aliasrlz
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| reply to SmackWeasel
Re: Can we discuss stock picks and trading in here?
Heya!
Thank you. I really want to learn options (see the links above) and write some AAPL and RIMM calls.
Dang, that was a whopper ...... with those gold contracts, LOL!!! :  As you said, no sense in crying over it. It happens so much in all markets (securities, commodities, futures, etc).
Yes, low vol stocks are easily & heavily manipulated, making them even more dangerous (high risk) than other equities. Now, don't get me wrong, I like the big cap brand names (AAPL, GOOG, RIMM, etc, etc), and I keep a "core" holding in my favorites (for retirement). I have AAPL shares from 2003 at $11/sh that I am still holding  Something like a 1200% gain, and those shares ain't going anywhere......
I think once you teach me (hopeful thinking. lol) how to write some AAPL calls, I'll join your side of the trade  |
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SmackWeasel
join:2008-01-02
| I can see why a person would trade the low volume stocks and hold the big caps; there's more movement in the low volume ones, thus more short term profit potential. Then you plow your profits into the big caps...nice.
I take it AAPL is APPLE and RIMM is Research in Motion? If not, those puppies sound like some really exotic options there..heh-heh.
Yea commodities are hot right now. Gold has moved from a low of $255 in 2001 to $1037 last year. (big money if you consider each futures or options contract controls 100 ounces 100oz X $100 = $10,000) After dropping back down to $680/oz, it popped back up to $1027 again this year. I personally love taking the downside of the market as most traders are always looking for an upside trade and the downside smacks um up-side the head WHAPP!.
Crude Oil went from $14 a barrel to over $140 a Barrel. Most of that movement was just last year (1000 barrels per contract). So I expect to make a few more good trades before it's over with.
Yea no problems teaching you once you've researched the basic concept of options writing and trading. The thing with learning options trading is it's hard to wrap your head around the concept. Took me a few weeks just to do that, But once I got a handle on it, it seemed very simple and basic. Having someone handy to toss questions at, is the key to fast learning, and I could help you with that.
here's a fast lesson, hold your hat:
- Calls are a bullish vehicle (call = up or call up)
- Puts are a bearish vehicle (put = down or put down)
- Buying an option means you are a buyer of someones else's written option.
- Writing an option means you are the one that originates a new option. Sorta like giving birth to an option. The options you write are considered income because it goes directly into your account. And you hope it expires worthless for the buyer.
Here's the confusing part so look lively...heh-heh:
If you write a call option, you are actually taking a bearish position and hoping the stock will go down. make sense?..no? OK look at it this way; if you had merely bought that call it would have been a bullish position. There are two sides to the trade.
There are a heck of a lot of variations and strategies like buying an option and selling another at the same time. but that's for another time.
The truth is 90% of all options expire worthless. Some long term investors buy options as a kind of insurance against their actual position. They really don't mind losing on the option. So writing options makes sense. Although by writing options you are taking on unlimited risk. Whereas by merely buying an option, the only risk involved is the actual price paid for the option.
You shouldn't discount the idea of trading (buying) puts when you think a stock will tank. The SEC doesn't limit the amount of puts you can trade. It's virtually short selling with-out the overall risks associated.
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Gomez
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1 edit | said by SmackWeasel 
The truth is 90% of all options expire worthless.
Key point to be noted.
Depending on the play, it's very easy to lose control and walk away from the trade with nothing.. been there, done that. With increased leverage comes increased risk.
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jester121
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| reply to aliasrlz
Just popped in and enjoying the educational thread.
Can anyone recommend a good simulator that allows options as well? I'm familiar with the operations but I'd still like a couple months with play money before I fund an account with real play money. |
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Gomez
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1 edit | said by jester121 :Just popped in and enjoying the educational thread. Can anyone recommend a good simulator that allows options as well? I'm familiar with the operations but I'd still like a couple months with play money before I fund an account with real play money. Before you go nuts on options.. they are great if you are right, the hurt when you are wrong.
I'd like to hear from SmackWeasel about an exit strategy when those puts (buy side) go under water..
Keep in mind that option pricing has a built in time factor, and as time passes, they diverge back to the cost.
Currently, I'm limited to covered calls.. I don't have time for boxing a trade, and baby sitting a naked trade.
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jester121
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Lake Zurich, IL | Yep, that's exactly how I'm looking to get started (covered calls). With a stop loss on the underlying issue the risk can be mitigated.
(that's from a book I read, paraphrased) |
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Gomez
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| said by jester121 :Yep, that's exactly how I'm looking to get started (covered calls). With a stop loss on the underlying issue the risk can be mitigated. (that's from a book I read, paraphrased) Still recommend this »www.amazon.com/Trading-Living-Ps···71592242
Even though it's not up on the fast movement of todays market..
