Stock Options

[offroad]

Am looking at ETF type trading. Does any know of a self directed IRA where you can buy- trade ETF?

 

[gojo]

So let me see if I'm following.  You'll be in the money if CRM goes below 57.50 by Friday, am I right?  

Good luck!

CRM had a break out today through the resistance. Broke out sooner than I expected. Earnings report will be 02/25/2015, figured I had more time to play with it. Which means I expected break out on that date. There is a 57% chance of a pullback. I'll probably lose on this one. Why, because a symmetrical triangle has a 2% failure rate. The rule is don't buy any sooner than break out, which I didn't abide by.. I'm still hoping for a rebound in my PUT OPTION, lol. Win some lose some, that's part of the game, win a lot, lose a few, don't put all your eggs in one basket.

Here is the break out I'm describing.

 

[HarmonicaBruce]

Am looking at ETF type trading. Does any know of a self directed IRA where you can buy- trade ETF?

I think any self directed IRA will allow you to trade ETFs, they're traded just like stocks.  My IRA is with Fidelity.  They made me go through some gyrations before they'd let me sell covered calls, and they still won't let me sell covered puts.  

I think most of the money to be made in an ETF is from selling the covered calls.  They don't pay dividends, so how else can you generate income form it?

Good luck!    

 

[HarmonicaBruce]

I got it @ .21.

If I'm reading this right, your call is now $3.75, a 1500% increase!  Am I right?  I'm looking at Feb 13 $57.50 call.

 

[gojo]

If I'm reading this right, your call is now $3.75, a 1500% increase!  Am I right?  I'm looking at Feb 13 $57.50 call.

If I would have bot a call, that would be correct. But I bot a put. I didn't expect a breakout till earnings report, in about two weeks. If I would have bot a strangle or a straddle, which would be buying a call and a put. Then I would have a profit on one and a loss on one. Then I would subtract my loss on my profit. Then I would have a smaller profit, but still a profit.

 The best time to buy strangles or straddles is on earnings report dates because of breakouts.  If you go to the earnings calendar dates, it will state the time of report (before open or after market close). You want to put a limit orders in day before earnings. I try to get in at the lowest by watching the intraday live charts. On surprise earnings you can make good money.
You can experiment by looking at this mornings earnings reports.
Go to:  http://www.morningstar.com/earnings/earnings-calendar.aspx

 

[HarmonicaBruce]

If I would have bot a call, that would be correct. But I bot a put. 

Ouch!  Bummer.  When I was studying options, I read about people buying a call and a put when you expect a big movement but you're not sure which direction, such as some event going to be announced (a court decision, earnings report, yada yada).  
I was about to hire you as my options tutor!

 

[HarmonicaBruce]

UCO is $8.75 now...  Right now I can sell a $9 april 17 call for $1.20, which means I'm making 15% in just over 2 months.  But, UCO is down 7% today.  The time to sell covered calls is when the stock is up.  I'll bet it's back up over $9 this week, so I'll wait to sell the calls.

Well, UCO is up big, $9.57.  So I sold some $10 March 17 calls for .90.  Crazy thing, the bid was .75, ask 1.10, so I put in I'd sell at .90, and it executed in about a minute.  My average cost for UCO is $9.44, so I'm looking good.  If it stays where it's at, in a month I'll have made over 10%.  If it tumbles to $8.70, I'll still be ahead.  

I'm trying to figure out why it's even possible to do what I'm doing.  Where is the money coming from?  The best I can come up with is I'm taking it from gamblers.  Why would anyone buy an option to pay $10 for my UCO, and pay .90 for it?  The only way to make money doing that is if UCO is over $10.90 in a month.  UCO is up today because of what's going on with Greece (I think), but I believe it will stay down for at least a year.  That's what the articles are saying.

My general rule:
1) buy UCO when it's down
2) Sell covered calls when it's up
3) Buy back the covered calls when they're down to .10
4) Never sell the underlying stock, let it get assigned.

Good luck to all!

