Friday, December 30, 2011
Vacation time (sort-of)
You guys will be flying pretty much without me after Monday night. My wife and I are going to the Caribbean for 25 days. 10 days in ARUBA 7 in Curacao and 7 more in Bonaire. Some diving, snorkeling and fishing. Options bought this vacation for us so I want to thank all the traders on the other side.. I will have my lap-top to do some trading and checking on the blog. Take care and leave cushion…
Saturday, December 24, 2011
Merry Christmas to all ...
A very Merry Christmas and a Happy and prosperous New Years to all the Bloggers and option traders out there..
Friday, December 16, 2011
A wild week
Hi all, what a week, up and down in the hundreds. This Europe really has me somewhat worried. Places like Ireland and more, are paying more out each month than they are bringing in. This has to end in an ugly drop one day. I am still fully invested but in quality stocks. I avoid plays like trying to outguess RIMM or other stocks that have fallen pretty far and the temptation is to think that it can't fall more...IT CAN. Don't try to catch a falling knife. In this market my advice is to stick to quality and proven plays. I also avoid 'hot' stocks such as Panera bread and that bunch. There is plenty of money to be made and without as much risk. Many of these stocks will turn into super plays one day but not for me. I've been on the express train both north and south bound. North is much better.
Stocks like XOM, MSFT, ORCL, MCD and KO to name a few. They all offer weekly options with decent premiums. I also have a lot of CLF.
It might be a good time to do some vertical put spreads. Plenty of weekly plays that offer 1+% for a week. Compounded that is around 67% annual ROI.
Some good advice has been offered by other contributors. If you are new to options or are just getting a feel for them read all the post by our gang. Everyone here wants all of us to be successful. This is some of the best advice that is both free and available to all. Again, in a market which it can be up or down 300-400 points in a day.. leave lots of cushion and settle for less. The tortoise can win the race and have a smile on his face.
Stocks like XOM, MSFT, ORCL, MCD and KO to name a few. They all offer weekly options with decent premiums. I also have a lot of CLF.
It might be a good time to do some vertical put spreads. Plenty of weekly plays that offer 1+% for a week. Compounded that is around 67% annual ROI.
Some good advice has been offered by other contributors. If you are new to options or are just getting a feel for them read all the post by our gang. Everyone here wants all of us to be successful. This is some of the best advice that is both free and available to all. Again, in a market which it can be up or down 300-400 points in a day.. leave lots of cushion and settle for less. The tortoise can win the race and have a smile on his face.
Thursday, December 1, 2011
Rolling up a calendar spread
A common question is where and to what strike to roll to if the stock has made a move north in a calendar spread. The deciding factor on which strike is, which one makes the most $$. To consider---
If you can roll to the same strike you get more return. But I don't want the stock to run away from me, so it is kind of a guess on where to roll to. If the stock is generating more and more up pressure i will go to the next strike and maybe out a week or month?
It is important to remember that rolling up for a stock that has moved up even if a neutral roll, is not all bad as you get the new intrinsic value.
EX; you have sold the 25 strike and the stock has moved to 27. To buy-to-close the 25 might cost you 2.10 and the next month’s 27.50 sells for 1.50. On paper you have lost .60 to roll up and out. But remember that you now have gained 2 of intrinsic value and also the bought call has gone up in price..(there will come a day when you want to sell that one)
So on paper two things have happened.
1. you lost .60 on each contract
2. you have gained 2 of intrinsic val in the sold one.
The one danger is that all of a sudden the stock drops back to 25 and then the .60 you lost is really lost..lol That is why it is a balancing act of when to roll and how far. Intuition, experience and gut feeling is the answer. Oh yeah a crystal ball helps.
If you can roll to the same strike you get more return. But I don't want the stock to run away from me, so it is kind of a guess on where to roll to. If the stock is generating more and more up pressure i will go to the next strike and maybe out a week or month?
It is important to remember that rolling up for a stock that has moved up even if a neutral roll, is not all bad as you get the new intrinsic value.
EX; you have sold the 25 strike and the stock has moved to 27. To buy-to-close the 25 might cost you 2.10 and the next month’s 27.50 sells for 1.50. On paper you have lost .60 to roll up and out. But remember that you now have gained 2 of intrinsic value and also the bought call has gone up in price..(there will come a day when you want to sell that one)
So on paper two things have happened.
1. you lost .60 on each contract
2. you have gained 2 of intrinsic val in the sold one.
The one danger is that all of a sudden the stock drops back to 25 and then the .60 you lost is really lost..lol That is why it is a balancing act of when to roll and how far. Intuition, experience and gut feeling is the answer. Oh yeah a crystal ball helps.
Saturday, November 19, 2011
Some thoghts on this market
Regarding the overall market, this Europe stuff keeps affecting the market, next is Spain and France. My advice is leave lots of cushion and leave as little time as necessary. You don’t need to take excessive chances with options to make money. Even with the Europe problems etc, there is still plenty of money to be made with options.
