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Post by danshirley on Dec 22, 2010 13:50:15 GMT -5
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Post by danshirley on Dec 23, 2010 16:14:31 GMT -5
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ModE98
Administrator
Start Investing admin
Joined: Dec 20, 2010 16:11:39 GMT -5
Posts: 4,441
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Post by ModE98 on Dec 23, 2010 17:22:49 GMT -5
Kinda scary ... we could see the dreaded "double dip" ... do hope not ... but, who really knows? We are living in a "house made of cards" and any ill breeze could have its consequences.
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lovetobike
Junior Member
Joined: Dec 20, 2010 18:44:08 GMT -5
Posts: 100
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Post by lovetobike on Dec 26, 2010 22:20:03 GMT -5
Dan - can you post a general post on good places to go to learn the basics of options trading? I believe you posted some websites on the MSN boards and I think it would be a great resource to have here.
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Post by danshirley on Dec 28, 2010 6:59:54 GMT -5
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Post by danshirley on Dec 28, 2010 7:02:54 GMT -5
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Post by danshirley on Dec 29, 2010 20:21:27 GMT -5
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Post by danshirley on Dec 30, 2010 11:14:56 GMT -5
Any poor soul following this thread will know we have a March 80/85 bear call spread on SHLD and SHLD had some rare good news on Tuesday: finance.yahoo.com/news/Sears-shares-up-as-retailer-apf-522975926.html?x=0&.v=2This resulted in a spike in SHLD to a closing of 74.49. Today SHLD is back down to 73.90. The spread itself is underwater but, depending on how conservative you are, you can follow the 'bail at any sign of trouble ' rule and lose about .80 on the spread or you can stick . Since the stock has remained below a substantial resistance line and does not appear to be threatening our lower strike I will stick for now. One issue with any 'good news' on SHLD is the high level of short selling... currently 43% of the float is short. |
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Post by danshirley on Jan 2, 2011 15:21:06 GMT -5
Rovo has been bullish on F for some time and expects F to advance from here. finance.yahoo.com/q/bc?s=F&t=2y&l=off&z=l&q=c&c=Trade 1: June Bull Call Spread on F With F at 16.79 Buy the June 16 call and sell the June 18 call for a net debit of $96. ................P/L 0.............(96) 14...........(96) 15...........(96) 17..............4 18...........104 100.........104 ------------------------ Yield @ 18+ = 104/96 = 108% in 167 days. Trade 2: June Bull Put Spread Sell the June $15 put and buy the June $10 put for a net credit of $75 ................P/L 0............(425) 10..........(425) 12..........(225) 13..........(125) 15...........75 17...........75 18...........75 100.........75 ------------------------ Yield = 75/425 = 17.6 % in 167 days. Lots of other possibilities. |
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Post by danshirley on Jan 3, 2011 13:13:15 GMT -5
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Post by yclept on Jan 3, 2011 16:31:11 GMT -5
Dan, I've got a couple of questions that I'm thinking you might know the answers to.
If a stock goes into a fall that triggers a halt in trading, do the options on that stock stop trading at the same time and for the same duration?
Has the SEC, CBOE, or whomever is in charge written any rules that determine how options would be settled if an extended market closure (such as the one after the World Trade Center attack) enveloped the normal expiration date?
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Post by danshirley on Jan 3, 2011 21:46:48 GMT -5
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Post by yclept on Jan 4, 2011 3:01:30 GMT -5
Thanks. I couldn't find much either that specifically lays out the rules for halting options trading in a "flash crash". The second scenario actually bothers me more. It might be less likely than computer algorithms running amok as in the flash crash, but I could see a big mess and fairness arguments on both sides if the markets were closed for an extended period right before and/or encompassing expirations date. Actually after seeing stuxnet, it doesn't seem so far fetched to me that something could happen to shut down the entire market (and probably the electrical grid as well) for an extended period.
I wonder if AIG is still too busy licking its wounds to sell me some insurance to protect against not being able to close or exercise an option. It's so unlikely, I'm sure I could get the rating agencies to give it a triple A rating, which should keep the premium nice and low -- let's say I pay AIG $50/yr to protect me from all market meltdowns. I won't even bother to buy the options, I'll just buy the insurance just like the big boys did with the mortgage credit default swaps. There's something awfully wrong with an entity being able to buy an instrument to protect them from a risk they don't have. Of course then I'll have to worry about the counter-party risk and whether or not the government will bail AIG out again. I guess there's just no end of things to worry about!
I don't get a warm and fuzzy feeling from knowing the CBOE would get together after the fact to sort out whose bets were going to get paid versus whose were going to be cancelled -- talk about buying a pig in a poke!
