StockFetcher Forums · General Discussion · Volatility Indexes<< 1 ... 2 3 4 5 6 ... 7 >>Post Follow-up
Kevin_in_GA
4,553 posts
msg #82183
Ignore Kevin_in_GA
modified
10/31/2009 1:16:56 PM

Options are still a largely uncharted ocean for me - I'm just starting to see if this style is for me.

The option delta (the amount the option will increase for a $1 increase in the underlying stock) also should be considered, if you have not looked at this already. The Nov 38 call for TNA has a delta of 0.5 (50 cent rise in the option for a 1 dollar rise in the stock). At $2.55 per contract and the stock at 36, it only needs to move up about $2 to $38 (about 5%) to make a 40%profit. Given this is a 3x, all the ^SML needs to add is about 4 points (and it gave up 9 on Friday).

Have not looked into vertical spreads - lots to learn still.

tmanbone
124 posts
msg #82186
Ignore tmanbone
10/31/2009 1:56:22 PM

This is a long biased opinion. All you are doing on a vertical call is buying the lower strike and selling the higher strike for a reduced cost per trade, the buy being a debit and the sell being a credit to offset some cost, the drawback being your profit is set and not infinite, but keeping in mind the market is in whipsaw mode, imho it is cost effective, especially for close to expiration options. You are looking to predefine the expected move in your time frame and not pay for any move extra that the option is not likely to do anyway. Hope this helps.

BarTune1
406 posts
msg #82243
Ignore BarTune1
11/1/2009 5:56:07 PM

Well boys,

I was headed home Friday, hoping for some follow through from Thursday's gains ..... I put in some orders to sell at the 5 dma or slightly higher .... obviously they did not fill Friday during the day .... and I was pretty unimpressed with the results once I learned Friday night how much the market had dropped ....

That being said, I am not down too much because I bought in Wednesday at 3:50 or so. And, had I had access to my account Friday, I would have been buying more.

So here is hoping for an upwards move this week .... and .... if the market drops ..... I will add to my positions.

Kevin_in_GA
4,553 posts
msg #82678
Ignore Kevin_in_GA
11/9/2009 10:23:17 AM

Well, VIX continues to drop as the markets go higher - based on the current position for the lower BB(10,2) at 22.04 any close near this gives an alert (not a SELL signal until it closes below this value). VIX is currently at 23.64 at the time of this posting.

I now check the VIX value at 3:45 PM or so, to see if I should buy SPXU or UPRO before the close. For this short term trade, I now look to the 3x ETFs for maximum gain.


kevin


tmanbone
124 posts
msg #83390
Ignore tmanbone
modified
11/23/2009 11:50:29 PM

I'm curious about stats for VIX closing on BB. SPY puts could make money tomorrow. ACH

Kevin_in_GA
4,553 posts
msg #83564
Ignore Kevin_in_GA
11/28/2009 12:38:37 PM

Everyone should look at these charts - every volatility index has closed above its UBB yesterday. A VERY good signal for a short term rebound, especially for the SPX and Russell 2000.

Kevin

marine2
829 posts
msg #83579
Ignore marine2
11/29/2009 2:49:14 AM

In Big Charts if you chart .DJIA (Dow Jones Industrial Average) and the .VIX you will see that when .DJIA Slow Stochastic %D goes above 80 Dow Jones Industrial Index begins to move up. And when Slow Stochastic %D goes below 25 the .VIX is about ready to get excited again and forces Dow Jones Industrial Index downward. Call it the teter totter effect or whatever but when the stochastic %D goes to its extreme either way it means something is going to happen in the stock market areana. Note, this is only my interpretation. You can believe it or not but run the charts and see what you come up with.

BarTune1
406 posts
msg #84670
Ignore BarTune1
12/18/2009 6:57:42 PM

Hey Kevin,

Just glanced at these charts, we had what appears to have been a good intra-day sell signal on oil.

Also, we seem to be getting close to a near term sell signal on the QQQQ.

Maybe something to keep an eye on.

Might also be tough shorting immediately given the upside seasonal and month end bias in the next week or so. However, it might be good opportunity to short if we get a rally.



Kevin_in_GA
4,553 posts
msg #84674
Ignore Kevin_in_GA
modified
12/18/2009 7:45:56 PM

I'm assuming you believe that the whole "Iran takes over Iraqi oil well" thing will be over by Monday?

All kidding aside, are you thinking about shorting OIL or going long SCO?

EDIT: Het, I just looked at the Oil Vol index - the close is back near the 9 day MA. Not a signal for me - what's your thinking on this one?

TraderZap
3 posts
msg #85211
Ignore TraderZap
12/30/2009 9:22:14 AM

Kevin,
You may have figured this out already but options At The Money will always have a delta of .5. The deeper in the money you go the higher the delta to a maximum of 1.0. Traders also look at delta as the probablity of an option expiring in the money. So an option at the money has a probibility of 50% of expiring in the money.

Calls always have a positive delta and puts have a negative delta. That is if you are buying them. Some traders use options to balance out delta to become more neutral. When you go long a stock you are also long delta. To help bering you back to a neutral delta you would buy puts. So, if I bought 100 shares of a stock I would be long 100 deltas. This puts me in the position of having unlimited upside potential but also ulimited downside risk (unlimited meaning if the stock went to 0). If I wanted to cap my downside risk I would buy a put. The put would give me -100 deltas giving my entire position a delta of 0. This means that I stand to profit if the stock goes up or down but I lose if it satys where it is. Obviously, as prices move up and down I have to adjust my positions to stay delta neutral. This move is not free though. I have to buy the put and it caps my upside potential. But some are willing to cap the upside to not have an umlimited down side. As the stock decreases the put increases in value.

You can also use deltas to skew your positions one way or the other. So if I think the market is going down but I still want the protection I could, using the above example, buy 2 puts gving me -100 deltas for the total position. When this is charted I have a down side bias but I stand to gain if the market rises. If it rises I would reduce my downside bias but if it started down as i had predicted I would reduce my upside.

This is but 1 method to use options to reduce downside risk.

StockFetcher Forums · General Discussion · Volatility Indexes<< 1 ... 2 3 4 5 6 ... 7 >>Post Follow-up

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