 

[gojo]

Well, UCO is up big, $9.57.  So I sold some $10 March 17 calls for .90.  Crazy thing, the bid was .75, ask 1.10, so I put in I'd sell at .90, and it executed in about a minute.  My average cost for UCO is $9.44, so I'm looking good.  If it stays where it's at, in a month I'll have made over 10%.  If it tumbles to $8.70, I'll still be ahead.  

I'm trying to figure out why it's even possible to do what I'm doing.  Where is the money coming from?  The best I can come up with is I'm taking it from gamblers.  Why would anyone buy an option to pay $10 for my UCO, and pay .90 for it?  The only way to make money doing that is if UCO is over $10.90 in a month.  UCO is up today because of what's going on with Greece (I think), but I believe it will stay down for at least a year.  That's what the articles are saying.

My general rule:
1) buy UCO when it's down
2) Sell covered calls when it's up
3) Buy back the covered calls when they're down to .10
4) Never sell the underlying stock, let it get assigned.

Good luck to all!

You got me confused now? Where do you get March 17 Calls? I see UCO does trade weekly Options.
March 6
March 13
March 20
March 27

 

[HarmonicaBruce]

You got me confused now? Where do you get March 17 Calls?

My bad, I was thinking of St. Patrick's Day.  They are March 27 calls.

 

[offroad]

This discussion is interesting and scary at the same time. Am not even close to doing what you are pulling, but do think about it. Not sure I could do this with a self directed IRA as am unsure of the rules for buy-sell-hold-cash with IRA money. But might find out soon when I move some of my IRA funds to an AMERITRADE account.

Have any of you tried ETF instead of the raw trading? Am subscribing to a signal tool that gets anywhere from 25% to 35% yearly. Am thinking of using that to make my IRA money increase much faster than the traditional ridiculous low 5% I see for the buy-hold investors.

 

[offroad]

Am re reading the beginning of the thread about put-call and did see a mention of doing this with IRA money. So that can happen.

But as was mentioned don't understand how people loose money unless that are aggressively gambling with their day trading actions. So that must be what is happening. But I question why they would gamble??only reason I can think is because it's not their money, maybe? They are trading with some other accounts funds, which they really don't care about much. Continually speculating for where they can find that next stupidly large gain of 30% in a few days. If they loose big they do not care, as they speculate they will make it up soon enough. That's wrong thinking bad gambler thinking.

Personally I don't ever want to loose. So am much more conservative by considering ETF funds. These typically do not move as fast. So you have time to react to general market conditions And move out weekly when the market does its general glacial directions.

All speculation of course. Still shocked that people make 30% with self directed IRA money, while buy-hold IRA folks only get 5% per year maybe. It's really weird.

 

[HarmonicaBruce]

Not sure I could do this with a self directed IRA as am unsure of the rules for buy-sell-hold-cash with IRA money.   But might find out soon when I move some of my IRA funds to an AMERITRADE account.  

I know Fidelity allows selling covered calls, that's where I have my IRA.  But, they make you "apply" for permission to do so.  You answer questions, like how much experience do you have with options, etc.  You might call Ameritrade and ask them about it.  I wish Fidelity would let me sell covered puts, but they won't.

Have any of you tried ETF instead of the raw trading?

Not sure what you mean by "raw trading".  I trade ETF's, GLD, SLV, and UCO.

Am subscribing to a signal tool that gets anywhere from 25% to 35% yearly.  Am thinking of using that to make my IRA money increase much faster than the traditional ridiculous low  5% I see for the buy-hold investors.

Short term buying and selling works great, for hedge funds that have the world's fastest computers and a small army of programmers and analysts.  Sometimes these computers will buy and sell the same security within a second.  I don't see how you're going to beat them. 

That being said, buy and hold doesn't work.  I realized this when I had AMZN, and watched it climb from 180 to 240, then back to 180, all in the same calendar year.  

Selling covered calls is more conservative than not trading options.  Let me explain.  Suppose you buy UCO at $9, where it's currently trading.  In theory, you could lose the whole $9.  Now, suppose you sell a covered call, lets say a $12 strike, and you get $1 for the premium.  If UCO were to go to zero, you'll only lose $8, not the whole $9.  What you're giving up is the potential to possibly sell UCO for more than $12.  If UCO were to go to $15, you'll only get $12 for your shares, because you sold someone the option to buy your UCO for $12, which he'll do with UCO trading at $15.

