HOMEWORK AND MISTAKES
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Glad I did this in the virtual trader, thought I was putting in a put limit order @ 143 strike before the market opened this morning but my fat fingers hit a call with a144 strike which was filled. So now I have a naked call Here's the trade. Lets see how it works out.
APR was 40% net 285.05 By the way Paul, I thought last nights class was exceptional, I got a lot out of it. CHUCK B Disregard the APR number. that came from the cool_tool set up for puts not calls. CHUCK B From: charles brunell <cbrunelll@yahoo.com> To: "cool_club@bivio.com" <cool_club@bivio.com> Sent: Thursday, September 13, 2012 10:01 AM Subject: [cool_club] HOMEWORK AND MISTAKES Did you already own SPYs in the virtual trader? If not, will the VT allow us to place a CALL if we don't own it? Theresa Note: Chuck, you gotta play with Aapl in the VT - it's so much fun. Too much money to play with in real life but lots of action each week. On Sep 13, 2012, at 10:10 AM, charles brunell wrote:
I appreciate the comment about last night's Cool Club. I think the broad market indexes is one of the most exciting areas for the retail investor to play. It is one of those fishing holes you love to go back to over and over and over because you know they will always be biting and they will be good tasting fish.
Fat fingers is a problem we all have from time to time. The lesson is to stop and really study the preview of the trade. Read it aloud, maybe to a spouse or friend, and just make sure you are doing what you want to be doing. There is enough going on with options that you don't want to be doing wrong trades.
Let me talk about selling Naked Calls so that everyone understands what that is. If your account is a margin account which the Virtual Trading System is, then you can sell Naked Options (either Calls or Puts) that are not "covered" with stock in the case of Calls or cash in the case of Puts.
If they are not Covered then you are essentially borrowing the funds that would be necessary to Cover the trades. That means that you will be paying interest on those borrowings until the position is closed. I do not think the money we make on selling options is significantly large enough to cover paying interest on the borrowings.
I do not sell Naked nor do I recommend it. That is why I recommend not having margin on your account so that when you are selling options, you cannot accidentally sell Naked as Chuck just did in the Virtual Trading System.
I think we should all be civilized and not run around Naked. Paul Madison
On Thu, Sep 13, 2012 at 9:10 AM, charles brunell <cbrunelll@yahoo.com> wrote:
I have found that if I phone my broker immediately after placing a wrong trade, they can either cancel it or help me find the best way out of it. They have been most helpful. I tell them I am a beginner at selling options. Etana On Thu, Sep 13, 2012 at 10:01 AM, charles brunell <cbrunelll@yahoo.com> wrote:
-- Etana etana.finkler@gmail.com Paul, Thanks for explaining the Naked trading & thank you Chuck for sharing your unintentional Nakedness. I really appreciate people sharing their mistakes as they are GREAT learning tools for all of us! Theresa On Sep 13, 2012, at 10:29 AM, Paul Madison wrote:
Paul wrote: I think we should all be civilized and not run around Naked. AMEN CHUCK B From: Paul Madison <TheCOOLClubDude@gmail.com> To: cool_club@bivio.com Sent: Thursday, September 13, 2012 10:29 AM Subject: Re: [cool_club] HOMEWORK AND MISTAKES Let me talk about selling Naked Calls so that everyone understands what that is. If your account is a margin account which the Virtual Trading System is, then you can sell Naked Options (either Calls or Puts) that are not "covered" with stock in the case of Calls or cash in the case of Puts.
If they are not Covered then you are essentially borrowing the funds that would be necessary to Cover the trades. That means that you will be paying interest on those borrowings until the position is closed. I do not think the money we make on selling options is significantly large enough to cover paying interest on the borrowings.
I do not sell Naked nor do I recommend it. That is why I recommend not having margin on your account so that when you are selling options, you cannot accidentally sell Naked as Chuck just did in the Virtual Trading System.
