Is there a requirement that the NET PREMIUM be over $100? Or are we only suppose to worry about getting the highest APR?
Theresa H on
I would want it to have the highest APR AND the highest Net Premium - but I can't remember the reasoning behind the $100 minimum Net premium on the Cool Tool.
P.S. - Eric is trying to beat my APR but his net premium is under $100 - that's why I'm asking :)
On Aug 13, 2012, at 12:48 PM, Paul Madison wrote:
Ahhhhh.... very good question ....what do you think the answer should be.....if it was your money what would do?
Is there a requirement that the NET PREMIUM be over $100? Or are we only suppose to worry about getting the highest APR?
Paul Madison on
There is nothing super Magic about $100. The reason I encourage getting more than $100 is I like to minimize the % of my gains that I am spending on commissions. So a kind of average commission is about $10 and and thus $10 of $100 is a 10% commission....I personally do not like to go higher than that. That's all ......technically you can go collect a $.35 premium (or $35 for 1 contract) and spend $10 on commissions (or $15 in the simulator), it just does not make a lot of sense to me.
Back on APR's, shorter duration options will always have the highest APR's. But think of CD's ...would you rather have a CD that paid 40% APR for 1 day or a 20% APR for 40 days. Some of that answer is can I consistently redeploy my money every day and get 40% every day or if my opportunities are more scarce then maybe I would want the longer term deal even though it is a lower APR.
The homework was to see who could get the highest APR but the real lesson is that APR is only a part of the story.
I would want it to have the highest APR AND the highest Net Premium - but I can't remember the reasoning behind the $100 minimum Net premium on the Cool Tool.
P.S. - Eric is trying to beat my APR but his net premium is under $100 - that's why I'm asking :)
On Aug 13, 2012, at 12:48 PM, Paul Madison wrote:
Ahhhhh.... very good question ....what do you think the answer should be.....if it was your money what would do?
Is there a requirement that the NET PREMIUM be over $100? Or are we only suppose to worry about getting the highest APR?
Jim Thomas on
In the Cool Tool, I thought it showed Net Premium
... *after* commissions are already subtracted. I don't see how
commissions can be the reason for a $100 minimum premium *after*
commissions.
Subject: Re: [cool_club] Disney Homework
question.....
There is nothing super Magic about $100. The reason I
encourage getting more than $100 is I like to minimize the % of my gains that
I am spending on commissions. So a kind of average commission is about
$10 and and thus $10 of $100 is a 10% commission....I personally do not like
to go higher than that. That's all ......technically you can go collect
a $.35 premium (or $35 for 1 contract) and spend $10 on commissions (or $15 in
the simulator), it just does not make a lot of sense to me.
Back on APR's, shorter duration options will always have the highest
APR's. But think of CD's ...would you rather have a CD that paid 40% APR
for 1 day or a 20% APR for 40 days. Some of that answer is can I
consistently redeploy my money every day and get 40% every day or if my
opportunities are more scarce then maybe I would want the longer term
deal even though it is a lower APR.
The homework was to see who could get the highest APR but the real lesson
is that APR is only a part of the story.
I would want it to have the highest APR
AND the highest Net Premium - but I can't remember the reasoning behind the
$100 minimum Net premium on the Cool Tool.
P.S. - Eric is trying to beat my APR but his net premium is under $100
- that's why I'm asking :)
On Aug 13, 2012, at 12:48 PM, Paul Madison wrote:
Ahhhhh.... very good question ....what do you
think the answer should be.....if it was your money what would
do?
Is there a requirement that the NET PREMIUM be over
$100? Or are we only suppose to worry about getting the highest
APR?
Paul Madison on
The COOL_Tool does show Premiums net of commissions. My rough rule of thumb is that I want to Net $100 after commissions. If someone was using the Virtual Trading System in order to net $100 they would have to collect $115 before paying a $15 commission (which I consider very high). Their commission on that trade on a percentage basis would be over 10%.
What I was trying to say earlier is that if you netted $100 and your commission was a more normal $10 then your commission on a percentage basis is just under 10% (precisely it would be 9%) and I personally do not want my commissions to exceed 10%.
I suppose to be absolutely precise I could set the minimum to $90 net but I find $100 is just a nice easy number for people to focus on and it does not prevent people from selling and collecting less if they so chose. It is just a guide.
Hope this helps clarify.
By the way the version of the COOL TOOL I am releasing this week will allow even more flexibility around commissions to better simulate different broker's structures. Specifically this will address the question from the last COOL_Club meeting around handling the fee structure at OptionsExpress.
I also want to thank you, Jim Thomas , for recommending putting the COOL Tool out as a Office 97-2003 Excel spreadsheet to afford more compatibility and I will be doing that from here on out.
In the Cool Tool, I thought it showed Net Premium
... *after* commissions are already subtracted. I don't see how
commissions can be the reason for a $100 minimum premium *after*
commissions.
Subject: Re: [cool_club] Disney Homework
question.....
There is nothing super Magic about $100. The reason I
encourage getting more than $100 is I like to minimize the % of my gains that
I am spending on commissions. So a kind of average commission is about
$10 and and thus $10 of $100 is a 10% commission....I personally do not like
to go higher than that. That's all ......technically you can go collect
a $.35 premium (or $35 for 1 contract) and spend $10 on commissions (or $15 in
the simulator), it just does not make a lot of sense to me.
Back on APR's, shorter duration options will always have the highest
APR's. But think of CD's ...would you rather have a CD that paid 40% APR
for 1 day or a 20% APR for 40 days. Some of that answer is can I
consistently redeploy my money every day and get 40% every day or if my
opportunities are more scarce then maybe I would want the longer term
deal even though it is a lower APR.
