StockFetcher Forums · Filter Exchange · you can also use option pain value to to sell options the last week of exp<< >>Post Follow-up
MARY4MONEY
806 posts
msg #80881
Ignore MARY4MONEY
modified
10/9/2009 10:49:29 AM

just go to optionpain.com--Option Pain (Max-Pain) Calculator and plug in you stock-- stock will generally migrate back near their max value into expiration( the last 5 days) so on bac the option pain is at 17$(this is the price calculated that the most people will lose money on their options making in most cases them just about worthless-- so the friday before exp- is a very good time to play stocks-- you want to play options both ways and you want them in the say 0.07 to 0.27 price range because these have the greatest chance of of you winning- what you are doing is using the time decay which really goes down fast the last 5 days of exp--and what you want to play is a to sell a strangle play to protest yourself--bac is at 17.45 now- so we want to sell the 16 oct puts and sell the 19 oct calls-they are both 0.10 right now--so to show you in real life how this works i will buy equal $ amounts of both right now--2009/10/09 Sell to Open BAC Oct 09 16.00 Put BAC -5.0 $0.09 -- $45.00
2009/10/09 Sell to Open BAC Oct 09 16.00 Put BAC -1.0 $0.09 -- $9.00
2009/10/09 Sell to Open BAC Oct 09 16.00 Put BAC -21.0 $0.09 -- $189.00
2009/10/09 Sell to Open BAC Oct 09 16.00 Put BAC -90.0 $0.09 -- $810.00
2009/10/09 Sell to Open BAC Oct 09 16.00 Put BAC -124.0 $0.09 -- $1,116.00
2009/10/09 Sell to Open BAC Oct 09 16.00 Put BAC -759.0 $0.09 -- $6,831.00
2009/10/09 Sell to Open BAC Oct 09 19.00 Call BAC -794.0 $0.09 -- $7,146.00
2009/10/09 Sell to Open BAC Oct 09 19.00 Call BAC -4.0 $0.09 -- $36.00
2009/10/09 Sell to Open BAC Oct 09 19.00 Call BAC -6.0 $0.09 -- $54.00
2009/10/09 Sell to Open BAC Oct 09 19.00 Call BAC -3.0 $0.09 -- $27.00
2009/10/09 Sell to Open BAC Oct 09 19.00 Call BAC -27.0 $0.09 -- $243.00
2009/10/09 Sell to Open BAC Oct 09 19.00 Call BAC -75.0 $0.09 -- $675.00
2009/10/09 Sell to Open BAC Oct 09 19.00 Call BAC -91.0 $0.09 -- $819.00
let do another stock too to give you more examples of selling puts and calls using the option pain value--lets use rimm--its pain value is 70$---rimms price is 69.84$ that pretty cool- the 75 oct calls are 0.21 and the 65 puts are 0.18-- so we will buy 5100$ of each that would be 300 of the 65puts and 255 of the oct 75 calls--Activity Date Transaction Description Symbol Qty Fill Price Commission Net Amount
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -10.0 $0.20 -- $200.00
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -1.0 $0.20 -- $20.00
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -3.0 $0.20 -- $60.00
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -2.0 $0.20 -- $40.00
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -4.0 $0.20 -- $80.00
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -55.0 $0.20 -- $1,100.00
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -20.0 $0.20 -- $400.00
2009/10/09 Sell to Open RIMM Oct 09 75.00 Call RIMM -160.0 $0.20 -- $3,200.00
2009/10/09 Sell to Open RIMM Oct 09 65.00 Put RIMM -6.0 $0.17 -- $102.00
2009/10/09 Sell to Open RIMM Oct 09 65.00 Put RIMM -28.0 $0.17 -- $476.00
2009/10/09 Sell to Open RIMM Oct 09 65.00 Put RIMM -5.0 $0.17 -- $85.00
2009/10/09 Sell to Open RIMM Oct 09 65.00 Put RIMM -18.0 $0.17 -- $306.00
2009/10/09 Sell to Open RIMM Oct 09 65.00 Put RIMM -16.0 $0.17 -- $272.00
2009/10/09 Sell to Open RIMM Oct 09 65.00 Put RIMM -227.0 $0.17 -- $3,859.00
and you want to use stocks with a low wm% that have good option volume--we will use intc which rarely moves much-- its at 20.10 now(max pain is 19) so we will sell the 21 calls for oct and sell the 19 puts-- Activity Date Transaction Description Symbol Qty Fill Price Commission Net Amount
2009/10/09 Sell to Open INTC Oct 09 19.00 Put INTC -4.0 $0.17 -- $68.00
2009/10/09 Sell to Open INTC Oct 09 19.00 Put INTC -2.0 $0.17 -- $34.00
2009/10/09 Sell to Open INTC Oct 09 19.00 Put INTC -4.0 $0.17 -- $68.00
2009/10/09 Sell to Open INTC Oct 09 19.00 Put INTC -53.0 $0.17 -- $901.00
2009/10/09 Sell to Open INTC Oct 09 19.00 Put INTC -137.0 $0.17 -- $2,329.00
2009/10/09 Buy to Open INTC Oct 09 21.00 Call INTC 11.0 $0.25 -- -$275.00
2009/10/09 Buy to Open INTC Oct 09 21.00 Call INTC 12.0 $0.25 -- -$300.00
2009/10/09 Buy to Open INTC Oct 09 21.00 Call INTC 17.0 $0.25 -- -$425.00
2009/10/09 Buy to Open INTC Oct 09 21.00 Call INTC 90.0 $0.25 -- -$2,250.00
lets do apple too-- price now 190.10(pain is--170)-- that would be the 170 put and 210 calls--Activity Date Transaction Description Symbol Qty Fill Price Commission Net Amount
2009/10/09 Sell to Open AAPL Oct 09 170.00 Put AAPL -2.0 $0.14 -- $28.00
2009/10/09 Sell to Open AAPL Oct 09 170.00 Put AAPL -1.0 $0.14 -- $14.00
2009/10/09 Sell to Open AAPL Oct 09 170.00 Put AAPL -47.0 $0.14 -- $658.00
2009/10/09 Sell to Open AAPL Oct 09 170.00 Put AAPL -150.0 $0.14 -- $2,100.00
2009/10/09 Sell to Open AAPL Oct 09 210.00 Call AAPL -126.0 $0.10 -- $1,260.00
2009/10/09 Sell to Open AAPL Oct 09 210.00 Call AAPL -174.0 $0.10 -- $1,740.00


medowz
59 posts
msg #81694
Ignore medowz
10/24/2009 5:10:04 PM

I don't understand entirely what's going on here?

Friday before expiration. The strategy instructs us to open a position. I'm assuming to buy to open the initial October strangle position for a debit?

Then as option expiration week winds down, we sell to open positions with the idea of taking in credits to cover the debit as well as make profits. Obviously we're hoping that our put and call prices jump around a lot, too or if that ain't happening, that the stock price spikes enough to cover and exceed our debit. This is what confuses me, though, how many contracts were sold to open in the examples. There's got to be a technique to that I'm sure. Was there a STO schedule or something? .

Intriguing strategy. What's a wm%?

StockFetcher Forums · Filter Exchange · you can also use option pain value to to sell options the last week of exp<< >>Post Follow-up

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