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Post by danshirley on Jan 4, 2011 5:28:50 GMT -5
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Post by danshirley on Jan 4, 2011 7:36:27 GMT -5
Among my expiring option spreads this month is a 65/60 bull put spread on BCR. I would like to replace it with a similar spread in BCR but, like many stocks right now, BCR has had a run of late: finance.yahoo.com/q/bc?s=BCR+Basic+Chartand put option pricing is way too low for any reasonable risk level. e.g. looking at July 5 point spreads from 70/65 on up: Spread....Premium....Yield....Annual.....Prob....Expectation 70/65........5.00.........1%......1.9%.....96%........(2.5) 75/70......15.00.........3%......5.8%.....91%.........(18) 80/75......40.00.........9%.......16%.....82%.........(28) 85/80......85.00........20%......38%.....68%.........(44) ---------------------------------------------------------------------- The market makers just won't give me a positive expectation. The only chance I would have is to get $10 on the 70/65 which would give me a just barely positive expectation but wouldn't be worth the effort or risk. Next month might be better if BCR stays where it is or declines and premiums stay the same or get better. The basic issue , of course, is how low the VIX is right now: finance.yahoo.com/q/bc?s=%5EVIX+Basic+Charten.wikipedia.org/wiki/VIX |
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Post by danshirley on Jan 5, 2011 14:41:48 GMT -5
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Post by danshirley on Jan 6, 2011 8:00:25 GMT -5
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Post by danshirley on Jan 6, 2011 10:36:56 GMT -5
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Post by danshirley on Jan 6, 2011 23:33:12 GMT -5
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Post by danshirley on Jan 8, 2011 2:14:43 GMT -5
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Post by danshirley on Jan 10, 2011 13:21:12 GMT -5
SHLD: Sears Holdings' brief pop due to its internet initiatives, followed by earnings is all over: finance.yahoo.com/q/bc?s=SHLD&t=3m&l=on&z=l&q=l&c=It was silly for people to think that they could remake themselves into an internet company and this would make a difference. :-) |
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Post by danshirley on Jan 13, 2011 4:33:28 GMT -5
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Post by danshirley on Jan 16, 2011 12:44:56 GMT -5
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Post by danshirley on Jan 16, 2011 20:29:45 GMT -5
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Post by danshirley on Jan 18, 2011 7:15:16 GMT -5
WMT: Also expiring this week finance.yahoo.com/q/bc?s=WMT&t=2y&l=on&z=l&q=l&c=I will do the 47.50/45 bull put spread which is what is expiring. Expiration.........Return.........Days.......Annualized.....Prob.......Exp March..................3.3%..........60..............20%............99%......6 June....................7.7%.........151............18.7%..........93%.....6.3 Jan....................21.3%.........368............21.1%..........83%.....9.8 Just to compare: an at-the-money Covered Call with Expiration Jan would return 8.65% including dividends, a June CC would return an annualized 14.4%. The thing I haven't been showing is a CC using SSF's. A June SSF is available so that a June CC on WMT using SSF's would return 18.75% in 151 days or 45% annualized...which is obviously the best return of all. It's also better because expiration is sooner and we are less susceptible to parameter drift and catastrophe occurrence. Unfortunately a June CC whether using stock or SSF is susceptible to stock price drift. IF WMT wasn't so extended I would choose the SSF but with the WMT chart, like most charts, being at the top of it's 2 year excursion I will stick with the bull put spread because WMT may well drift down towards 48 from here which would completely cancel out any profit on a CC. |
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Post by danshirley on Jan 18, 2011 15:07:38 GMT -5
SYY: Expiring this week finance.yahoo.com/q/bc?s=SYY&t=5y&l=off&z=l&q=c&c=Trade: Sell the Jan '12 22.50 put and buy the Jan 17.50 put for a net credit of $30 Yield = 30/470 = 6.4% in 367 days = annualized. Prob = 96% Expectation = .96(30) - .04(470) = 29 - 19 = 10 OR: Sell the Jan '12 25 put and buy the Jan 20 put for a net credit of $50 Yield = 50/450 = 11.1% in 367 days Prob = 87% Expectation = .87(50) - .12(450) .01(225) = 43.5 - 54 - 2.25 = -12 i.e. a negative expectation. This is what the low VIX is doing to me. |
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Post by danshirley on Jan 26, 2011 3:04:37 GMT -5
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Post by danshirley on Jan 27, 2011 12:19:34 GMT -5
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Post by danshirley on Jan 27, 2011 19:23:35 GMT -5
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Post by danshirley on Jan 27, 2011 23:36:24 GMT -5
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