I started by opening a "virtual" account at optionshouse.com.  It's free.  

I said earlier that I think I'll make 20% this year.  Since I started trading UCO Dec 15, 65 days ago, I'm up 13%.  Anything can happen, but I actually think I'll make 40% this year.  

Let me show how easy it is to do.
A) Buy UCO for $9.34 (the current price).
B) Sell a $10 call that expires Jan 15, 2016 for $2.50.  That's the current "bid" price.
You spent $9.34 per share, got back $2.50, so your net cost per share is $6.84.  
C) If on Jan 15, 2016, UCO is trading at $10 or more, you'll get your shares assigned, and you'll get $10.  Your $6.84 gets you $10, a 46% increase.  If on Jan 15, 2016 UCO is still trading at $9.34, you'll keep your shares, a 36% increase in 331 days, for an annual rate of 40.3%.  If the worse happens, and UCO tumbles to $6.84, you'll break even.  But so what?  You'll just sell more covered calls.  
 
Now, I don't sell calls out that far, for several reasons.  I just used this example because it's easy to explain.  If you trade a shorter time-frame, like a month or 2 or 3, more money can be made.

There's more to it than this, but that's it in a nutshell.

 

[gojo]

You only gambling when you don't understand the fundamentals. I wouldn't use stock options in an IRA , till I would understand a 100%  of it. There is a lot of books on this subject, because there's many ways to trade options. The volatility you see in in the market today are day traders and market makers. A day trader will buy in the morning and sell at the close, win or lose. You can tell when the market makers are trying to bluff you. They will trade among each other just to bluff the market. This happens a lot in small float stocks. You'll see a wide spread between bid and ask, stay away. If you own a 100 shares of stock, then you can use options as an insurance. I'm not going explain to much because, I don't want to confuse you. There is a lot of good books on this. You may learn some from us clowns when we trade while reading books on the subject. Good luck buddy....

 

[HarmonicaBruce]

I said earlier that I think I'll make 20% this year.  Since I started trading UCO Dec 15, 65 days ago, I'm up 13%.  Anything can happen, but I actually think I'll make 40% this year.  

Having thought about what I wrote, it's sort of true, but could be misleading.  Let me explain.
I sold some $10 and $11 calls that expire on 3-27 and 4-17.  When I get on Fidelity and look at my portfolio, it shows those options as negative amounts.  Now, when the options expire, those amounts will go to zero.  So, I was counting that money in the 13% I'm up.  It's misleading because it didn't happen in 65 days, but by 4-17-15 it will have happened.     

 

[HarmonicaBruce]

You only gambling when you don't understand the fundamentals. I wouldn't use stock options in an IRA , till I would understand a 100%  of it. There is a lot of books on this subject, because there's many ways to trade options.

I tried learning about options.  I don't understand much, there are straddles and condors and all kinds of strategies, but I do understand covered calls.  And that's all I trade, covered calls.  Sell the call, get the premium, wait for it to expire.  

You'll see a wide spread between bid and ask, stay away.

I agree, like you may see a bid .50 and an ask $1.20.  If I'm selling a call, I'll try to sell it at .70 or .80.  Lots of times, even though the bid is only .50, an order will execute with the price higher.  But, in general, I like a bid .70 ask .80 a lot better.

 

[gojo]

What will WMT do tomorrow?? Earnings report 7:00 AM ET . 2/19/2015.....
If you never watched earnings reports on Stock Options, this is the one to watch. Go to Yahoo Finance, type YHOO, then click on Options, you'll get the latest expiration date 2/20/2015, print it, then compare it to tomorrows prices. I'm not going to say there will be a big move, but if there is any surprises or disappointment or good news, should be a nice movement. If you see an option that is priced .50 that would cost you $50.00 a contract, 1.25 would be $125.00., that's what you pay for it plus commission.

