Stock Options

[gojo]

SLB, one of my favorite stocks, figure I would share. It traded at support line yesterday. It had a 75% plus change of opening up. About 5 mins. before yesterdays close, its' 90.00 June 12 CALLS went for $0.55...

This morning about 5 mins after opening sold it for $0.91...

Bot. @ $55.00 X 10 = 550 + 19.50 commission = 569.00

Sold @ $91.00 X 10 = 910 - 19.50 commission = 890.00

Profit of $321.00

56%

I trade on the average of 10, that way you can cover if you have any losses. You can have more losses and still come ahead on average.

Chart  below shows the support line....

 

[HarmonicaBruce]

Bot. @ $55.00 X 10 = 550 + 19.50 commission = 569.00

Sold @ $91.00 X 10 = 910 - 19.50 commission = 890.00

Profit of $321.00

56%

I trade on the average of 10, that way you can cover if you have any losses. You can have more losses and still come ahead on average.

Chart  below shows the support line....

Yes, but if you were trading 100 contracts, you'd be making enough so you could live on an ocean liner instead of a van!

 

[gojo]

Yes, but if you were trading 100 contracts, you'd be making enough so you could live on an ocean liner instead of a van!

LOL,,,, Then that would be gambling. Or maybe greedy, remember hogs get slaughtered sooner or later.

There is so many strategies to use as an technical trader. That's why I showed this one.

You'll be surprise to see how many side moving stocks abide by this rule. All you have to do is find the lowest point it traded and draw a horizontal line and see if any other trading days connect with it. Same goes for resistance, which means a line above. Also the Bollinger Band indicator has similarities.

Your doctor's charts show what happened in the past and what will possibly happen in the future , same here.

Remember nothing is 100% save, even living in an RV.

 

[gojo]

My trades for the week. On contracts with June 12, means expiration date. All were 10 contracts.

Ticker          Entry Date                   Contract                 Entry Price      Exit Date       Exit Price     Profit or loss

SLB              6/8/15                 90Call,June12                   .55               6/9/15             .91             $321.00
SPY              6/9/15                 208.50 CALL, June 12      1.20               6/10/15          2.14            $901.00
CREE            6/9/15                 29.50 CALL, June 12          .44              6/10/15            .74             $261.00
YHOO           6/10/15               42.00 CALL,June 12           .35               Expired          0.00            ($369.50)

                                                                                                                           Total Profit   $1113.50

 

[HarmonicaBruce]

My trades for the week. On contracts with June 12, means expiration date. All were 10 contracts.

Ticker          Entry Date                   Contract                 Entry Price      Exit Date       Exit Price     Profit or loss

SLB              6/8/15                 90Call,June12                   .55               6/9/15             .91             $321.00
SPY              6/9/15                 208.50 CALL, June 12      1.20               6/10/15          2.14            $901.00
CREE            6/9/15                 29.50 CALL, June 12          .44              6/10/15            .74             $261.00
YHOO           6/10/15               42.00 CALL,June 12           .35               Expired          0.00            ($369.50)

                                                                                                                           Total Profit   $1113.50

I really need to study your system, it looks like you're doing great!

Ok, I had some calls expire on 6/12, easy money since I bought them just 2 weeks earlier.  They were about .83, so I made $83 / contract.  That meant I had some stock that wasn't committed, so today I sold some more calls.

UCO did a 5 to 1 reverse split, so instead of trading at $9, it now trades at $45.  Anyway, I sold some $50 calls, expire 10/16, for $5.10.  On Oct 16, I'll have made 12%, in 4 months.  If UCO is over $50, I'll have made another 6%.

I don't understand why I can do this.  If anyone can tell me why is should be possible to make 12% in 4 months by betting that oil doesn't drop another 12%, I'd like to hear it.  I honestly believe I'm not particularly intelligent, there are many, many traders who are smarter than me.  So why is it so easy to make such big returns?  I know if oil were to become worthless, I'll lose my money.  I consider that to be far less likely than nuclear war, the dollar becoming worthless, or an invasion of aliens.  I don't get it, but I'll still take it.

 

[gojo]

Bruce, If you write covered call, you don't want to see USO go up, am I right? If it goes sideways or up, the buyer isn't making any money. Most likely it will expire worthless. If you look at UCO's charts you will see it's been going side ways for the past 2 months.

 

[gojo]

Bruce, If you write covered call, you don't want to see USO go up, am I right? If it goes sideways or up, the buyer isn't making any money. Most likely it will expire worthless. If you look at UCO's charts you will see it's been going side ways for the past 2 months.

I didn't mean to say up or sideways, I meant to say down or sideways. sorry... You the seller wants it to go down or sideways. The buyer wants it to go up. And it's been going sideways by looking at the chart.

 

[ccbreder]

reminds me of the casinos. Every one has a story of winning. every one can predict the stock market yesterday. and every day trader is getting rich.

 

[HarmonicaBruce]

Bruce, If you write covered call, you don't want to see USO go up, am I right?