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SmackWeasel
join:2008-01-02
| reply to jester121
I can't really recommend any as I've never actually used one. But I can offer you some advice:
Your best bet would be to contact a broker that specializes in options trading. Most large Stock Brokerage houses have a few resident Options specialists.
If you're interested in commodity trading, options are a big part of their business so you wouldn't have a difficulty finding qualified help.
Most trading software (order entry platforms) offered free to customers by brokerage firms have a simulation option, so you can use the same trading interface as you will use when you are trading live with real money. They usually call this paper trading and offer that service free of charge. The platforms are either browser based or down loadable.
Personally I don't use a platform nor trade on-line. I do check options prices on-line, make my own evaluation then call my broker and make the trade. I then track that trade on-line and determine based on chart action when to close the trade for a profit or to save a loss from running too deep.
I can't see why you couldn't do like wise. It may take awhile until you get the hang of it, but you would be doing research at the same time.
There are several analytical software programs available with "what if" type simulation, but these can be very expensive. Plus you would need a streaming price quote service.
Also there are several on-line training courses that offer simulated trading. I Have no idea what they would cost nor whether they would offer just an options trading simulator separate from the main course.
Again your best bet since you already understand the concept, is to contact a broker and ask about paper trading.
Also feel free to ask me any direct questions about options trading.
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SmackWeasel
join:2008-01-02
1 edit | reply to Gomez
said by Gomez :said by jester121 :Just popped in and enjoying the educational thread. Can anyone recommend a good simulator that allows options as well? I'm familiar with the operations but I'd still like a couple months with play money before I fund an account with real play money. Before you go nuts on options.. they are great if you are right, the hurt when you are wrong. I'd like to hear from SmackWeasel about an exit strategy when those puts (buy side) go under water.. Keep in mind that option pricing has a built in time factor, and as time passes, they diverge back to the cost. Currently, I'm limited to covered calls.. I don't have time for boxing a trade, and baby sitting a naked trade. Hey Gomez, calls going "under water" are just as likely to happen as would puts. One of the benefits of options buying is there would never be a margin call as you'd have either with a futures contract or a naked short in stocks.
My exit strategy comes from the "gut", I'm a chartist and live by technical analysis and technical indicators. If I see a pattern emerging I take prompt action. Either to cover a short or exit the market. This comes from years of experience. My first few years of trading was mostly trend following and I managed to keep my "head above water" so to speak.
You also have to realize there are a myriad of strategies to protect yourself:
Straddle - holding a position in both a call and put with the same strike price and expiration. The position is profitable (to the buyer) if the underlying stock/commodity changes value in a significant way, either higher or lower. If the options have been bought, the holder has a long straddle. If the options were sold, the holder has a short straddle.
Strangle - the simultaneous buying or writing of out of the money put and an out of the money call, with the same expirations. Similar to the straddle, but with different strike prices.
Butterfly - buy at the money and out of the money call, write two in the money calls, or vice versa.
There are even strategies that lock in profits.
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aliasrlz
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| reply to SmackWeasel
Heya SW!
Good morning... Yes, AAPL is Apple and RIMM is Research In Motion (Blackberry). I use the ticker symbols a lot as it is shorter to type I forget that not everyone knows the ticker symbols for the various companies, heh, my bad..
I followed the metals a little bit last year, and almost bought a few gold stocks that track the price of gold or a gold based ETF (exchange traded fund) that covered a variety of gold stocks. I still couldn't pull the trigger though.......
In a way, I"m a bit of a Buffet thinker, and tend only to buy names I'm closely familiar with or understand the business model of, so I"m always big in the tech sector. I have owned some energy stocks in the past (VLO = Valero), and the energy spyder ETF (XLE), and did fine with both them ...20+%gains, then I got out. I wish I had bought some oil contracts in the past, heh (the rise in the price of crude oil really caught many by surprise).......
Now, it is so difficult to know where the oil market is going with the economy still very volatile, more energy efficient cars being pushed, etc - even Boone Pickens blew the price of oil last year, so did GS (Goldman Sachs) and MS (Morgan Stanley). They were all wrong....and oil did tank back with the economy. Its headed back up this yr, but has since pulled back again (some). Its very unpredictable.
