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.











Tuesday, October 18, 2011

Earnings tonight

Well AAPL reports tonight and later this week MCD & MSFT report. It will interesting to see how the stocks respond. Especially AAPL, as expectations are so high. If they drop in after hours, it will probably be only for a day or so as the numbers will be massive.
Like the drop when the 4S was announced, big drop for a while and then roaring back.
My positions at this time are all calendar spreads;
AAPL- 1/2013—400 and 10-22—405 (will probably need rolling into next weeks 405’s)
1/2013 – 380 10-22--385 “ “
1/2013 –395 10-22—400
MCD 1-2013—87.5 10-22---90
MSFT 1-2013---25 10-22- some 26’S / some 27’S and lots of 29’S
Those are my only options at this time. So now it is sit back and wait for a few days. These plays average around 4-5% for a week.so there is money to be made out there but use caution and nothing wrong with waiting until Wednesday or Thursday to make trades.

63 comments:

Rob M said...

When did you sell the MSFT 29's and what was the premium? I've thought about rolling up to the 28's but I will wait to see what happens with earnings.

Pascal said...

28's? for nov 18 2011?

ihaveoptions said...

AAPL misses earnings! At least my calls should expire worthless. Now I know what Jerry was talking about...feeling like I missed a payday by rolling up when it would have been better to stand pat. Guiding higher next quarter tho and the numbers are still pretty incredible.

ihaveoptions said...

AAPL gross revenue 'only' $28.3 billion for the quarter. A disappointment?

Selling Put Options said...

HI Rob, on the 10/12 i bought the 1-2013--25 strike for 4.24 and sold the 28 calls for .22 net = ROI of 5.2% on a 10 day trade. If they expire i will then do them again and again etc for the next 60 weeks or so.
ihaveoptions; it is always a guess. They could have shot up 30 points or so? I assume some rebound tomorrow as 28 billion isn't much , but it is a start..lol

Raging Bull Winkle said...
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Raging Bull Winkle said...

The new show I talked about last week they did an AAPL strangle in Nov. sold 475 call and 370 put for a 6.86 credit covered this AM at 3.79 For a sweet 3.07 over night cash grab.

If you have the time check it out they don't bite.
https://www.tastytrade.com/ref?id=94c157f83d95a8010063febc5bb8340e

Pascal said...
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Pascal said...
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Pascal said...

I'm going to open a new calander spread on Royal dutch Shell tomorrow.

What do you think about apple Jerry? It took a nother hit today.

Selling Put Options said...

The aapl drop was just what the doc ordered for me. The highest call I had sold was the 405 so for it to drop back into that area boosted my acc't a bunch. Sounds counter intuitive but remember that the highest premium is near the stock price. So I was looking at having to buy back at a higher cost and sell with not much time factor. But now all is well.
AAPL will coast around for a while and then start back up? They are still the 1000 pd gorilla.
But all of my MSFT & MCD are just about perfect. Tomorrow I will roll anything that needs it and the decision will be weekly or monthly?
Good luck all, and still a lot of earns to come.
Jerry

ihaveoptions said...

Jerry, Didn't go for the INTC's? Good earnings report this but who knows where they are going...Too volatile?

Nicky said...

Hey Raging Bull whats that woman's name on the show, not the black one the other one?

Fulgore said...

SPX put spread 1135/1130 for .10.

Alsmost 70 points for 1 day

DMK said...

@fulgore, still having trouble with the spreads in IB. I see 1135/1130 for a .05 debit?? Can you email me? dmk112(at)gmail(dot)com

rhmoptions said...

Ill go out on a limb and declare 18 weeks in row success with SPX spreads. My 1090/1070 put spread (sold at 0.20) 1% return. Will expire worthless (I doubt a 120pt drop).

Will look to do it again Monday

Cheers
RHMOPTIONS

Raging Bull Winkle said...

Hey Nicky
The black girl is Vonetta, must stand for little ball of energy? And the girl with the large eyebrows is Sarra. Also today half way into call in Beth sat in for Tony

So what do you think of the show?

Nicky said...

I like the show, but their trading philosophy differs from the people on this board, yesterday they were talking about buying FAS $15 Dec call and selling the $13 or $14 (I forget) Nov call, trading these triple leveraged funds can be risky as I found out personally, but they were only talking about trading 1 contract, dipping your feet in, getting a feel for spreads, I like it, a different point of view, I didn't read up on the discount, store and voucher stuff, so I don't know how that exactly works.