I don't trade USO (United States Oil, an eft), I trade UCO (another oil etf).

That's the great thing about covered calls.  

My cost for UCO is about $45.  It's trading today at $48.  My calls have a strike of $50, so if UCO is over $50, I'll lose my stock but I'll get $50, so I'm happy, plus I already got the premium for the calls.  If it stays at $48, my calls expire and I can do it all over again, so I'm happy.  If it goes down, I don't mind too much because my calls will become very cheap before the expiration date, so I can buy them back for .05, and sell more calls.

The one thing I don't understand is why any of this is possible.  I'm just a dumb hillbilly, it shouldn't be this easy.

 

[offroad]

Bruce --- lol. You are far from dumb. So very far.

 

[gojo]

reminds me of the casinos. Every one has a story of winning. every one can predict the stock market yesterday. and every day trader is getting rich.

Your right bud, here's my yesterdays prediction. Yesterday bot. FB June 19, 81.50 call @ .51 and sold at todays opening for .75  AND also bot. HAL June 19, 45.50 call @.42 and sold at opening for .81....... I love this casino.

A man with little learning is the frog who thinks its pond is a ocean.
                                          
                                                                                          Japanese proverb

 

[gojo]

I don't trade USO (United States Oil, an eft), I trade UCO (another oil etf).

That's the great thing about covered calls.  

My cost for UCO is about $45.  It's trading today at $48.  My calls have a strike of $50, so if UCO is over $50, I'll lose my stock but I'll get $50, so I'm happy, plus I already got the premium for the calls.  If it stays at $48, my calls expire and I can do it all over again, so I'm happy.  If it goes down, I don't mind too much because my calls will become very cheap before the expiration date, so I can buy them back for .05, and sell more calls.

The one thing I don't understand is why any of this is possible.  I'm just a dumb hillbilly, it shouldn't be this easy.

I'm guessing if it weren't for all the buyer out there, it wouldn't be all that way for the sellers or writers. As for me the buyer, I'll try to make a quick profit and then sell to another buyer. If I'd stayed in for the long run, then I'd be the 80% losers, probably.

BTW the way, I'm a country boy from Texas, some may call me a hillbilly. When I was 12-14, I'd pull cotton to make money. I have no city in me and I'm proud of it.

 

[HarmonicaBruce]

Bruce ---  You are far from dumb.

Thanks for the compliment, but I think one of the easiest ways to lose money is to think you're smart.  It's so easy, so why aren't all the smart guys on wall street doing it in a much bigger way, such that it stops being so easy?  This really bothers me.  

I've kept detailed spreadsheets.  I bought my first UCO Dec 15, 2014.  I didn't buy all my UCO then, it kept going down and I kept buying until it started back up.  So far the premiums I've collected are 17% of my total cost for all the UCO I own.  It would be misleading to claim I made 17% in 6 months, as the options first need to expire.  Most of mine will expire in a month, some won't expire until october.

So I'm feeling pretty good about it... so far.  But why are the premiums for calls selling so high?  One of the explanations I've offered myself is that the buyers of these calls believe oil is going to rise sharply, therefore they bid up the price of the calls.  These are smart guys, who have cash, to it probably will happen.  Eventually all my calls will get exercised, and I'll lose all my stock, but have more cash.  But of course I don't really know.

 

[gojo]

Thanks for the compliment, but I think one of the easiest ways to lose money is to think you're smart.  It's so easy, so why aren't all the smart guys on wall street doing it in a much bigger way, such that it stops being so easy?  This really bothers me.  

I've kept detailed spreadsheets.  I bought my first UCO Dec 15, 2014.  I didn't buy all my UCO then, it kept going down and I kept buying until it started back up.  So far the premiums I've collected are 17% of my total cost for all the UCO I own.  It would be misleading to claim I made 17% in 6 months, as the options first need to expire.  Most of mine will expire in a month, some won't expire until october.

So I'm feeling pretty good about it... so far.  But why are the premiums for calls selling so high?  One of the explanations I've offered myself is that the buyers of these calls believe oil is going to rise sharply, therefore they bid up the price of the calls.  These are smart guys, who have cash, to it probably will happen.  Eventually all my calls will get exercised, and I'll lose all my stock, but have more cash.  But of course I don't really know.

Bruce, you're using two strategies on you're investment. You're averaging down on share price and selling covered call.

Averaging down can be go and bad.

I remembered back when I started trading stocks. I averaged down on a penny stock. I'll demonstrate it, minus commission.

   Invested                                             Share Price                                      # shares

 $2500.                                                     $2.50                                             1000
 $1200.                                                     $1.25                                             1000
 $1000.                                                     $1.00                                             1000
 $1500.                                                     $1.50                                             1000
 $1000.                                                     $0.40                                             2500
 $1000.                                                     $0.25                                             4000
 $1000.                                                     $1.00                                             1000  sold all shares

 $9200.  Total invested                                                                                 11,500 total shares

Sold @ $1.00 a share  X  11,500 = $11,500

11,500 - 9200 = $2300. profit.