Ok, I'll do my homework on options. Thanks for the tips, information, and getting me started. I didn't realize that by writing calls, I was putting myself on the bearish side (oops!). Maybe I should start with just "buying" first, learning that & the strategies, then writing later. This unlimited risk with writing is scary though (risking it all) ......akin to shorting a security, which I've always been too chicken shyt to do, lol I want to try the straddle ......that seems like an interesting strategy |
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SmackWeasel
join:2008-01-02
3 edits | Good morning aliasrlz. Yea the symbols seriously spaced me out at first heh-heh. Had to surf for info, and was really really relieved that they weren't some kind of new exotic options I had to learn.
Spot Gold and Gold futures/options, trade in parody (spot = physical gold). The Gold stocks (mining companies) have their own fundamentals and sometimes either lead or follow the spot/futures movement. This last year the gold stocks have been under performers but when and if the metals take off the stocks should eventually lead.
If you don't want to trade or track individual stocks you could follow a basket of companies in an index:
The Xau: »www.kitco.com/pop_windows/stocks/hui.html
HUI: »www.kitco.com/pop_windows/stocks/hui.html
Well you know I probably wouldn't trade the mining companies, but I was seriously thinking of getting in this stock as an investor if I saw it start to break out:
»www.ariansilver.com/s/home.asp
»finance.yahoo.com/q/bc?s=AGQ.V&t···m&q=l&c=
Super cheap Canadian Silver mining stock. the volume is way too low, but looks like someones starting to nibble at the bottom.
I agree with what you're saying about trading with what's familiar and close to home. Like I wouldn't even think about trading the grains (wheat, corn, etc) because I don't live anywhere close to the grain belt and would think it weird to have to keep up with the weather in Nebraska heh. Gold trades everywhere and you can find the closing price in any newspaper from Albania to Zanzibar.
You want to check out a crude oil chart? »futuresource.quote.com/charts/ch···=bar&st=
That's the weekly (each bar represents one week of activity) I've been watching it for a few months now. I conclude that cude is moving up. It's just that the move will be somewhat limited for now. but check the gap at 94. that gap will be filled sometime soon. The reason I believe the move will be sort of a "head fake", is the technical information I'm looking at: Same chart with studies overlaid: »futuresource.quote.com/charts/ch···C3%29%3B
Besides the fundamental fact that there's is an over abundant amount of physical crude in storage that has to be consumed before the next big leg up.
Oil blew everyone's mind last year. I was anticipating the up move last year but was fully into a Gold trade and couldn't offord the added risk. I actually did score a small profit on the downside, but didn't think it would go as low as it did...so the low side was the mind blower for me.
As I said yesterday learning options isn't that hard once you get the concept. And yea keep it simple at first. I hardly ever do any complex strategies. I used to my first couple years but found that I tied too much money into too few trades, by constantly hedging and maintaining my trade. My broker's into that, but the last time I entered one of his trades I lost my ass. He got me into shorting the Euro in a strangle and the Euro flew! Kicking me in the dirt with the margin crap. So I usually just take a bet on direction and am done with it.
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jester121
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Thanks Smack and Gomez for the follow up.
I'm with alias when it comes to picking and choosing -- kind of pore over news clips and check out companies that I've heard of. From what I've heard some of the pay site/software filters through all the metrics and shows a list of potential targets for calls/puts. I may reach that point eventually, but for now I'm keeping it simple.
Last night I ran across investopedia.com which lets you create a free play account with access to options and seems to simplify some of the more complex transactions. I'm going to tinker around with it a bit and see how it goes; I'm guessing they just use market activity to decide when, for example, you get called out.
Am I the only one who gets a huge kick out of all these crazy terms for things? Straddles, strangles, tickles, iron condors, flaming orangutans (ok, I made up a couple of those). Every industry loves their jargon I guess... |
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SmackWeasel
join:2008-01-02
| said by jester121 :Thanks Smack and Gomez for the follow up. I'm with alias when it comes to picking and choosing -- kind of pore over news clips and check out companies that I've heard of. From what I've heard some of the pay site/software filters through all the metrics and shows a list of potential targets for calls/puts. I may reach that point eventually, but for now I'm keeping it simple. Last night I ran across investopedia.com which lets you create a free play account with access to options and seems to simplify some of the more complex transactions. I'm going to tinker around with it a bit and see how it goes; I'm guessing they just use market activity to decide when, for example, you get called out. Am I the only one who gets a huge kick out of all these crazy terms for things? Straddles, strangles, tickles, iron condors, flaming orangutans (ok, I made up a couple of those). Every industry loves their jargon I guess... Good find Jes. Yea I have to admit I was kinda blocked last night trying to locate a good options sim for you. I think that program you found allows for real time activity without the real money. So at least it will acclimate you to the activity.
Yea man those jazzed up terms are the shitz. "Butterfly spreads" ...heh-heh.
