StockFetcher Forums · General Discussion · The Canaries have DIED<< 1 2 3 >>Post Follow-up
Kevin_in_GA
4,548 posts
msg #80643
Ignore Kevin_in_GA
10/5/2009 2:14:49 PM

Jeff Macke Crazy

Kevin

chetron
2,817 posts
msg #80644
Ignore chetron
10/5/2009 2:43:16 PM




Kevin_in_GA
- Ignore Kevin_in_GA 10/5/2009 2:11:58 PM


My crystal ball said short ACE @ $54.00.
++++++++++++++++++++++++++++

But it's trading at 53.67 right now (a total of -0.63%).


I don't get how you guys can make money on these small moves ...


******************************

VOLUME

HTH

= )

karennma
6,827 posts
msg #80645
Ignore karennma
modified
10/5/2009 2:46:38 PM

Kevin_in_GA
- Kevin_in_GA 10/5/2009 2:11:58 PM
My crystal ball said short ACE @ $54.00.
++++++++++++++++++++++++++++
But it's trading at 53.67 right now (a total of -0.63%).
I don't get how you guys can make money on these small moves ...

========================================================

Kevin:
Just for clarification and disclosure purposes....
I am not shorting ACE. (because I'm still short AMZN and NKE)
I'm just putting it "out there" in case someone else wants to "look" at it.
Besides still being short AMZN & NKE, I personally don't like trading stocks I know nothing about.
Now, *IF* ACE happens to drop $5 bucks ... great!. Maybe someone can take advantage, but it won't be me.

Re: your comment: "I don't get how you guys can make money on these small moves ..."
They're probably doing what poster jnafah did last week ...
He bought 4000 shrs. of TZA @ 11.92, then sold 'em @ $12.32
He spent $47,680 to make $1,600. on a 0.40 cent move.
I made the same amount with options (TNA puts), but I only used $3K.
(bot 10 Octo $47 puts @ 3.10; sold @ 4.80)
He jumped in and out the same day.
I stayed in longer ... for a bigger move.
The more money you risk, the sooner you need to get out.
I can stay in longer, because I have less at risk.




karennma
6,827 posts
msg #80646
Ignore karennma
10/5/2009 2:53:33 PM

OMG!!
That video NOW, is funnier than it was 6 months ago!!
:>)


Kevin_in_GA
4,548 posts
msg #80648
Ignore Kevin_in_GA
modified
10/5/2009 3:13:10 PM

Got the leverage thing - in fact, trying it on paper right now since I can't trade options within my 401k.

But what is the corresponding move in the option when a stock moves a fraction of a percent?

Example - when I bought 50 shares of TNA on Thursday at $40.96, I also recorded the price of the Oct 43.00 call ($2.30).

on Friday it closed down 2% at $40.22 - option price dropped $0.60 to $1.70.

Today it is up at $42.41 (up 5.45%), but the option price is only at $2.30 again, even though the option is almost in the money.


EDIT: Now it's at $42.49, but the option went down to $2.20. WTF??

Options are clearly a way to get leverage and larger percentage moves - just trying to figure out how well they track the underlying stock.


BarTune1
404 posts
msg #80649
Ignore BarTune1
modified
10/5/2009 3:23:58 PM

Kevin, its somewhat difficult with options that expire shortly as the "time value" decay is somewhat rapid ...... I lost a little on my SSO calls because of time decay. You really have to guesstimate the move - the more the option is in the money, the move will be 1:1 versus the move in the underlying stock - the farther away from the strike price (out of the money) - the smaller the move. Then you have to account for the time to expiry - like 9 trading days from now.

There are other variables that add or decrease from the price of an option also ... like overall volitility ... and with volitility droping, like it is today, so will the option prices.

It would probably be best if you paper traded and got a feeling for options pricing ...... also, you might want to look at some options 3-4 months out, like January expiry. They are often heavily traded, relatively speaking, and the "time decay" factor affecting the option pricing, is muted to a degree.

You have to be careful buying infront of an earnings release also, because volitility spikes, the options can be very expensive before and collapse after the news is out. Often both the puts and calls lose alot, even when the stock doesnt move.

karennma
6,827 posts
msg #80653
Ignore karennma
modified
10/5/2009 3:58:40 PM

Kevin_in_GA
- Kevin_in_GA 10/5/2009 3:13:10 PM
Today it is up at $42.41 (up 5.45%), but the option price is only at $2.30 again, even though the option is almost in the money.
============================================================================================

Kevin:
I'm following you're thinking, and you ARE correct.
The "stock" price is "up" to $42.41 ... HOWEVER ... using YOUR words ...
"but the option price is only at $2.30 again, even though the option is almost in the money."

In options trading "Almost" doesn't cut it.
Either you're in the money or you're not. Period.
At this point, IF your strike price is $43.00 and the stock is trading @ $42.41. You are NOT in the money.
In fact, the rule of thumb is (for calls): SP + premium = B/E.
So, technically, if your premium was $2.30, and your SP is $43.00, you don't even breakeven until the stock hits $45.30.
So, the MM owes you nothing (the dirtbag that he/she is) LOL!
Besides, ... take a look at the volume on the option. The MM has no volume.
No volume = no volatility -= no gain.
Only 144 TIJ-JK contracts have traded today, and no one if offering more than $2.30 for the option.
So, the holder of this option has two obstacles:
lack of volatility and lack of volume in buyers and sellers.








Kevin_in_GA
4,548 posts
msg #80656
Ignore Kevin_in_GA
10/5/2009 4:13:32 PM

Lots to learn - obviously!! Thanks for the insights. No doubt I'll learn and eventually trade these. For now and probably through the rest of this year, I'll paper trade to get a feeling for what to do.

Kevin

karennma
6,827 posts
msg #80657
Ignore karennma
10/5/2009 4:13:56 PM

Kevin:
Afterthought ...
Poster BarTune is correct about the "time" decay.
The more days you hold the options, the LESS money you will make.
For example, AMZN closed @ $88.67 today.
Lask week, my target SELL price (for puts) was $89. I would've doubled my money ... last week!!
BUT ... I can't double my money now at today's closing price because a week has elapsed.
So, all I can do is hope we have a SEVERE meltdown this week.
The closer you get to expiration, the more time moves AGAINST you.
The value of the option will DECLINE, regardless of whether the price moves in your favor.


Eman93
4,659 posts
msg #80690
Ignore Eman93
10/5/2009 10:53:25 PM

K,
Only 144 TIJ-JK contracts have traded today, and no one if offering more than $2.30 for the option.
So, the holder of this option has two obstacles:
lack of volatility and lack of volume in buyers and sellers.
==================================================

Doesnt the Market Maker have to buy all the options at the ask price...no matter how many you want to sell? so the market is always liquid to a point the spreads get large though...

Kevin you should be able to plot the puts and calls then overlay the stock... you can get an idea of whats going on.

StockFetcher Forums · General Discussion · The Canaries have DIED<< 1 2 3 >>Post Follow-up

*** Disclaimer *** StockFetcher.com does not endorse or suggest any of the securities which are returned in any of the searches or filters. They are provided purely for informational and research purposes. StockFetcher.com does not recommend particular securities. StockFetcher.com, Vestyl Software, L.L.C. and involved content providers shall not be liable for any errors or delays in the content, or for any actions taken based on the content.


Copyright 2016 - Vestyl Software L.L.C.Terms of Service | License | Questions or comments? Contact Us
EOD Data sources: DDFPlus & CSI Data Quotes delayed during active market hours. Delay times are at least 15 mins for NASDAQ, 20 mins for NYSE and Amex. Delayed intraday data provided by DDFPlus