Hi Malcolm and everyone 5/6/13
In my Interactive Brokers Simulated account I am playing some paper calls to get a feel for options. Here are the notes I wrote as rational and a call I just opened on a weekly.
Everyone feel free to criticize this. I'm here to learn. I'll add the results early next week
Art Christensen
5/6/13 GMCR weekly
GMCR has a nice slow up trend but now is bumping on a 2/1/13 resistance level, its likely to break through and get called I think.
With the price $58.75 the 61 Strike gives about 2.5% price value, and the $3.15 Time Value another 6% gain in 1 week (round numbers) if it strikes / Assigns. That's a nice gain for one week if it gets called.
I started a GMCR STO at 3.35 5/6/13 at 10:35 (B/A 3.35/3.50 at that time) but it wouldn't hit. The price moved up to 59.50 and then back down. Moved the sto down a couple times to new lower bottoms. Finally moved it .05 below the 3.15 B at that time and it hit right away. (This might be a good way to go, give up 5 to get in if price is weak to down.) The price went up to 59.50 at 10:20 and is 58.75 at the fill.
5/6/13 STO 1 GMCR MAY 10 61 C, premium $3.15
Paul Madison on
Hi Art,
Just a few thoughts.
Do you own GMCR and if so what does your fundamental study tell you? Where would you normally being looking to sell GMCR at? Or put another way, without options in the picture, are you happy to sell at $61 (or you could even say $61 + the $3.15 premium which would be $64.15)? As long as this is a place that you are comfortable selling your stock this could be a good trade.
The other thing you need to take into account is that GMCR's earnings come out on May 8th, two days ahead of this option's expiration. If the earnings come out and are much better than expected you would be limiting your upside to the $64.15 when the actual stock price might jump even higher after earnings. That is why it can be tricky selling options over earnings dates. Having said that, I do think it sometimes makes sense to go ahead and sell covered calls if I feel the stock is starting to reach an overvaluation level and I personally would base the overvaluation on the fundamentals and not technicals.
On your issue about having to go lower than the best bid to get a trade done, I do know that the Options Industry Councils Virtual Trading System does not give live quotes and that that sometimes explains why you have to be more aggressive than the current "best bid price" to get a trade on as that price might be 15 minutes delayed. You may be seeing the same thing at Interactive Brokers in your Simulated Account.
I applaud you for giving the Simulated Account a try and I hope my thoughts help you as well. Keep us posted on how it turns out and what else you might have learned by doing the trade. Your experiences will help others so thanks for sharing.
On Mon, May 6, 2013 at 1:49 PM, ARTHUR Christensen <artchris@somtel.net> wrote:
Hi Malcolm and everyone 5/6/13
In my Interactive Brokers Simulated account I am playing some paper calls to get a feel for options. Here are the notes I wrote as rational and a call I just opened on a weekly.
Everyone feel free to criticize this. I'm here to learn. I'll add the results early next week
Art Christensen
5/6/13 GMCR weekly
GMCR has a nice slow up trend but now is bumping on a 2/1/13 resistance level, its likely to break through and get called I think.
With the price $58.75 the 61 Strike gives about 2.5% price value, and the $3.15 Time Value another 6% gain in 1 week (round numbers) if it strikes / Assigns. That's a nice gain for one week if it gets called.
I started a GMCR STO at 3.35 5/6/13 at 10:35 (B/A 3.35/3.50 at that time) but it wouldn't hit. The price moved up to 59.50 and then back down. Moved the sto down a couple times to new lower bottoms. Finally moved it .05 below the 3.15 B at that time and it hit right away. (This might be a good way to go, give up 5 to get in if price is weak to down.) The price went up to 59.50 at 10:20 and is 58.75 at the fill.
5/6/13 STO 1 GMCR MAY 10 61 C, premium $3.15
--
Malcolm Myles on
Hi Art,
I concur with Paul... follow the plan, know your risks, know your
entry and your exits, practice, practice, practice. The only
thing I'll add is the question: Are you comfortable owning GMCR
IF the stock drops (buy the rumor and sell the fact). Always a
potential.