Nicky; I would be careful following that advice regarding MSFT. That is a lot of time to give for bad news to come out. I have over 250 MSFT in my calendar spreads so I like the steady action of MSFT but caution should be the by-word with any naked put. There is a name for traders that take bigger chances on what ‘seems’ to be a safe play… they call them ‘broke..’ so be careful.
Nicky; I would be careful following that advice regarding MSFT. That is a lot of time to give for bad news to come out. I have over 250 MSFT in my calendar spreads so I like the steady action of MSFT but caution should be the by-word with any naked put. There is a name for traders that take bigger chances on what ‘seems’ to be a safe play… they call them ‘broke..’ so be careful.
Monday, November 7, 2011
Stock selection.
Hi all, just a reminder that there are different stocks that are appropriate for different situations. I don’t use stocks for a calendar spreads that I would use for vertical put spreads or for naked puts.
Don’t fall into the rut of using the same stocks and trying to force them to fit where they don’t belong. An example is AMZN. A great stock with good premiums. But that is ok ok for a short play such as a one week put or even a vertical put spread. The same might be said for even RIMM or FSLR. There are lots of examples of these kinds of plays.
For a calendar spread where you might plan on owning the long call for a year or so, you don’t want the roller coaster ride associated with hi-PE stocks.
I am listing the stocks that I am now using in calendar spreads. If they fit your profile for investing, jump aboard. There are lots of others that fit the profile but these are some of my favorites. They offer decent premiums, lower volatility and especially- WEEKLY options.
AAPL, CLF, IBM, KO, MCD, MOS, MSFT, ORCL POT, SLB, XOM
Don’t fall into the rut of using the same stocks and trying to force them to fit where they don’t belong. An example is AMZN. A great stock with good premiums. But that is ok ok for a short play such as a one week put or even a vertical put spread. The same might be said for even RIMM or FSLR. There are lots of examples of these kinds of plays.
For a calendar spread where you might plan on owning the long call for a year or so, you don’t want the roller coaster ride associated with hi-PE stocks.
I am listing the stocks that I am now using in calendar spreads. If they fit your profile for investing, jump aboard. There are lots of others that fit the profile but these are some of my favorites. They offer decent premiums, lower volatility and especially- WEEKLY options.
AAPL, CLF, IBM, KO, MCD, MOS, MSFT, ORCL POT, SLB, XOM
Friday, October 28, 2011
Which one..Calendar spreads, vert put spreads or naked puts??
HI all. Well a lot of chatter regarding the different kinds of plays while using options. For me I have pretty much rotated into calendar spreads. If you are not familiar with them, do some reading, they are easy once you get to know them. Also I hesitate to say this but it is hard to lose money with them. CaCa can happen but if it happens to calendar spreads the rest of the options market is in really bad shape.
But again there is nothing wrong with plain vanilla vert put spreads. They seem to give a pretty easy 1-3% a week. Naked Puts can usually match that but both have a potential downside. With calendar call spreads all the maint. needed is known up front. Each week or month should produce some profit . I only use weekly options but at times I might roll out two weeks to get some higher strike. Other than a major drop in the underlying stock, a continual problem with calendar spreads is the stock moves higher. This is both a curse and a blessing. Its true that it make it difficult to get decent prem’s at the same strike but and excuse the put ..A BIG BUTT, is that the bought call for Jan or ?? is going up and one day you get to sell that one.
EX; a stock is trading around 89, you buy a ‘leap’ for a year out at the 87.50 strike and sell this weeks 90 strike. All is well and then the stock starts moving up. You suffer through lower prems (but all positive) and in a year the stock has moved to 99. Well at that time you get to sell that bought call for over 10 when it might have cost you 5 or? Plus each week or month you made money. I am not saying these are for all traders as it takes some getting used to but for me it seems the easiest way to make money that I have found in the options market.
But again there is nothing wrong with plain vanilla vert put spreads. They seem to give a pretty easy 1-3% a week. Naked Puts can usually match that but both have a potential downside. With calendar call spreads all the maint. needed is known up front. Each week or month should produce some profit . I only use weekly options but at times I might roll out two weeks to get some higher strike. Other than a major drop in the underlying stock, a continual problem with calendar spreads is the stock moves higher. This is both a curse and a blessing. Its true that it make it difficult to get decent prem’s at the same strike but and excuse the put ..A BIG BUTT, is that the bought call for Jan or ?? is going up and one day you get to sell that one.
EX; a stock is trading around 89, you buy a ‘leap’ for a year out at the 87.50 strike and sell this weeks 90 strike. All is well and then the stock starts moving up. You suffer through lower prems (but all positive) and in a year the stock has moved to 99. Well at that time you get to sell that bought call for over 10 when it might have cost you 5 or? Plus each week or month you made money. I am not saying these are for all traders as it takes some getting used to but for me it seems the easiest way to make money that I have found in the options market.
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