Just realized I made $14.8k this morning

The miss on AAPL is affecting other stocks such as Sprint. Sprint is down 0.72% in the aftermarket, if it passes over to the opening tomorrow can see the position turn to 10% gain.

Anyhow, PCLN strangle is attractive for Monday. I'll post the exact strikes and exp to get in on Monday.
 


craigmc said:
Not on a call option he wouldn't.
Click to expand...

Correct, but then his put option would pick up on the gains. It would just flip.

The only questionable area left to assume is if the downside potential would have been as much as the upside potential we saw.
 
mGrunin said:
Damn dude, that's not how you should have set it up. I did say to pick up November expiration in my post. My Sprint play actually went into the green by market's end.

I only put in $2,300 since I'm not looking at any serious trading till I start selling options. Either way, the positions are currently worth $2,445. Peasant gains but no loss. That comes out to a gain of 5% and I'm still holding the position. At this point the Call side is completely worthless at 1c so any more drops in Sprint will be full gains to my put position without my call position interfering with my gains.
Click to expand...

:D
i'm only down a few hundreds, especially since it recovered in the after hours. looking forward to your Priceline suggestions on Monday!
 
ameyer said:
:D
i'm only down a few hundreds, especially since it recovered in the after hours. looking forward to your Priceline suggestions on Monday!
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Yea, too bad. If you had selected the same exp you would be in the green. It's all good.

I made a mistake on PCLN. They report Nov 5 Monday; for some reason I thought Nov 5 was next week. My mistake.
 
mGrunin said:
Yea, too bad. If you had selected the same exp you would be in the green. It's all good.

I made a mistake on PCLN. They report Nov 5 Monday; for some reason I thought Nov 5 was next week. My mistake.
Click to expand...

By the way, what's the difference between option selling and option trading?
(you mentioned you are going into option selling now?)
 
ameyer said:
By the way, what's the difference between option selling and option trading?
(you mentioned you are going into option selling now?)
Click to expand...

You're comparing it wrong.

Option selling is part of the whole option trading industry.

Right now what you are doing and what I have been doing is purchasing options from option writers. There is a seller behind every single option out there. If you lost money on an option, the seller made money on the option.
If you decide to write the option, then your maximum gain is the premium (cost) of the option.

Btw, with Sprint my straddle is currently up 30%. Not bad considering it came out pretty flat on earnings.

Yesterday Apple's earnings came out and even though it was a miss, the stock ended up trading completely flat. Which is the worst possible thing for option buyers but the optimal movement for writers (sellers). Options that expire mid November lost 50% of their value overnight just because there was no movement. When the IV (Implied Volatility) is high on options because huge movement is expected, option prices are much higher. At soon as the catalyst has gone by (earnings release); the IV drops, and so does the option price. Who takes the hit? The buyers. Since there was no movement, the IV drop hit is felt very badly.
Writers made a shit load of money today from Apple and will laugh to the bank.
 
mGrunin said:
You're comparing it wrong.

Option selling is part of the whole option trading industry.

Right now what you are doing and what I have been doing is purchasing options from option writers. There is a seller behind every single option out there. If you lost money on an option, the seller made money on the option.
If you decide to write the option, then your maximum gain is the premium (cost) of the option.

Btw, with Sprint my straddle is currently up 30%. Not bad considering it came out pretty flat on earnings.

Yesterday Apple's earnings came out and even though it was a miss, the stock ended up trading completely flat. Which is the worst possible thing for option buyers but the optimal movement for writers (sellers). Options that expire mid November lost 50% of their value overnight just because there was no movement. When the IV (Implied Volatility) is high on options because huge movement is expected, option prices are much higher. At soon as the catalyst has gone by (earnings release); the IV drops, and so does the option price. Who takes the hit? The buyers. Since there was no movement, the IV drop hit is felt very badly.
Writers made a shit load of money today from Apple and will laugh to the bank.
Click to expand...

Sounds interesting, but I guess you can make insane losses this way (theoretically)?
Or don't you have to pay out (possibly infinite) winnings to the buyers?
It sounds like a fair strategy for somebody who is already owning shares of a stock?
 
ameyer said:
Sounds interesting, but I guess you can make insane losses this way (theoretically)?
Or don't you have to pay out (possibly infinite) winnings to the buyers?
It sounds like a fair strategy for somebody who is already owning shares of a stock?
Click to expand...

Yes, in theory your losses are unlimited.

Which is why doing it via a vertical spread strangles would limit that from happening. Write a call. Write a put. Buy a call more OTM, further expiration date. Buy a more OTM put, further expiration date.

Just closed the Sprint position at 48% gain. The total gain is not impressive since I barely put any money into the trade. It was more or less a trade for the thread:

YAeND.gif


$1,125 was the total profit on a $2,320 trade. Keep in mind that the commission came out to $400 since this was a total of 400 contracts for both legs. One of the big downsides to trading cheap stocks.
 
mgrunin, thank you for doing an impromptu AMA, I'm super interested in this business if for nothing else to understand your been had videos better. I have a few questions tho, you said you're trying to get into option selling... I see the word selling and my eyes light up because this is what I have trained myself to do. How does it compare to say, going down the street to buy a car or even traffic online? Where is this marketplace and why are you moving from trading to selling? Thanks in advance!
 
mGrunin said:
Yes, in theory your losses are unlimited.

Which is why doing it via a vertical spread strangles would limit that from happening. Write a call. Write a put. Buy a call more OTM, further expiration date. Buy a more OTM put, further expiration date.