By doing a buy-write, you've set
yourself up to capture a chunk of that potential rise. You've
"exposed" yourself to a potential valuation loss on a company that
you wouldn't mind owning for a while if the price drops, but more
importantly, you've made minimum wage for the week. If the stock
goes up and you get called, you've made steak dinner money.
I'm putting on a virtual paper B-W with GMCR too to see how it
plays out... practice, practice, practice.
Malcolm
On 5/6/2013 4:42 PM, Paul Madison
wrote:
Hi
Art,
Just
a few thoughts.
Do
you own GMCR and if so what does your fundamental study tell
you? Where would you normally being looking to sell GMCR
at? Or put another way, without options in the picture, are
you happy to sell at $61 (or you could even say $61 + the
$3.15 premium which would be $64.15)? As long as this is a
place that you are comfortable selling your stock this could
be a good trade.
The
other thing you need to take into account is that GMCR's
earnings come out on May 8th, two days ahead of this
option's expiration. If the earnings come out and are much
better than expected you would be limiting your upside to
the $64.15 when the actual stock price might jump even
higher after earnings. That is why it can be tricky selling
options over earnings dates. Having said that, I do think
it sometimes makes sense to go ahead and sell covered calls
if I feel the stock is starting to reach an overvaluation
level and I personally would base the overvaluation on the
fundamentals and not technicals.
On
your issue about having to go lower than the best bid to get
a trade done, I do know that the Options Industry Councils
Virtual Trading System does not give live quotes and that
that sometimes explains why you have to be more aggressive
than the current "best bid price" to get a trade on as that
price might be 15 minutes delayed. You may be seeing the
same thing at Interactive Brokers in your Simulated Account.
I applaud you for giving the
Simulated Account a try and I hope my thoughts help you as
well. Keep us posted on how it turns out and what else you
might have learned by doing the trade. Your experiences
will help others so thanks for sharing.
On Mon, May 6, 2013 at 1:49 PM, ARTHUR
Christensen <artchris@somtel.net>
wrote:
Hi Malcolm and everyone 5/6/13
In my Interactive Brokers Simulated account I am playing some
paper calls to get a feel for options. Here are the notes I
wrote as rational and a call I just opened on a weekly.
Everyone feel free to criticize this. I'm here to learn. I'll
add the results early next week
Art Christensen
5/6/13 GMCR weekly
GMCR has a nice slow up trend but now is bumping on a 2/1/13
resistance level, its likely to break through and get called I
think.
With the price $58.75 the 61 Strike gives about 2.5% price
value, and the $3.15 Time Value another 6% gain in 1 week
(round numbers) if it strikes / Assigns. That's a nice gain
for one week if it gets called.
I started a GMCR STO at 3.35 5/6/13 at 10:35 (B/A 3.35/3.50
at that time) but it wouldn't hit. The price moved up to 59.50
and then back down. Moved the sto down a couple times to new
lower bottoms. Finally moved it .05 below the 3.15 B at that
time and it hit right away. (This might be a good way to go,
give up 5 to get in if price is weak to down.) The price went
up to 59.50 at 10:20 and is 58.75 at the fill.
5/6/13 STO 1 GMCR MAY 10 61 C, premium $3.15
--
Art Christensen on
5/15/13
Hi Paul and
Malcolm
On 5/6 I sent you the following
message and made the option trade below it. I didn't mention, but the actual
trade was in my Interactive Brokers Simulation account, not real money. I think
I mentioned giving you an update Post Mortem on my outcome after the expiry.
"5/6/13 GMCR weekly option GMCR has a
nice slow up trend but now is bumping on a 2/1/13 resistance level, its likely
to break through and get called I think. With the price $58.75 the 61 Strike
gives about 2.5% price value, and the $3.15 Time Value another 6% gain in 1 week
(round numbers) if it strikes / Assigns. That's a nice gain for one week if it
gets called.
5/6/13 - STO 1
GMCR MAY 10 61 C, premium $3.15"
In your messages below you
pointed out the gains (possible good one week gain) and risks (exposed to
valuation loss from big price move up in earnings week which it was May 8th - I
hadn't checked that out - and downside risk of the underlying; GMCR).
