Options Trading

[mike1618]

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I haven't seen any threads that deal strictly with trading options. With the markets moving so rapidly, now is a great time to be in this game. It is also a great way for students who don't have enough money for a balanced portfolio to speculate with huge upside opportunity.

Do any of you trade options on a regular basis for speculation or even for hedging risk? I would love to talk strategies with anyone who does.

 

[mgdsh]

I haven't seen any threads that deal strictly with trading options. With the markets moving so rapidly, now is a great time to be in this game. It is also a great way for students who don't have enough money for a balanced portfolio to speculate with huge upside opportunity.

Do any of you trade options on a regular basis for speculation or even for hedging risk? I would love to talk strategies with anyone who does.

I've traded options a few times, but I'm literally still a newb at them. I think my success rate is something like 30-40% of the few trades I've taken and as a result I only paper trade options now until that dramatically changes and I better understand options pricing. I'm far more comfortable and successful with stocks/ETFs etc and I will probably just stick to that area.

All I can do is probably refer you to a few options related blogs of guys that really know what they are talking about:

http://www.optionaddict.net/blog/

http://slopeofhope.com/index.htm

You'd also probably have better luck discussing options on the threads of those blogs than you would here. Most MDs are investor types and not trader types. Theres only a handful of us trader types on here.

 

[mike1618]

Thanks for the advice. I hate writing on financial blogs because it always seems someone is trying to sell you on a particular trade. I enjoy this forum because most everyone provides good insight and their experiences, whether good or bad.

Of my last 10 trades, 8 have been executed at a profitable level. I think a lot of it has to do with luck, given that I am still new at this. Hopefully, I can keep this going.

 

[mgdsh]

Thanks for the advice. I hate writing on financial blogs because it always seems someone is trying to sell you on a particular trade. I enjoy this forum because most everyone provides good insight and their experiences, whether good or bad.

Of my last 10 trades, 8 have been executed at a profitable level. I think a lot of it has to do with luck, given that I am still new at this. Hopefully, I can keep this going.

Yea, from what I can tell the 2 blogs I've listed don't really try to sell you on anything. I'm personally pretty picky about the blogs I take the time to visit (after all there are a bajillion of them... especially financial/market related). These guys both trade their own accounts from what I know.

My thing with options is that I still don't fully understand how volatility and decay reflect the price now and in the future. I'm pretty familiar with various option strategies, but what kills me is you can be right on the direction of the underlying asset, yet still not make $$ on the option trade.

 

[mike1618]

I have been reading up on the Options Addict blog. Thanks for that recommendation. It seems very informative.

I have had the time decay affect a few of my trades, namely one on Citigroup. I am also still learning about this. Also, I am trying to get better at company valuations as well as technical analysis. There is so much to learn. I want to give myself the biggest base possible to build on.

 

[etf]

i've sold covered calls, written naked puts, and used a couple of strangles to profit off of aapl/goog earnings. don't do it anymore because i realize that i just got lucky, and don't want to spend my life watching the markets, regardless of how rewarding it is.

 

[mgdsh]

i've sold covered calls, written naked puts, and used a couple of strangles to profit off of aapl/goog earnings. don't do it anymore because i realize that i just got lucky, and don't want to spend my life watching the markets, regardless of how rewarding it is.

Isn't that awfully dangerous for someone who is all about the mutual fund? 🙂 I mean I wouldn't even try something like that. The risk reward is skewed so far out of your favor, that if indeed the price does get hit and someone calls the option, you're basically screwed.

 

[mike1618]

I agree, I am not a big fan of writing options for speculation, especially naked options. The risk/reward is awfully skewed towards the buyer. The only reason that I will ever write options is if I am hedging my current positions.

 

[etf]

Isn't that awfully dangerous for someone who is all about the mutual fund? 🙂 I mean I wouldn't even try something like that. The risk reward is skewed so far out of your favor, that if indeed the price does get hit and someone calls the option, you're basically screwed.

well i've only recently become all about index funds, and still, the majority of my portfolio is individual stocks but yeah, it was kind of risky, but i was basically doing 1 or 2 contracts at a time and using options that were near-the-money for stocks that i wouldn't mind having a position in should i be forced to buy the stock at expiration. the way i saw it, it was like getting paid to place a limit order. the most i ever made selling puts was around $600.

 

[mike1618]

Did anybody make anything on the short side of Wachovia today? I pulled a portion of my April options off of the table, but I still think their is some downside play. What do you think?

 

[mgdsh]

Did anybody make anything on the short side of Wachovia today? I pulled a portion of my April options off of the table, but I still think their is some downside play. What do you think?

I'm guessing there isn't a whole lot of downside that would dramatically increase the value of your options between now and this friday's expiration. Unless your calls are deep ITM, you're going to end up losing $$ b/c of the time decay.

 

[mike1618]

They are already deep in the money. The time decay has already played out over the last week. I am actually thinking about buying some April 22.5 puts for $.05. This would be a very small amt due to the risk, but the upside would be huge and I think the idea is plausible.

My original options were april 30's that I bought at around 2$.