risk in volatile markets like today!
If you get in at the right time (like Kenny did today and got 3% ROI on that trade with 40pts cushion for 1.5days left)and not being greedy in trying to get more premium, you will get filled and opportunities like that is where the market is just giving money away! LOL
Hannah, I think it was the opposite, the market was going down because of the oil intervention (investors don't like not being in control!) and only shot up becasue the EU/IMF agreed the 5yr austerity plan for Greece. :)
@Avid_Kris, do you do alot of volume with TOS? I definetly would like to get the 0.65 with 4.95 ticket charge on all legs of a spread. or the 0.95 you are going to ask for
Do you do alot of volume with TOS? are they very easy to talk down? I want to have all my ammo ready when i call them.
@Roadking, My goal is 1.2% a week. The reason for this is I like to use SPX and if I use 0.05 premium the return is 0.2% per week after commissions. When i use the next premium at 0.10 it puts me at 1.2% after commissions thats why the above would be crucial to get for me.
For people like Jerry they can get the 0.05 premium and still make 1% return because of the low commissions.
@Chelski:
I agree! SPX has been my "go to" trade for the past several months. The cushion and ROI allows me to sleep at night haha.
Fulgore,
Wanted to know if your SPX trade of .10 is on a spread or is it a naked put? Thx RK
This week is looking good for me. Traded AAPL for .18 and felt good about it.
Looked for a bit more but nothing jumped out so I didn't do anything.
Roadking2, I'm sure Fulgore's is a spread as most of us on here do spreads, with a handful doing naked, like Dave G, Jerry and possibly Bald Harley as they have the big bux!
Having said that, from time to time, I calculate the naked ROI and it is slightly higher or even lower than a spread because a naked requires more margin. Given that spreads are supposed to be "safer" than nakeds and use less margin, I don't see why I won't still use spreads even when I eventually have $100Ks in my account.
One of the advantages I see with nakeds is you can close anytime to take a big chunk of profit off the table to take advantage of other opportunites, whereas a spread we would probably wait til it expires. Oh yeah, with nakeds we can do the infamous Dave G GIGO method!! LOL
@Dave/Jim - Thanks for the email addresses.
@Fulgore - I hardly do 20 puts a week. Just 1 trade. This is one of the reasons I haven't talked to TOS to reduce further like other high volume/high asset traders here :) I doubt if they will oblige. The last I checked with them they won't match Options House. Next time I will ask if they match with IB (which is .95).
I use TOS and can't get them to go any lower than 1.50 per contract. I have tried many times. They keep telling me they reduce the price when people are averaging 3000 contracts a month. Im not close to that. It's not bad I guess, when comparing TOS to other brokers. I use TOS only due to thier iPhone app. I think it is the easiest when creating a spread, quick and easy. Price isn't always the key, convienence is.
Chris
In an attempt to keep every one going WTF they are switching up the SPX for the end of Q2 sorry if already posted I have not had time to read the forum. Sigh
http://www.cboe.com/tradtool/webcast.aspx#ooid=Z3bXJoOnhoqcg0w4kr5k-7Z62eVYtM-n,ZocGxqMjrJ1j7Og6CqVjSnntkMKfHCkm
Using a goal of .10 SPX spread:
I ran the numbers tonight for a spread trade on the SPX and one contract takes 2,500 of my margin away. So....ten contracts equal 25,000 for only a $100 dollar profit......minus commish on top of that. Must be missing something? How much does your broker take from margin for SPX trades or are they all the same?
I'm with OH currently.
Roadking I use OH and TK and at both brokers the margin on SPX is 500.00 per spread when strikes are 5 points apart. It will be 2500.00 at the lower strikes when the spread is 25 points.
James,
thank you. guess I was trying to stay too far OTM. :-)
Hi all
I trade mostly SPX iron condors. I like ICs because there is margin req'd on ONE side only. I do alot of 100c trades, or 400c for IC. This requires $50k in margin. However because I collect premium on both spreads, I usually collect .15-.30, or 3-6% ROI before comm & fees. I can usually get 60-70pts Cush on either side on Wednesday's and sometimes on Thursday's.
NFLX was the only other 'safe' trade I found. Today I got the 220/225/280/285 for .24 cents. At $257 I still have 23pts Cush on upside and 32 to the downside.
My biggest trade this week is SPX 1225/1230/1320/1325. Another wild ride the last two days, but I've got over 40pts Cush either way. Btw I sold this IC for .30 on Tuesday. "mark" was at .40. Three months ago I was selling SPX for a nickel ABOVE the midpoint/mark. On the Nflx trade the mark was .26. Not bad.
Happy returns
Rick
After TTL, I'm booking about 6% per month
Bald,
Was that NFLX trade for next week? It doesn't add up for me on the IC's..
BTW - I have been trading IC's for over a couple years and love them. I had subscribed to a site for trading condors, which worked out great, then last summer came across Jerry's method. Instead of trying to be aggressive with my trading style, I combined both methods in August and it went from there.
CHris
Rick,
All I can say is....WOW.....I wanna be like you!
My experience and strategy with options over the past several years has been with only one leg. Usually DITM calls with rising stocks. I have not had much experience with spread trading but am learning fast.
What happened to Jerry (big gains, big losses) also happened to me. I wasn't wiped out though and have been reading/learning as much as I can. It seems to be a constant battle to stay on top of things....news/politics/world affairs etc.