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Iron Chef
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| reply to aliasrlz
I got a question on options. We learned the basics in class, and I've been reading up on them ever since.
Let's use C - Citigroup for example. Its currently trading in the low $3 range. The in the money put options have strike prices of 4, 5, and 6 bucks. The $6 strike put option is currently trading at $2.90.
So, if I sell a put because I don't think C has any chance of getting to $6 by August 21st, then will I pocket $2.90 x 100 x however many contracts I sell? |
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SmackWeasel
join:2008-01-02
| said by Iron Chef :I got a question on options. We learned the basics in class, and I've been reading up on them ever since. Let's use C - Citigroup for example. Its currently trading in the low $3 range. The in the money put options have strike prices of 4, 5, and 6 bucks. The $6 strike put option is currently trading at $2.90. So, if I sell a put because I don't think C has any chance of getting to $6 by August 21st, then will I pocket $2.90 x 100 x however many contracts I sell? Remember a put is a bet that a stock goes down, (from in your case, strike at $6 ) since you sold or "wrote" the put option, you are actually hoping the stock indeed goes higher.
Now if you are personally bearish on that stock, and you want to write an option, you would want to be selling (writing) call option/s.
....and yea to answer your basic question; if you are the writer of an option and it goes your way (expires worthless), you will pocket the entire amount paid to you.
Another thing to think about as an option writer, if the market stalls or hardly moves, is buy the option back later at a cheaper price:
- Lets say you wrote a call or put option for $3 (pocketing the $3) and it sits at or near where you Wrote it for several weeks. It will degrade in time value. OK lets say in 3 weeks it's now worth only $2.50, you buy it back from the market and pocket the difference. $3 - $2.50 = 50¢ x 100 shares, your profit from the trade.
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aliasrlz
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| SW, thank you for everything. I have been looking at some September and October AAPL calls.
I will let you know what I am thinking, and you can advise if I , at least, have the right understanding (not the right decision), but understand what I am doing. So, stay tuned....and lets keep this thread ROCKING!
FYI -- watching my earnings run with Sirius XM (SIRI) "extremely" close. I always have a problem pulling the trigger to sell (blew 3x this summer), and trying to HOLD til PM (pre market) on Thurs before getting out, but it will be tough  |
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the Grumble
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join:2009-05-11
| reply to aliasrlz
I only have 2 stocks left and one is a complete loser (paid $55 a share and now it's worth $0.009 a share  ) and the other is a liver cancer delivery system in phase3 testing.
Plus one mutual fund that lost half of it's value. |
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aliasrlz
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| said by the Grumble :I only have 2 stocks left and one is a complete loser (paid $55 a share and now it's worth $0.009 a share ) and the other is a liver cancer delivery system in phase3 testing. Plus one mutual fund that lost half of it's value. I feel your pain..........My main 401K lost near 40% in 2008. I have (2) 401Ks now, and one is up 15% and the other up 10%.
My personal stocks (that I trade at E*Trade), have rebounded from being near 40% down in 2008, to break even or UP this year (that's like a 40% gain - thank you!).
Its tough......but sticking with big cap "solvent" (that's the key word) companies is important. I didn't touch any financial stocks during 2007 - present, and still won't. As much as I love GS (Goldman Sachs - as a stock), still wouldn't touch it. I rather buy my big cap techs (no debt, cash on the books) that I know won't be going under anytime in the near future.
For now, I need immediate cash (not working), so I am momentum or position trading (as SW explained), in certain stocks, WHILE holding "core" positions in the big cap solvent babies |
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the Grumble
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join:2009-05-11
1 edit | reply to aliasrlz
I want to buy Fannie Mae and Freddie Mac for a long term investment but am scared to take any more chances. Sooner or later they both have to rebound and hit at least $20 a share. When?
But, it will (if all goes right) be a major score from $0.60 a share to $20 |
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aliasrlz
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| said by the Grumble :I want to buy Fannie Mae and Freddie Mac for a long term investment but am scared to take any more chances. Sooner or later they both have to rebound and hit at least $20 a share. When? But, it will (if all goes right) be a major score from $0.60 a share to $20 That's a big risk taker. You can dump some money into them "hoping" they will come back, but they may never. You would have to resolve that the money could just be lost/wasted dollars that you may never recoup.....
You do what is best for you, but if you believe housing/real estate will turn around, you can always invest in a home builder's ETF (exchange traded fund) , while they are still pretty cheap, and ride it out the recession. Just my thoughts.
Disclaimer: I'm just sharing ideas and thoughts, and it is up to the individual to do their DD (due diligence) and make their own decisions. Not responsible for any money made or lost based on discussions here, lol |
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