I think we should all be civilized and not run around Naked. Paul Madison
Like I said in post earlier this week with all the mistakes I've made I should be a genius by now. I wonder why its taking so long? CHUCK B From: Theresa H <breezytreeshome@gmail.com> To: cool_club@bivio.com Sent: Thursday, September 13, 2012 10:38 AM Subject: Re: [cool_club] HOMEWORK AND MISTAKES On Thu, Sep 13, 2012 at 9:10 AM, charles brunell <cbrunelll@yahoo.com> wrote: It's called the twelve step program because you take twelve progressive steps. It doesn't count if you just do step one twelve times. Malcolm Sent from my Communicator
Some ideas for Puts from today; I have not yet placed these or examined in Cool Tool comments welcome Mr. Cool, do you look at chart patterns? Etana 33.00 ALGN Oct 20 2012 33.0 Put; 0.60-0.75 premium 0.174 delta | earnings 10/25 (Nav AAB) 32.00 ALGN Oct 20 2012 32.0 Put 0.45-0. premium -0.139174 delta | earnings 10/25 (Nav AAB) 85.00 TSCO Oct 20 2012 85.0 Put; 0.65-0.80 premium -0.121 delta | earnings 10/24=yahoo (Nav BAB)
62.50 ROST Oct 20 2012 62.5 Put; 0.50-0.60 premium -0.18 delta | earnings 11/15 (Nav AAB)
45.00 CSTR Oct 20 2012 45.0 Put; 0.60-0.70 premium 0.162 delta
| earnings Some ideas for Puts from today; I have not yet placed these or examined in Cool Tool comments welcome Mr. Cool, do you look at chart patterns? Etana 33.00 ALGN Oct 20 2012 33.0 Put; 0.60-0.75 premium 0.174 delta | earnings 10/25 (Nav AAB) 32.00 ALGN Oct 20 2012 32.0 Put 0.45-0. premium -0.139174 delta | earnings 10/25 (Nav AAB) 85.00 TSCO Oct 20 2012 85.0 Put; 0.65-0.80 premium -0.121 delta | earnings 10/24=yahoo (Nav BAB)
62.50 ROST Oct 20 2012 62.5 Put; 0.50-0.60 premium -0.18 delta | earnings 11/15 (Nav AAB)
45.00 CSTR Oct 20 2012 45.0 Put; 0.60-0.70 premium 0.162 delta
| earnings Some ideas for Puts from today; I have not yet placed these or examined in Cool Tool comments welcome Mr. Cool, do you look at chart patterns? Etana 33.00 ALGN Oct 20 2012 33.0 Put; 0.60-0.75 premium 0.174 delta | earnings 10/25 (Nav AAB) 32.00 ALGN Oct 20 2012 32.0 Put 0.45-0. premium -0.139174 delta | earnings 10/25 (Nav AAB) 85.00 TSCO Oct 20 2012 85.0 Put; 0.65-0.80 premium -0.121 delta | earnings 10/24=yahoo (Nav BAB)
62.50 ROST Oct 20 2012 62.5 Put; 0.50-0.60 premium -0.18 delta | earnings 11/15 (Nav AAB)
45.00 CSTR Oct 20 2012 45.0 Put; 0.60-0.70 premium 0.162 delta
| earnings There are several in the Greystone Trading Group who are into TA but I personally am not. I believe in fundamentals, first and foremost, so no I don't look at charts. I don't know anything about TSCO, DVA, ROST, or CSTR from a Fundamental standpoint so strictly from an APR standpoint: TSCO .80/85 x 365/36 = 10% nope DVA 1.10/90 x 365/36 = 12% nope
ROST .60/62.5 x 365/36 = 10% nope CSTR .70/45 x 365/36 = 16% nope Although I think the COOL TOOLs are fun, the dirty little secret is the math is not hard to calculate APRs. The more you learn the math then you don't need anybody else's tools or you can build your own tools.