Pascal said...

dos anyone know why Microsoft shares slipped in after-hours trading?

Nicky said...

Windows sales edged up only 2 percent, in line with limp personal computer sales last quarter, breaking the streak of three straight quarters of declining sales, as compared to the year before. But it fell short of some analysts' hopes.

"We still had Windows miss again, although not by nearly as much as it has the last couple quarters," said Brendan Barnicle, an analyst at Pacific Crest Securities.

"They were just in line on EPS, which typically Microsoft beats," Barnicle said. "Q1 is seasonally not a big quarter for Microsoft, and this was no exception."

Pascal said...

@ Nicky. Thanks!

Pascal said...

Jerry are you going to roll Microsoft weeklies tomorrow or did you do it already today? I'm thinking about rolling to next week strike 27.

I'm glad Apple is working out for you!

DMK said...
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DMK said...

@raging, show is like a stock market version of howard stern! Listening longer it seems like there is some value, are you a subscriber? $45/yr seems reasonable

ihaveoptions said...

We could use an up day tomorrow to help us roll our calendar positions effectively. Rollin', rollin', rollin'. Looks like the weeklys are the way to go right now. Rolled some AAPL and INTC short positions early today, then premiums got weak and I decided to wait til Friday.

Francois said...

I got creamed yesterday with the GMCR 65 put. Lost 55k in one day !! this @$$#@%#$ fund manager Einhorn made some bad comments and started to short the stock at the same time ! the stock lost 30% in 2 days and was only 1 day to expiration !

DMK said...

@All - with MSFT call calendar spreads. If you sold the 27's and if it goes ITM are there chances to get assigned? If you do - what happens (provided you can't short the stock)?

Pascal said...

@DMK. you use your long call

Rob M said...

DMK,if it is in the money you will need to buy to close the 27 for this week and sell to open the 27 for next week. You can also roll up and sell to open the 28 strike if you prefer.

Pascal said...

Just now I rolled my strike 90 McDonald's call to a next week 92,50 strike call

Pascal said...
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Pascal said...

That's bad luck Francois. I hope you make it up and and get it all back in the future

ihaveoptions said...

Sorry to hear that Francois. This thing is a minefield for sure...even one day to expiration is one day too many!

DMK said...

@Rob - If I am long the $30 calls, I would be taking a pretty big loss. Is that correct?

MSFT pushing up past 27 and very well may expire ITM, what is everyone doing?

Pascal said...

@DMK I just rolled into next week 27

Rob M said...

DMK, you will only take a loss if you let the 27's that you sold expire. To avoid this, go ahead and buy to close the 27's for this week and sell to open for next week. Right now you can buy to close for .20 and sell to open next week for .58, therefore you will have a gain of .28 on the spread.

Rob M said...

^*sell to open for .48

Pascal said...

@Rob M That's the right way to go and exactly what I did

ihaveoptions said...

Have some 26's with MSFT that seem to defy a good premium for next week or next month for that matter. Will probably wait a couple of hours and then roll for what I can get. Looks like the time value is about .06 for one week, not very good for what we've been getting, tho MSFT is new to me so don't really know what to expect. All other positions rolled successfully for another week.

Raging Bull Winkle said...

DMK
If you like the show 45.00 a year for the after noon is another no brainier.
I know few trades fit Jerry's modal I'm just digging the free education. Also dose not hurt to have a combined 45 years on the floor of the CBOE giving there view of were they feel the market is going,
Yes I'm a member.

KauaiTrader said...

After the rally we have seen over the last two weeks, I'm not sure what to do. Most of my contracts are expiring today.

Do I try to wait it out for a day or two of solid drops, or do I just wade in and try to get some extra downside cushion?

I'm talking here about PUTs and Vert. PUT SPREADs. It's hard to know if we are on solid ground or if it will all melt away again in a week. What goes up can come down, right?

Just looking for a little perspective from Jerry and the crew.

liong91 said...

@fulgore-how much maintenance is it required per contract for your SPX spread?
I rolled to MSFT OCT28 27 calls for 0.47.

ihaveoptions said...

lion91- At about what time did you roll your MSFT 27's. I got .26 in the morning. Guess I rushed things a bit!

liong91 said...

@ihaveoptions - Exact time was 11:23:43 . MSFT price was >27

Pascal said...

