  |
|
|
|
InvestmentStock Options
« Previous 6 7 8 9 10 11 12 13 Next » » jamesj24 - The generation of time value I love the concept of earning time value. Even though my investments in DNA have gone south, I rolled the June 80 short puts to July, and they are earning daily time value again. (The time value had become exhausted as the June puts went deeply in the money.) On all my options, I'm now showing that they gain $10.59 per day, which is enough to buy a good lunch or dinner with. If I were simply holding stock, it would actually be consuming capital by the interest foregone on the investment. Of course stocks are expected to appreciate more than the rate of low-risk interest investments, but in periods such as this, it is preferable to have something actually generating value as time passes, while allowing (or in this case, waiting) for some gains in stock prices. In the case of a stock on which I'm very bullish, like CCJ, I prefer, and own the outright stock because the probability of capital appreciation is much clearer to me, and has been consistently proven. -- posted by jamesj24 » jamesj24 - Buying SPY (writing naked puts) using Brinker's buy signal Based upon Bob Brinker's recommendation to buy the SP500 in the mid-1400's, I wrote out of the money puts, AUG 138 for $1 each. It is unlikely that SPY will even get this low, but the out of the money strike provides a good margin of safety. The $100 per contract should be pure gravy. If it ends up in the money, I'm buying the SPY for an effective price of 137, which must be considered a bargain in the eyes of Bob Brinker's followers, fully 80 points below Bob's buy signal point. Similarly, I sold SEP 138 puts for $270 per contract. Either they expire worthless with SPY greater than 138, or I buy SPY for a net price of 135.30. Either way, it looks like a winner if Bob Brinker is correct. I have to say that I have made the most money following Brinker's buy points, although it may take a few months for them to work out. If that happens, I just roll the positions to the next month for a small credit. -- posted by jamesj24 » jamesj24 - Riding the volatility wave on the S&P 500 In response to Buying SPY (writing naked puts) using Brinker's buy signal posted by jamesj24:In volatile markets like this one, it is possible to make quick money. The two puts I wrote on Aug. 1 had a gain of $170 after just one day. I was tempted to buy them back and lock in the quick short term gain. On Friday, near the close, the market fell and the positions were back to break even. In year 2000, I made a huge amount of money riding the volatility of the market. Because I had a lot of long S&P 500 positions, I wrote calls on the SPX each time the market rallied, and it did often as a reflex to a sell off. When it corrected again, which it did often, I would buy back the calls. My gains on these trades were over $60,000 for the year, helping to offset other losses on stock trades that occurred towards the end of 2000. I ended up with a total gain os $45,000 for the year, all attributable to riding the volatility wave on the S&P 500. -- posted by jamesj24 » jamesj24 - Buying SPY (writing naked puts) using Brinker's buy signal In response to Buying SPY (writing naked puts) using Brinker's buy signal posted by jamesj24:I wrote more AUG 138 SPY puts for $1, even though it is now 9 days later from when I got the same price from the same option. There are only 7 days left on these options. As long as SPX stays above 1380 by expiration, they will expire worthless and I'll make a quick $100. I also wrote more SEP 138 SPY puts, this time for $3.30, compared with $2.70 last time. Even though there are 9 fewer days on the option, they have appreciated $0.60 due to SPY's having fallen another point (10 points on the SPX), and the VIX's being extremely elevated at over 29. It was previously high enough in the mid-20s when I wrote the first set. 138 is Brinker's earlier buy signal price, resulting from the correction that began at the end of February with the fear of a crisis in the Chinese stock market, so I feel fairly safe writing these options. These 4 SPY options are now generating $35 per day due to decaying time value (this is called positive theta), mostly from the AUG options, which expire in a week, and whose time value is decaying quickly. $35/day will buy a few lunches or even dinners! I try to have most of my long positions generating time value; that way, they pay me, through either short puts or covered calls, rather than costing me lost interest opportunities, although that still happens at times. -- posted by jamesj24 » jamesj24 - wrote puts on UNH United Health is a stock I've wanted to own for years as a fantastic performer. With its drop into the 47 area, I wrote 2 SEP 45 puts for $.70 each 2 days ago, when UNH's price was at about 47.50. This morning, the put was priced at 1.35. Later in the morning, I intended to write another one at 1.15. Instead, I accidentally entered it as a buy and it executed immediately. The result is that I realized a loss of $45 on one contract. Now, the most I can net on both contracts is a mere $25 if UNH closes above 45 at expiration in 41 days, instead of a potential $140. I put an order to resell the same put at $130 but I'll modify change th price to sell it for anything higher than 115. UNH rallied today and the put's only worth .95, but this correction is not over yet.