The homework was to see who could get the highest APR but the real lesson
is that APR is only a part of the story.
I would want it to have the highest APR
AND the highest Net Premium - but I can't remember the reasoning behind the
$100 minimum Net premium on the Cool Tool.
P.S. - Eric is trying to beat my APR but his net premium is under $100
- that's why I'm asking :)
On Aug 13, 2012, at 12:48 PM, Paul Madison wrote:
Ahhhhh.... very good question ....what do you
think the answer should be.....if it was your money what would
do?
Is there a requirement that the NET PREMIUM be over
$100? Or are we only suppose to worry about getting the highest
APR?
Dan Hess on
Paul and Jim
On the 6/27 Webinar my notes indicated it was desirable to keep
commissions between 2 and 5% on options. Thus assuming a $10
commission this would suggest an option premium of $200 to $500
(10/.05) or (10/.02). Do I misunderstand or how does this relate
to a $100 minimum cash showing on the Cool Tool?
If I desire to keep my commissions to 5% or less then since what
shows up on the Cool Tool is after commissions I should strive for
a minimum Net Premium of $190 [10 / 200).
What have I misunderstood?
Dan
On 8/13/2012 1:34 PM, Jim Thomas wrote:
In the Cool Tool, I thought it
showed Net Premium ... *after* commissions are already
subtracted. I don't see how commissions can be the reason for
a $100 minimum premium *after* commissions.
Subject: Re: [cool_club]
Disney Homework question.....
There is nothing super Magic about $100. The reason I encourage
getting more than $100 is I like to minimize the % of my gains
that I am spending on commissions. So a kind of average
commission is about $10 and and thus $10 of $100 is a 10%
commission....I personally do not like to go higher than that.
That's all ......technically you can go collect a $.35 premium
(or $35 for 1 contract) and spend $10 on commissions (or $15 in
the simulator), it just does not make a lot of sense to me.
Back on APR's, shorter duration options will always have
the highest APR's. But think of CD's ...would you rather have
a CD that paid 40% APR for 1 day or a 20% APR for 40 days.
Some of that answer is can I consistently redeploy my money
every day and get 40% every day or if my opportunities are
more scarce then maybe I would want the longer term deal even
though it is a lower APR.
The homework was to see who could get the highest APR but
the real lesson is that APR is only a part of the story.
I would want it to
have the highest APR AND the highest Net Premium - but
I can't remember the reasoning behind the $100 minimum
Net premium on the Cool Tool.
P.S. - Eric is trying to beat my APR but his net
premium is under $100 - that's why I'm asking :)
On Aug 13, 2012, at 12:48 PM, Paul
Madison wrote:
Ahhhhh.... very good
question ....what do you think the answer
should be.....if it was your money what
would do?
Is
there a requirement that the NET
PREMIUM be over $100? Or are we only
suppose to worry about getting the
highest APR?
Paul Madison on
You have not missed a thing. You have it down pat.
When do I the full Covered Options Webinar I say that to begin with, it is good to try to net $100 as you are learning about Covered Options. For beginners it is often hard for them to get much over $100 without taking on more exposure than they are willing to do in the beginning.
But as you get more experience, then I do encourage people to try to develop strategies to achieve even more net premiums by considering doing more contracts or doing higher premiums. And you are right that means if you can net $200 -$500 then your commission percentage goes down to a much more reasonable level of 5-2%.
The COOL_Tool was really aimed at helping people when they are just getting started and so it seemed more important in the beginning keep the $100 net target in front of them.
On Mon, Aug 13, 2012 at 2:27 PM, Dan Hess <danhess@nc.rr.com> wrote:
Paul and Jim
On the 6/27 Webinar my notes indicated it was desirable to keep
commissions between 2 and 5% on options. Thus assuming a $10
commission this would suggest an option premium of $200 to $500
(10/.05) or (10/.02). Do I misunderstand or how does this relate
to a $100 minimum cash showing on the Cool Tool?
If I desire to keep my commissions to 5% or less then since what
shows up on the Cool Tool is after commissions I should strive for
a minimum Net Premium of $190 [10 / 200).
What have I misunderstood?
Dan
On 8/13/2012 1:34 PM, Jim Thomas wrote:
In the Cool Tool, I thought it
showed Net Premium ... *after* commissions are already
subtracted. I don't see how commissions can be the reason for
a $100 minimum premium *after* commissions.
Subject: Re: [cool_club]
Disney Homework question.....
There is nothing super Magic about $100. The reason I encourage
getting more than $100 is I like to minimize the % of my gains
that I am spending on commissions. So a kind of average
commission is about $10 and and thus $10 of $100 is a 10%
commission....I personally do not like to go higher than that.
That's all ......technically you can go collect a $.35 premium
(or $35 for 1 contract) and spend $10 on commissions (or $15 in
the simulator), it just does not make a lot of sense to me.
Back on APR's, shorter duration options will always have
the highest APR's. But think of CD's ...would you rather have
a CD that paid 40% APR for 1 day or a 20% APR for 40 days.
Some of that answer is can I consistently redeploy my money
every day and get 40% every day or if my opportunities are
more scarce then maybe I would want the longer term deal even
though it is a lower APR.
The homework was to see who could get the highest APR but
the real lesson is that APR is only a part of the story.
I would want it to
have the highest APR AND the highest Net Premium - but
I can't remember the reasoning behind the $100 minimum
Net premium on the Cool Tool.
P.S. - Eric is trying to beat my APR but his net
premium is under $100 - that's why I'm asking :)
On Aug 13, 2012, at 12:48 PM, Paul
Madison wrote:
Ahhhhh.... very good
question ....what do you think the answer
should be.....if it was your money what
would do?