Not all Stocks trade weekly options. A lot of stock option expire only the 3rd Saturday of the month.

 

[gojo]

What will WMT do tomorrow?? Earnings report 7:00 AM ET . 2/19/2015.....
If you never watched earnings reports on Stock Options, this is the one to watch. Go to Yahoo Finance, type YHOO, then click on Options, you'll get the latest expiration date 2/20/2015, print it, then compare it to tomorrows prices. I'm not going to say there will be a big move, but if there is any surprises or disappointment or good news, should be a nice movement. If you see an option that is priced .50 that would cost you $50.00 a contract, 1.25 would be $125.00., that's what you pay for it plus commission.

Not all Stocks trade weekly options. A lot of stock option expire only the 3rd Saturday of the month.

CORRECTION !! Don't type YHOO, type WMT...

 

[HarmonicaBruce]

What will WMT do tomorrow?? Earnings report 7:00 AM ET . 2/19/2015.....
If you never watched earnings reports on Stock Options, this is the one to watch.

WMT is $86.08 (3:27).  A $86 call is $1.01 - $1.05, and an $86 put is $1.17 - $1.21.  So one could buy a call AND a put, it would be $2.26.  That seems to mean that you'll make money if WMT is either above $88.26, or below $85.74.  The problem with WMT is that it has such a low implied volatility.  It doesn't really do much.  The high for the year is 90.97, the low is 72.61.  My method of options trading, selling covered calls, won't make much using WMT.  For WMT to move much they'd have to increase the dividend a lot or cut it.  I can't see why people worry about the WMT dividend, it's only 2.2%.   

UCO on the other hand has a high for the year of $40.17, low $6.54.  It seems hardly a day goes by when it doesn't move at least 3%.  UCO is oil, black gold, texas T!  

 

[gojo]

WMT is $86.08 (3:27).  A $86 call is $1.01 - $1.05, and an $86 put is $1.17 - $1.21.  So one could buy a call AND a put, it would be $2.26.  That seems to mean that you'll make money if WMT is either above $88.26, or below $85.74.  The problem with WMT is that it has such a low implied volatility.  It doesn't really do much.  The high for the year is 90.97, the low is 72.61.  My method of options trading, selling covered calls, won't make much using WMT.  For WMT to move much they'd have to increase the dividend a lot or cut it.  I can't see why people worry about the WMT dividend, it's only 2.2%.   

UCO on the other hand has a high for the year of $40.17, low $6.54.  It seems hardly a day goes by when it doesn't move at least 3%.  UCO is oil, black gold, texas T!  

I did not buy into WMT. I noticed it's options are to expensive , it's hard to make money in a strangle like this. If I did buy options, they would have been out of the money, more like 87 Call and 85 PUT. Their to expensive being tomorrow is Thursday. I like them more at .25...

Reason I posted this stock option, It's the only one I could find that has earnings report with weekly options tomorrow. Yes it  has low implied volatility. I circled on the chart the last earnings (11/13/2014) so  you can see what happened.

 

[HarmonicaBruce]

I did not buy into WMT. I noticed it's options are to expensive

Go figure.  Walmart has decent earnings, everything is good, but they announce they're going to pay their employees more, so the stock drops.  But, it didn't drop enough to make money on their options, (unless you guessed right and bought puts and didn't buy calls).

Now, what do you bet the federal government will jump in and raised the minimum wage?  The reason is they want the people to give the government credit for their pay raises, not the company that is actually paying the increases.  

Someone once said that when a Walmart opens up in your town, it's like every person in that town got a 10% pay increase.  Now they're giving raises to half a million people.  Want a job that pays more than minimum wage?  Go to work at walmart.  Want a place to camp free, free rest room, cheap prices on anything you need?  Go to walmart.  The people who hate walmart say walmart puts small hardware stores out of business.  I tell those people go ahead, shop at the little hardware store, pay more than walmart, it's your choice.  While you're at it, ask the people at the hardware store if you can camp in their parking lot.  Ask if you can use their restroom 24 hours.  Ask if they have ice, cold beer, anything you need.  They'll look at you funny.  God bless walmart, and god bless America!