I am happy to say that I have made is through the dot com bubble and this great recession (which may not be over).
Thanks you for the input. It is greatly appreciated.
RK
PS- about 6 months ago in Atlantic City I was on a roll. I didn't lose the dice for over 45 minutes. The casino had to send in the "cooler" if you know what I mean. I took em for 3K and only started with 500. Too fun!
I play craps about 3-4 times a year.
Gssound,
The NFLX trade was for THIS week. The similar SPX trade for next week (1220/1225/1320/1325) is getting .90 right now, or $9,000 for a 100/leg IC. That's 18% ROI !! I can/will get half that price next Wednesday assuming a 95-100pt spread on current SPX price. I know some folks use a 200pt spread (100pts each side), but that is too conservative for me. SPX only moves 30pts (in a day) 3-4x per year, and still rarely finishes a week up/down 50pts total. It has had several 20-30pt days in the last month. Very unusual, but has finished almost flat the last three weeks...It looks like today will be the same.
RoadKing -
The last time I bought DITM was GOOG just before their April earnings. You may recall GOOG fell thru the floor...still is... I lost $40k in a gap down. I've been a 100% 'crumber' since then, and have recouped that $40k. I'll never go back.
Re AC - you're story has my mouth watering. I used to go to Vegas monthly, courtesy of Mr. Caesar, or Bellagio. Craps & Baccarat are my favs. I make alot more $$$ now, but my tolerance for loss is WAY down. Age = Wisdom...or senility ;-)
Another GREAT week
Cheers All,
rick
Rick,
You've probably mentioned it before but who is your broker? I'm having such hard times getting filled at OH it's not even funny. I have my TOS screen up as well and I can see that even though I'm 5 cents under the last exchange I'm not getting filled. I guess this is the downside of the extremely low commission.
PS. You're getting .15-.30 with 60-70pts cush on Weds???
Nic, I am using TOS platform from TDA, I didn't get much filled except one order-spx 1125/1150 on Tuesday. Feel lousy to sit around with mostly idle cash.
It is really taking away some of the fun. You sit there and mull over different choices, pull the trigger and then you never get filled. In the meanwhile other opportunities disappear because the maintenance is locked up in open trades. Gah!
Anyone on a plattform where the maintencance isn't pulled until the trade goes through?
I am aiming the following for next week..
SPX 1200/1195 put spread
NFLX 220/225 put spread(CEO has joint facebook as board of director, good news for NFLX)
@Avid-Kris, yes you are right I have the spread for the SPX or wait I should say I HAD cause it is 4:01pm and that means .. I keep ALL the money honey hahah .. ohh yaa!!
I will be looking at the SPX again next week on Monday as far out as I can go for 0.10 return. I will wait till it opens Monday and see which way it goes then get in most likely.
@Bald, please let me know when you see the IC on Wednesday with 50 points of cush!!
@Ying, that trade is nice on the SPX I will join you most likely, but I will see what it opens at on Monday.
@All, IC on the SPX is really nice and I have used it 1 time, but it seems on the call side they don't give as much cush. I will not do anything less then 60 on the call side for points of cush. I want .05 out of this to add to my .10 from the put side at 70-80 points of cush.
Ill post this too since Bald did.
ROI per month right now = 8%
ROI per month AFTER COMM = 4.8%
I hate how I am over Jerry's limit of 6% before comm, but after comm im right in the money. Comm is kiling me TOS. But once I get up there I will make them charge me less :)
ROI will vary if I do an IC.
ROI per month Using All IC's = 12%
ROI per month AFTER COMM Using All IC's = 6.4%
Right now I am only doing 1-2 IC per month because I choose safety over $$$
So weird, some guy went on CNBC today telling people to sell cash-secured puts on the SPX. He said it'll generate 1-2% monthly. Maybe he stumble upon our little blog?
We've been found, Jerry close up shop haha
@Henry, can you link that post on CNBC?
Damn that guy on CNBC!! They'll all be put sellers now and we won't have any buyers!! LOL
It's now official--the SPX settlement value is: 1268.45 (for options expiring 06/24)
Congrats to Kenny on a home-run trade and all the others who made $$$ this week on SPX trading.
Hmmm... I think this is it.
http://video.cnbc.com/gallery/?video=3000029686
Hope everyone had a good week. All my trades expire yay!
Nic - I use OH and TK. I have a new unfunded acct at TOS, but the platform did not seem user friendly the 10min I played with it. It seems to be a BIG favorite.
SPX ended the 4th or 5th straight week @1270 +/- 10pts. Wow!!
TGIF
rick
CORRECTION - 3RD STRAIGHT WEEK @1270
The wild ride leading to the Friday's close has aged me...
How could I forget the previous Friday having a winning spread at $1300.16.
I noticed that quarterlys show 6 days left in TOS, whereas weeklys show 7 days left. So quarterlys close 1 day earlier which means margin will be released on Friday, for following weeks use. But prices don't look good on the quarterlys. Something to ponder! Not sure whether they close am or pm, that's another thing.
Time to start a new thread I guess. But Jerry is not around!
Hi all been out of town
Sorry
Avid,
Quarterlys will close at month end of every quarter, they are not traded as much as monthlys or weeklys that is why you don't see any good premiums.
Chris
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