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.











Saturday, July 30, 2011

Budget (lack of) and other market items

Hi Traders; Well we made it through a tough week. Hopefully all of you made some money. My advice is to avoid opening positions in any of the index type of available trades. There is just to much unknown until this is settled. As the reported deadline of this coming week approaches, I would imagine that the two sides will make some concessions and the president will sign it. Well, lets hope so! If we get a budget, the market should take off.. should!
Even though we have introduced various new kinds of option plays, Fulgore demonstrated this past week that plain old vanilla naked puts can and do make money in this nervous market. Various spreads can help with margins and maintenance and allow more positions, but the simplicity of naked puts is still a very viable play.
For those that are impressed with the movement in PCLN, don’t forget that earnings come this week.
For me I will wait until I get some direction from the budget etc. Trade careful and don’t try to ‘outguess’ the market, it will eat your lunch.

Sunday, July 24, 2011

Some thoughts

Hi all, some thoughts regarding how to trade all of the available stocks etc that allow weekly’s. I seem to consistently find that trading later in the week pays dividends. I have a hard time waiting when positions close on Friday and then trying to wait, but it gives (pays) many benefits as you can get a real feel for the direction of the general market, the direction of your stock and the amount of cushion that might be needed for 2 or 3 days of life left in the potential position.
The downside is some loss in potential earnings (ROI) So when opening a position I would recommend that you wait a few days to open. Also have an escape plan. The plan should include, do you want to keep the position. If what happened is a one time blip or a real change in the direction of your stock. Is the whole market in some sort of correction. Is there outside (the world) forces causing unrest. Add these and any other things that might,in your mind cause problems.
Right now the big question is who is going to give with the US debt ceiling and tax cuts etc. For me, I will not open any new positions until this budget deal is somewhat settled.
Some individual stocks could weather this but for the SPX and other stocks that follow the trend, it could be a real headache
So trade careful this coming week!

Wednesday, July 20, 2011

some blow-out earnings

Hi all, Wow, first GOOG and now AAPL. Apple was expected to be big. They can't keep inventory on the shelf. I would not be surprised to see a little pull back with Apple. From today’s 380's down to the 370's by Friday night? Just a guess but history show that happens more often than not. Tomorrow I will be making some decision on my appl calendar spreads.
Hope all have made some money this week.

Friday, July 15, 2011

I'm back Hello GOOG

Wow, guys, What a ride for GOOG. I had lots of them but closed nearly all before the announcement. A nice profit. I now have all AAPL calendars. A bunch of the 355 and more of the 360’s.
I have received many emails asking for more info on these. So the quickest way to explain them is to think of them exactly as covered calls on stocks. The advantage as I told in one email; As follows;
I now have 35 cal spreads in AAPL for the 360 July-22 and the Jan 360 calls.
The difference between a covered call and a calendar spread is as follows;
To do 35 covered calls means that I would have bought 3500 shares of AAPL, at 355 cost that would have cost me 1,246,500. and I would have received 14 ea. in prem. So cash in would be 49,000. This is a 3.9 ROI – But to set up the same income of 49,000 doing the spread, I just had to buy the Jan 360 call for a cost of 105,088 which is a ROI of, 49,000. / 105,088 = 46% on a week play. If AAPL goes up all is about the same. If it goes down below 360, I let them expire and then next week sell the 360’s again. Of course a major drop in the stock means your next week prem will be smaller but without a super drop, it is money in the bank each week. You have to keep in mind that Jan 2012 has a ton of ‘time value’ in it and that will start eroding. So I will only use these until late September or so. Eventually you will want to sell these so you don’t want them to drop to far.
This is not necessarily a bullish position. AAPL is reporting this week and I always expect good things but … it is advised to not use a close strike that is below the Jan strike. Use the same or a higher ‘near’ call strike price.
I hope all had a great week and more profits to come. I promise no new strategies.. lol
Jerry

Thursday, July 7, 2011

Another way of doing optons.

Ok all, another way of trading options. It was mentioned a while back by someone?
Calendar call spreads. I have done some for awhile and I will pass on the results. It is a little more complicated than straight naked puts and pretty much the same as our normal spreads.
These are not an 'end all', but in an up market they work pretty well. I hesitate to add another layer to what started as a simple (and still viable) naked puts blog, but I promised to share my trading styles.
Here is an example of recent trades I have made.
These are using the Jan 2012 options as the first part, and the current options (this weeks or next weeks.) So here goes all, I hope I don’t confuse and discourage new and old traders.
When doing these it is important to know what the ‘time’ value is. These are not for a trader that checks their positions at night. You should be on top of these as conditions change and never forget.. I believe in taking profits
Here is how they work for you, and then I will get in to a few examples.