-- posted by jamesj24 » jamesj24 - Some Quick Money I wrote an SPX AUG 1400 put for $2.70. This option has only two days remaining on it, expiring Thursday evening, and settling on Friday at the value of at the opening price of the S&P 500. Thursday is the last day to trade it. If the S&P 500 stays above 1400, it will be a quick $270 of profit. The delta of an option is said to be a measure of the probability of an option's expiring in the money. This option only has a delta of 15%. I consider that to be excellent odds. It consumes $25,040 of buying power, but because it is only for 3 days, it is well worth tying up this amount for some quick profits. I have consistently made the most money trading options on the SPX. -- posted by jamesj24 » jamesj24 - Using SPY to average down The support in the S&P 500 continues to be tested. I averaged down, writing five AUG SPY 140 puts at $.50 each. Since SPY is 1/10th of the SPX, this is equivalent to writing one half of an AUG SPX 1400 put for $5, a very good price! Even if these go in the money, I'm buying the S&P 500 significantly below Bob Brinker's recommended buy signal in the "mid-1400s" price area. I realize this is risky, considering the turbulence and fear in the market right now. However, I've realized that the way to make money is to be greedy (i.e., to buy) when prices drop, and to be fearful (i.e., don't buy, but if anything, sell) when prices get overextended, contrary to the mass psychology. James Dines aptly describes this phenomenon.I just realized that the SPY options have another day's life (technically, two days, counting Saturday), which would account for a higher premium. Dumb me. Still a pretty sweet deal, though. If the SPX and SPY trades go as planned, it will bring in over $500 by Saturday, with the margin freed up at that time as well. -- posted by jamesj24 » jamesj24 - Using SPY to average down In response to Using SPY to average down posted by jamesj24:
-- posted by jamesj24 » jamesj24 - Some Quick Losses - Repair Strategy My bet that the 1400 level would hold for the SPX at this expiration remains to be seen. Although the SPX reached a low 1370.60, it has now climbed back to hover around the 1400 level, now at 1396.13. There is a huge open put position at this strike, which helps to support the price, and that is what I was counting on. The options expire at the end of trading today, but the settlement, which is in cash, is based upon the opening prices tomorrow morning. Given the radical drops in the market that have occurred in the futures market overnight lately, I don't dare allow this option to settle at tomorrow's opening prices.My analysis of the SPX indicates that 1350 should be the absolute bottom of the trading range, barring any extraordinary event that would change past trends. The market is still bullish, and the floor is also rising over time. Therefore, I rolled the AUG 1400 put down and out to the SEP 1350, and received a credit of $20.50 ($2,050 for the contract.) Being able to roll for such a generous credit and to improve my strike by a full 50 points of safety is very gratifying. It reminds me why I used to trade the SPX so religiously. It has made me great money in the past. I had stopped trading largely due to time constraints. As for the 10 AUG 140 options on the SPY, which are equivalent to one option on the SPX, since SPY is based upon 1/10th of the SPX, they have another full day of trading before expiration at tomorrow's closing bell. I've noticed that often the market settles down on Friday, after the expiration of the cash settled options in the morning. So, I'll see how the prices are tomorrow for SPY before deciding what to do with them. If the price rises much above 140, I'll let them expire, and either be assigned stock at 140, or the options will expire worthless. The only concern with being assigned stock is that it will require a large amount of cash: about $140,000, which is far too much for me to have to come up with. Having been assigned the stock, I risk its price dropping before I can sell it, incurring a potentially large loss. I would never take that kind of risk. Therefore, unless SPY has a dramatic rally tomorrow morning, I am planning to roll the SPY options down and out as I did the SPX option. -- posted by jamesj24 » jamesj24 - Favorable Results The strategy worked beautifully. The SPY 140 options expired worthless with a gain of $500; the SEP 1350 SPX put option, to which I rolled from AUG 1400 now has a gain of $970 (2,100 gain, net of the $1,130 loss I realized on buying back the AUG 1400 for the roll.)I will note the unpleasantness that I had with the difficulty rolling the option on last Thursday during the sell off. It took a very long while and my having to try multiple price adjustments before it would execute. The market makers take a big cut when the market is volatile as it was then. The bid ask spreads on the SPX often jump to 4 points (from the usual 2) and will only execute at the most unfavorable price (bid for sell, ask for buy.) This implies that the market maker profits by $400 for each contract traded. At such times, one is pretty much at the mercy of the market makers. I have heard that most of the market action for most of this year has been due to institutional activity, hence the wide swings when the market gets volatile. Institutions are also the big buyers of options on the S&P 500, or so I hear. The individual investor has avoided the domestic equities market on the whole this year; institutions have run it up to where it is. The individual has reportedly been adding money to international funds. Now it appears the institutions are sitting on their holdings at the current levels, probably wondering when and how to get out with minimum losses. As soon as they start selling again, the market will collapse under its own weight. -- posted by jamesj24 « Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next » Please follow the guidelines set forth in the Suite101 Posting Etiquette when adding to the discussion. |
|
|
|