@Liong91 and ihaveoptions

Same here

Selling Put Options said...

Wow Francois, I have never used GMCR but it has been on run for a couple of months. Sorry to hear of the loss.
Kauai, Yes i am careful and leery of this market. It is on schedule for the best Oct in 20 years or some such number. I am liking my calendar spreads with stocks that have dividends and also some aapl. I rolled all of mine that needed rolling, some yesterday and some this morning.
My positions at this time are as follows;
MSFT Hundreds at the 27 strike
some at 28 and a few at 26
MCD Hundreds at the 90 strike
AAPL lots at the 400 - 405 and 385
KO 67.5 & 70's
As you can see I am avoiding stock that are Higher PE and subject to radical moves (hopefully)
I hope all of you got your roll-ups & outs complete. A new week coming and if Greece can get its loans and Europe is calm, all should be right with us.
Jer

Selling Put Options said...

Another learning point regarding the Francois position. When you have a stock that is dropping such as GMCR. From a high on 9/20 of 112 and nearly every day it dropped some. By the 30th, only 10 days, it had dropped over 20 points. By the Oct 17 it had dropped over 30 point. I don't know when the position was opened but no matter how much you like a stock, you have to pay attention to what is happening. Cut your losses and if it wasn't opened yet, never try to catch a falling knife. Francois, I only point this out as everyone's nightmare came true for you. But as traders, like I mentioned in the book, you have to do your due diligence and watch for the signs that this is not looking good. Having been through the times of waking up and sweating and wondering how much I was going to lose that day. I promised never again!
Jer

Nicky said...

I have a situation like the one DMK is asking about, I was away from the computer today, I rolled positions yesterday knowing I would not be trading today, I thought it was a safe bet, the position in question LYB, closed @ $27.39 yesterday, so I thought the 10 contracts of $31 Oct calls would safely expire today, when I get home I check the quotes, and wouldn't you know it LYB went up 13.25 % today to close @ $31.02, I own 10 contracts of LYB $35 Dec calls, so what happens now? Are the shares purchased @ $31.02 and sold @ $31? Which would result in a loss of only $20 + commission + margin interest, do I have this right?

Thanks.

Hannah said...
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Hannah said...
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Selling Put Options said...

Nicky, first an assignment isn't ever a done deal. It is very random. If there are a thousand OI only some of them will get assigned. So the chance of you getting hit is probably small since the stock only went pennies over the strike. If you receive notification that you were, call you broker and ask them what is best for you. Most brokerages have a trip-wire of anything from .05 to .25 before they automatically exercise the position and even then the owner might have to call and direct them to exercise. The cost in doing it is more than the .03 that happened So ?? But yes you can cancel the position with your bought call. That is why there is no maintenance required.

Nicky said...

Thanks for responding Jerry, when you say: "you can cancel the position with your bought call", can you explain that?

Thank you.

ihaveoptions said...

I'm pretty sure he means you can always sell your bot and paid for call to offset the short position that you may have to buy. Glad to know that it is not a 'done deal' and that for very near the money positions, it may not be exercised.

Raging Bull Winkle said...

Nicky
Do you have the buying power to take the stock? If so don't sweet it and see what Monday brings.Your long call are worth less and even at .02 ITM I bet your going to be assigned. Once I did not close out some ATM puts on AMZN it pinned to a strike to the frigging penny, I was put stock and come Monday AM I s*hit you not the stock gaps open over two bucks. :+)
So this could be a good thing.

Also next time your away and you have over 50% of the preamium in you pocket CLOSE the the thing out!

Friday on Tasty some one called in with BIIB 105 calls that he sold for 1.50 and did not close it out for .25 on wen-thu and fri it gaps up. Or grew Huge Teeth as Tony put it.

Raging Bull Winkle said...

If you don't have the buying power stock will be put to you, your broker will have you on the phone at the open Monday with a gun to your head saying SELL now!


This is some thing to think about, after the close you have about 15min. to decide to exercise or not. So in my case AMZN pinned at the close but droped after hour so I was put the stock.

I hate learning the hard way... COVER them shorts people!

DMK said...

Nicky, and what was the lowest that the option traded down to?

Nicky said...