These are for bullish thoughts. You can also do them for neutral or bearish feelings. You sell a near term option. And buy a ‘way out’ option. Most of the options books will tell you that it is usually done with the same strike. I do that sometimes but more often, I use different strikes. I am using the Jan strike and that is the lower strike..
I open by buying the Jan. 2012 at a near strike
I sell the July 16 at one strike above the strike I am using in Jan 2012
The best situation is when the stock you are using has a lot of time value in the near term options. For example the July 16 GOOG 545 sells for 15+ With GOOG trading at 546 there is easy to see that you have around 14 of time value in a one week option…wow.
So the trade
GOOG is trading at 546.60
I bought the Jan 2012 555 strike. Cost is 38.10
I sold the July 16, 560 strike for 8.60
Net debit is 29.5 or 2950 per options

Ok the plan is with GOOG trading at 546, the July 16, 560 strike is trading at 8.60. The stock has to go up within a week over the 560 (12.40) or it will expire worthless. And even if it goes up, the Jan 2012 will be in the money and will track along pretty close. So they both go up.
My bet is that it will not go above the 560 but I do not really care as stated, the one I bought will also go up and I get to sell it when closing.
An example; GOOG goes up 20 points to 566 next week. At closing the July 560 will be now ‘in the money’ 6 points and for me to buy it back it might cost 6.50 I sold it for 8.60 so I make roughly 2 dollars on that side but….
I now get to sell my Jan 555 and it will track along and might sell for around 14 more than I bought it for. So maybe 43.5
The profit picture looks like this.
Make 2 points on the July options and make 14 on the Jan option.
For 16 total. The set up cost me 29.10 but I will close the spread for around 45 for a net overall of 16 points. I invested 29.5 made 16 net =54% in a week. 16/29.5 =54%) Now that would be for a big run up in the stock
For a stock that does not move at all the results might be like this.
Bought the 1/2012 555 strike for 38.10
Sold the July 7, 2011 260 strike for 8.60
Net cost to open is 29.50
The stock does not move a bit
In a week the Jan option will trade about the same but the ‘time’ will leak out of the near term option and it will expire worthless. So you sell the Jan option for about 37 and don’t forget your net out of pocket was 29.5 so you make around 7.50. If the option ends any where below the 560 strike you will keep the premium of the sold July option.
Now for the downside.
If the stock falls much, the July option will expire but the long Jan option will drop and if it drops more than around 7 then you lose on it. But next week you can sell another near term option for the next week etc. it is basically a covered call on an option.
I have done many and some with AAPL and all others with GOOG as it has so much time value figured in. I also have some with the Jan 560 and the July 560 also the jan 550 and the July 555. So there are many ways to do these. The main point is that you are betting on the time leaking out. You must be prepared that the stock can drop and like owning a stock, your position can lose money. But for a stock like GOOG, trading around 546, it is like buying it for 29.5 in the above example. You can sell the near term call each week and hope that the stock comes back. BUT, IT MAY NOT… So be aware of the different ways the move can go against you.
Also it should be noted that you do not let these expire if any or both are in the money. . You are to close them before expiration. If the near term goes into the money and you are assigned, you will have to go through the hoops of assigning yours and the related hoops.
If neither is in the money let them expire and sell again next week.. etc etc. It is also advised to not 'leg' in or out of these positions. If the stock turns, a winning play can become a loser...
Also be advised that the time value is bigger as options are getting near earnins. Earnings = potential up or down...

This is just a quick over-view and I’m sure most get the idea. So if you don’t understand read up on them and the risk involved before jumping in.
Sorry for the long post but the profits for me have been quite big and I wanted to share this style with those interested. If any of you traders want to discuss these and the high POTENTIAL PROFITS, drop me a line at putman3232@ yahoo.com

Tuesday, July 5, 2011

Some thoughts for this short week

Hi all, like most of you I have not found any trades yet. AAPL NFLX and GOOG up. I will see if tomorrow opens up any decent plays. I am still bothered by Rick's situation. As someone mentioned, spread your exposure among several plays. Regarding when to close a spread I have not really decided what I want to use as a trip wire. Maybe falling back to the standard of a double of the ask? But the main point that I think we should take with us is to not let your losses run. Most that I have closed didn’t end up in the money but I wasn’t going to wait and see.
Some points..
--If you look at a position, and you think, you would not open it now.. Then it is probably time to close it.
--If your gut is telling you, this is getting ugly… close it.
--Develop a trip wire that you stick to. Avoid the trap of giving it ‘just one’ more day.
-- I have decided that I do not like opening both sides of an IC until I know which way the market is heading. Last week I had none.
I usually have so many options open that I do not think of a spread as any protection at all. For me it is just a way to limit and stabilize the maintenance needed. There is some truth that in a world collapse, it would give some limits, but for everyday trading don’t figure on it as stop loss position.
Think cushion and caution. If you can’t find a good trade,,,,don’t trade!