May 8th GMCR announced
and May 9th its price went from 59.50 to 76, $15 above my 61 strike.
It got called and I left 1500 on the table; lesson well learned I hope but
thankfully only paper money.
Another lesson, Put/call demand
was skewed heavily to calls at around $3 and puts dirt cheap.That should be a red flag that something
is up and the big money knows of it. Investigate.
Again, thanks for your inputs
that helped me get a little smarter.
I've got a couple more you might
find interesting DDD and CXW I'll try to write up this week.
Subject: [cool_club] Re: [SPAM]Re:
[cool_club] GMCR CC
Hi Art,
I concur with Paul... follow
the plan, know your risks, know your entry and your exits, practice, practice,
practice. The only thing I'll add is the question: Are you
comfortable owning GMCR IF the stock drops (buy the rumor and sell the
fact). Always a potential.
By doing a
buy-write, you've set yourself up to capture a chunk of that potential
rise. You've "exposed" yourself to a potential valuation loss on a
company that you wouldn't mind owning for a while if the price drops, but more
importantly, you've made minimum wage for the week. If the stock goes up
and you get called, you've made steak dinner money.
I'm putting on a
virtual paper B-W with GMCR too to see how it plays out... practice, practice,
practice.
Malcolm
On 5/6/2013 4:42 PM, Paul Madison wrote:
Hi
Art,
Just
a few thoughts.
Do
you own GMCR and if so what does your fundamental study tell you?
Where would you normally being looking to sell GMCR at? Or put
another way, without options in the picture, are you happy to sell at $61
(or you could even say $61 + the $3.15 premium which would be $64.15)?
As long as this is a place that you are comfortable selling your stock
this could be a good trade.
The
other thing you need to take into account is that GMCR's earnings come out
on May 8th, two days ahead of this option's expiration. If the
earnings come out and are much better than expected you would be limiting
your upside to the $64.15 when the actual stock price might jump even higher
after earnings. That is why it can be tricky selling options over
earnings dates. Having said that, I do think it sometimes makes
sense to go ahead and sell covered calls if I feel the stock is starting to
reach an overvaluation level and I personally would base the overvaluation
on the fundamentals and not technicals.
On
your issue about having to go lower than the best bid to get a trade done, I
do know that the Options Industry Councils Virtual Trading System does not
give live quotes and that that sometimes explains why you have to be more
aggressive than the current "best bid price" to get a trade on as that price
might be 15 minutes delayed. You may be seeing the same thing at
Interactive Brokers in your Simulated Account.
I
applaud you for giving the Simulated Account a try and I hope my thoughts
help you as well. Keep us posted on how it turns out and what else you might
have learned by doing the trade. Your experiences will help others so thanks
for sharing.
On Mon, May 6, 2013 at 1:49 PM, ARTHUR Christensen
<artchris@somtel.net> wrote:
Hi Malcolm and everyone 5/6/13 In my Interactive
Brokers Simulated account I am playing some paper calls to get a feel for
options. Here are the notes I wrote as rational and a call I just opened
on a weekly.
Everyone feel free to criticize this. I'm here to
learn. I'll add the results early next week
Art
Christensen
5/6/13 GMCR weekly GMCR has a nice slow up trend
but now is bumping on a 2/1/13 resistance level, its likely to break
through and get called I think. With the price $58.75 the 61 Strike
gives about 2.5% price value, and the $3.15 Time Value another 6% gain in
1 week (round numbers) if it strikes / Assigns. That's a nice gain for one
week if it gets called.
I started a GMCR STO at 3.35 5/6/13
at 10:35 (B/A 3.35/3.50 at that time) but it wouldn't hit. The price moved
up to 59.50 and then back down. Moved the sto down a couple times to new
lower bottoms. Finally moved it .05 below the 3.15 B at that
time and it hit right away. (This might be a good way to go, give up 5 to
get in if price is weak to down.) The price went up to 59.50 at 10:20 and
is 58.75 at the fill.