@ Raging Bull, I sold calls not puts, so the stock won't be put to me, it will be bought then sold, I have plenty of cash in the account but it is tied up do to rolling some puts to Dec., but it is still cash, so I'm hoping they use my cash to buy then immediately sell, then the cash could go back to being held for margin requirements, I guess that's wishful thinking, I've never had a debit margin balance before, how is the interest charged, say their rate is 8.75%, how is this calculated? Is it like a savings account APY?
@ DMK, I never even checked the price on the option itself, I just kept an eye on the stock price, when I saw the stock @ $27 on Thursday I thought it was safe to assume that $31 calls would expire the next day, looks like someone knew LYB was going to jump:

Thursday October 20, 2011

Shares of LyondellBasell Industries fell sharply yesterday while put selling led the option action.

LYB was down 4.8 percent on the day, finishing the session at $26.93. The Dutch plastics maker has bounced off a 52-week low of $22.90 two weeks ago but is still trending downward with lower highs and lower lows since its high of $48.12 set in May.

optionMONSTER's systems show that 5,000 October 28 puts were sold in the money , almost all of them for $0.75. This volume was more than twice the previous open interest, so these were new positions.

This put selling is likely a play to get long the stock . The trader will be assigned if shares remain below the strike price through expiration at the end of the week. The effective price would be $27.25, however, so the trader is already facing a small loss.

jbl said...

Jerry,
I'm really liking this selling of weekly calls against LEAPS. Could you please clarify some guidelines for these trades. What if the long call dropped below the strike price? Would you ever roll the short strike below the long call or would you sell the long call and buy back at a lower strike? For instance if MSFT dropped below 25 what would you do if you could not get enough premium for your short call at 25 or 26?

I'm thinking about using this strategy on CSCO. What do you think?

Thanks for all the ideas you share on this blog.

Raging Bull Winkle said...

Nicky don't worry about the interest for one day that's the least of your problems.

You were short calls with no stock to cover you will find 500 shares "Short" in your account Monday. Again not a bad thing IF the market is down Monday. So you will be buying stock to close.

FYI I pay about 1400.00 a month on 500K at 2.5%

the formula looks like this


.025 X 500000.00 X 30

---------------------------------

360

Raging Bull Winkle said...

Nicky
Was your long call in or out of the Money?

Selling Put Options said...

JBL;
In the past I have dropped down below the bought strike. But not anymore. If the stock is dropping and it seems like that is the way it is heading, I now close the position. On some of my positions I do sell the call at the bought strike but not below. Regarding MSFT if it dropped below 25 I would not worry with them (msft) as I will just keep selling calls and pocketing the money. That is one reason I like to go out to the 2013 leaps. It gives a stock you like and trust time to come back. But of course in an ideal world the stock moves up just a little at a time and you can roll up if you have to and eventually sell the long call at a profit also.
Regarding your question on CSCO. If you buy the Jan 2013, 17.50 for around 2.48 you can sell the Nov 19,2011 for .44. That is a ROI of around 17%, not bad for a month. The weekly premium is not very attractive. There is always some question when you have to go out a month to get decent prem,.. but a couple of years ago that was the only choice. All in all I like the CSCO trade.
I will be starting a new post later today
Jerry

Raging Bull Winkle said...

Nicky I just got to work and pulled up a chart. First thought was to stay short and see if you could pick up .25-.50 and cover at 30.50.....That was before I looked at the news LYB announced a special dividend that will be paid in the current quarter, the dividend would be about $4.55 per share. If your short on the X-div date you pay the 4.55

How the hell did you pick this dog anyway? The Nov. options look horrible, low volume and bid ask spreads of .15 Yuck you need to cover this ASAP. IMHO

Now the good news....

I also reread your post your long Dec. 35.00 calls HOLD THIS POSITION DO NOT SELL!!if the stock is over 35.00 THE DAY BEFORE the X-Dividend date you should exercise early to capture the dividend then sell the stock at the open of the X-date. You might come out selling like a rose on this. (CALL YOUR BROKER AND CHECK)

Even at almost 9% intrest for one day on 35K is nothing compared to the 4.55 Just keep in mind the stock will drop fast on the X-date buy a few puts the day befor also??

Good luck.

jbl said...

Jerry,
Thanks for the reply. I was thinking of buying Jan13 CSCO 15 Call for 3.85 and selling the 17 weekly call for .53 or selling 17 November monthly call for .95. You said if MSFT dropped below 25 you would still sell calls against it. Wouldn't you have to go pretty far out to get any kind of premium?