25% profit, minus commision

 

[HarmonicaBruce]

Averaging down can be go and bad.

Indeed you are correct.  People who averaged down on stocks like Radio Shack and Kodak lost all their money.  How could Kodak, who invented digital photography, ever go broke?  Well, they did.  How about a great bank like Washington Mutual, who raised their dividend every quarter?  They went broke.  The problem with companies is most of them go broke.  You don't know how true their financials are, or what the market will be in the future.  That's why I invest in things that are real, like oil and silver.  If one averages down on oil, how can it fail?

I talked to one of the brokers at Fidelity last friday.  I asked him to please explain the falacy of my system.  He couldn't, he said I'm doing real well.  So I asked him, why don't the guys on wall street, the smart guys with money and computers, why don't they do what I'm doing?  All he could say was he doesn't know.

So I'll keep posting my trades (assuming I don't get kicked off because of my sexual orientation), and see what happens.  This little bit of money I have has to last the rest of my life, and unfortunately that will be a long time.

 

[offroad]

Bruce. - am sure the Wall Street types are sometimes doing what you do. Or they will be. It's just that they make more profit in real estate buying and selling for now.

 

[HarmonicaBruce]

Bruce. - am sure the Wall Street types are sometimes doing what you do. Or they will be.   It's just that they make more profit in real estate buying and selling for now.

Could be.  I'm opening a new account, a non-ira account so I can sell covered puts as well as covered calls.  Fidelity is putting me through hell to do it.  First I opened the account.  Then I applied to trade on margin, even though I have no intention of ever trading on margin, but Fidelity told me I had to get margin approval before I could ask for options approval.  That took a day.  Today I applied to trade options.  When that gets approved, I'll fund the account.  

The stupid fidelity page asks me if I'm a conservative, or an aggressive trader.  I said conservative, which I am.  Then I couldn't click the "radio button" for trading options.  I was about to phone them, when I decided to change "conservative" to "aggressive", then the radio buttons worked.  Yes, Fidelity won't let you trade options unless you claim to be an "aggressive" trader.  Furthermore, they don't tell you, they just let you figure it out on your own.  

Every computer programmer should be required to read the original IBM CICS manual.  It explains how to write a screen for a user.  It explains how you have to make it clear to the user what he should do.  Today's programmers don't have a clue.

Anyway, hopefully I'll be selling puts in a few days.

 

[gojo]

Could be.  I'm opening a new account, a non-ira account so I can sell covered puts as well as covered calls.  Fidelity is putting me through hell to do it.  First I opened the account.  Then I applied to trade on margin, even though I have no intention of ever trading on margin, but Fidelity told me I had to get margin approval before I could ask for options approval.  That took a day.  Today I applied to trade options.  When that gets approved, I'll fund the account.  

The stupid fidelity page asks me if I'm a conservative, or an aggressive trader.  I said conservative, which I am.  Then I couldn't click the "radio button" for trading options.  I was about to phone them, when I decided to change "conservative" to "aggressive", then the radio buttons worked.  Yes, Fidelity won't let you trade options unless you claim to be an "aggressive" trader.  Furthermore, they don't tell you, they just let you figure it out on your own.  

Every computer programmer should be required to read the original IBM CICS manual.  It explains how to write a screen for a user.  It explains how you have to make it clear to the user what he should do.  Today's programmers don't have a clue.

Anyway, hopefully I'll be selling puts in a few days.

With Scottrade, you have to open a margin account if you trade options period. I never used it. I thought about going with Merrill Edge.

I didn't do any trades this week because it's a four day work week for my wife.

 

[IGBT]

I am able to trade covered puts as well as covered calls in my IRA account.   I assume you mean a put spread, which can be a bear play.
Like I can buy puts on Netflix at $700 and sell puts on Netflix at $670 in the same transaction, maybe paying $15 for the spread with a  profit potential of $15 if the $30 spread is realized.

 

[IGBT]

I have been playing around a bit at the end of last week shorting Amazon and Netflix when they hit a peak.

Amazon shot up to $566 and I bought 3 Sept $560 puts.  I sold them toward the end of the day Friday for a $4,500 profit (one day!)

I bought some puts on Netflix when it split and went up to $117.   The first set I sold way too early for about $300 profit but the stock was bouncy and I rebought when it was around $113.   I sold 4 on Friday when it was under $110 (these are Sept $115 puts) but kept 4 for is coming week.   I really think it is headed to $105 short term.

I don't usually short the market, and I like both Amazon and Netflix, but these are 1999 crazy prices.

I also bought 8 Sept $110 calls on Gilead.   They report earnings Tuesday but I might sell half on Monday if the biotech sector recovers from the BIIB rout.   Even though Gilead has a PE of 12, it is probably risky at earnings (people don't like that they are making billions of profit curing Hep C)