so the math is: premium/strike x 365 days/divided by days left pretty simple really Paul Madison
On Thu, Sep 13, 2012 at 10:22 AM, ETANA FINKLER <etana.finkler@gmail.com> wrote: Some ideas for Puts from today; I have not yet placed these or examined in Cool Tool I'm trying to liquidate 400 shares of FAST that have a healthy capital gain due to my buy smart, hold long behavior (>400%). I thought to use CC to have the stock taken at my price and make some extra cash while learning a few things about options. I wrote the following trade August 22 STO FAST 4x C 44.00 Oct 20 @ 1.91 I didn't know about COOL Club or how to use APR to evaluate a trade. Turns out it was a "Seeing Eye Single" and netted me $752 and an APR of 26%. I still need to liquidate the stock (before the end of the year) and still need to learn. So... Today I put in an order BTC FAST 4x C 44.00 Oct 20 @ 0.70 This will close out my position at a cost of $289 for a net of $463 and an APR of 42% in 23 days if/when it fills. Then I'll write the following STO FAST 4x C 41.00 Oct 20 @ 2.70 for a net $1,071 and an APR of 62% or whatever is available in that range and ITM. I know that there is an earnings due on Oct 21, but I really don't care if my stock is taken at 41 because the difference between 44 & 41 is $1,200 which is less than my projected option income of $1,552. I believe the earnings call will cause the stock to drop (buy the rumor, sell the fact). If I don't get called away in October (or if I BTC the C 41.00), I still have time to write more calls or sell the position out right before the end of the year. If the stock drops below 40 and remains there, I'll continue to hold the position and continue to write up calls. Comments welcome as I believe I'm only on step 2. Malcolm Malcolm:
I think you're well beyond Step 2. Another way of looking at your two trades is to do the BTC and STO simultaneously (through a multi-leg order). Then, in deciding on the parameters for your order, you can just worry about the net difference between your sell premium and your buy premium. Depending on the broker, there also MIGHT possibly be a savings in commissions. I just looked at the Oct 20 option chain for FAST, and the bid and ask prices at that time were: $41 strike $2.30 $2.45 $44 strike $.80 $.90 So, for example, if you wanted to increase the chances of the trade happening right away, you could submit an order with a net credit of $1.40 ($2.30 - $.90). Or if you wanted to hold out for a little more money, you could try for a net credit of $1.65 ($2.45 - $.80). Of course you could set the order at whatever level you want and see what happens. Using the current stock price, the APR for a net credit of $1.40 would be about 33%, and for a $1.65 credit it would be about 39%. --Ron -----Original Message----- From: cool_club@bivio.com [mailto:cool_club@bivio.com] On Behalf Of Malcolm Myles Sent: Thursday, September 13, 2012 10:47 AM To: cool_club@bivio.com Subject: [cool_club] FAST I'm trying to liquidate 400 shares of FAST that have a healthy capital gain due to my buy smart, hold long behavior (>400%). I thought to use CC to have the stock taken at my price and make some extra cash while learning a few things about options. I wrote the following trade August 22 STO FAST 4x C 44.00 Oct 20 @ 1.91 I didn't know about COOL Club or how to use APR to evaluate a trade. Turns out it was a "Seeing Eye Single" and netted me $752 and an APR of 26%. I still need to liquidate the stock (before the end of the year) and still need to learn. So... Today I put in an order BTC FAST 4x C 44.00 Oct 20 @ 0.70 This will close out my position at a cost of $289 for a net of $463 and an APR of 42% in 23 days if/when it fills. Then I'll write the following STO FAST 4x C 41.00 Oct 20 @ 2.70 for a net $1,071 and an APR of 62% or whatever is available in that range and ITM. I know that there is an earnings due on Oct 21, but I really don't care if my stock is taken at 41 because the difference between 44 & 41 is $1,200 which is less than my projected option income of $1,552. I believe the earnings call will cause the stock to drop (buy the rumor, sell the fact). If I don't get called away in October (or if I BTC the C 41.00), I still have time to write more calls or sell the position out right before the end of the year. If the stock drops below 40 and remains there, I'll continue to hold the position and continue to write up calls. Comments welcome as I believe I'm only on step 2. Malcolm |
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