Just closed the Sprint position at 48% gain. The total gain is not impressive since I barely put any money into the trade. It was more or less a trade for the thread:

YAeND.gif


$1,125 was the total profit on a $2,320 trade. Keep in mind that the commission came out to $400 since this was a total of 400 contracts for both legs. One of the big downsides to trading cheap stocks.
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Good to hear.
I was quite lucky today, closed it at around 12pm.
But I noticed that I did another mistake, for the Nov puts I bought 5 strike instead 5.50 ;) That cost me a little but overall I'm roughly break even or even a little profitable, didn't expect that.

By the way, did you see the rise in Priceline today (which was afaik due to Expedia)? Hope that won't make it less attractive for a straddle
 
ameyer said:
Good to hear.
I was quite lucky today, closed it at around 12pm.
But I noticed that I did another mistake, for the Nov puts I bought 5 strike instead 5.50 ;) That cost me a little but overall I'm roughly break even or even a little profitable, didn't expect that.

By the way, did you see the rise in Priceline today (which was afaik due to Expedia)? Hope that won't make it less attractive for a straddle
Click to expand...

Priceline went up because Expedia posted good earnings. Since they are in the same industry it's natural for positive sentiment to pass over to relevant companies.

Let's take a look at PCLN's chart for the last 60 days.

thwiE.png


So that big early gap down we see between July and August was when they reported bad earnings. The stock lost more than $150 overnight. Ever since then it's been working its way back to fill that gap. Well the highest it has seen on the recovery is $650. It actually has had a triple top on the $650 level. With earnings approaching though that sell off we started to see came natural.

After getting a support level at $590 the stock started consolidating well between the $600-$610 level before Google missed earnings. It was actually a few other companies too, but Google was the big play factor for that sell off to bring it down to $560. Pay attention to how $560 was a previous support when PCLN missed earnings.

By Expedia performing well it had tagged $20 more onto the stock to bring it to $580. With PCLN actually moving their earnings report earlier to November 1st I believe we will actually see the stock move up a bit more into the earnings. I would not be surprised to see at the $600-$610 level before earnings.

The way things are set up, a straddle play looks very effective. If PCLN beats, then we can expect PCLN to hit at least $650 again, even though pushing towards $680 isn't out of the question. If it misses, then $560 will definitely come into play again and that time around I am fairly sure that the support level will be broken.

In other words, I'm looking for at least a $40 movement in either direction.
 
mGrunin said:
Priceline went up because Expedia posted good earnings. Since they are in the same industry it's natural for positive sentiment to pass over to relevant companies.

Let's take a look at PCLN's chart for the last 60 days.

thwiE.png


So that big early gap down we see between July and August was when they reported bad earnings. The stock lost more than $150 overnight. Ever since then it's been working its way back to fill that gap. Well the highest it has seen on the recovery is $650. It actually has had a triple top on the $650 level. With earnings approaching though that sell off we started to see came natural.

After getting a support level at $590 the stock started consolidating well between the $600-$610 level before Google missed earnings. It was actually a few other companies too, but Google was the big play factor for that sell off to bring it down to $560. Pay attention to how $560 was a previous support when PCLN missed earnings.

By Expedia performing well it had tagged $20 more onto the stock to bring it to $580. With PCLN actually moving their earnings report earlier to November 1st I believe we will actually see the stock move up a bit more into the earnings. I would not be surprised to see at the $600-$610 level before earnings.

The way things are set up, a straddle play looks very effective. If PCLN beats, then we can expect PCLN to hit at least $650 again, even though pushing towards $680 isn't out of the question. If it misses, then $560 will definitely come into play again and that time around I am fairly sure that the support level will be broken.

In other words, I'm looking for at least a $40 movement in either direction.
Click to expand...

Well well well...PCLN did beat and guess what? It opened at $650.06. Six cents right above were I called it to be based on my charts. Boom.
 
Want to mention that Ameyer actually got in touch with me last week and offered a portion of is PCLN winnings based on my call. I personally didn't want to accept it, but I had him send the money to my girlfriend's paypal since she suffered badly from the hurricane. I know Ameyer was catching some heat earlier for not "spreading some love", so I feel this post fixes that.

So here is what I've been testing. As I've said before I am looking to get more in selling options and making money from collecting the premium. Well the only way to set it up so I can eat the premium while not having an insane hold by the brokerage, I have to setup a spread.

I've started testing spreads this past week with small funds for the learning process. So I opened this position in Google on Wednesday and it was closed Friday afternoon. This is a safe strategy with limited gains and limited loses:

VD61i.gif


So I took out a 25% gain at the end of it. The stock ended up trading about $10 below were I first entered into the positions. I would have come out ahead in my positions as long as Google had traded between $658-$685 during three trading days.

This sort of position would be opened early in the week and wouldn't be touched until expiration day. In that screenshot there is a combination of a vertical & calender spread. The vertical spread focused on benefiting on the high gamma on the STO positions and the calender spread focused on benefiting on theta eroding the STO weekly options.

On Monday I will be posting a new play here. I'm not sure if you are interested in jumping into it Ameyer, it's up to you. I'll update this thread throughout the week on the position. I'll still be dealing with small contracts ($5k) until I get perfect the way I setup the spreads.
 
Sounds interesting.

Recently I was playing around a little with that as well.
There were some AAPL options for a few cents that were completely out of the money and about to expire within a few hours.
I tried to sell some of those, as I was 99,99% sure they would just expire.
In the end they expired, but I only made around $100 but I risked(?) 10s of thousands in margin requirements.

I don't really understand that yet, like why do I need to keep such huge margins actually? (isn't it possible to make something like a stop-loss? :p)

Mgrunin, if you post more about this I will most probably go for it with a smaller amount ;) (just for fun)

Before I do something more serious I really should learn the basics first (I'm not familiar with most of the terms you used "vertical spread", "STO", ...)
 
That's the problem with selling naked options. The brokerage will end up holding a crapload of money. That is done for insurance. Let's say during that day news came out that for some crazy reason the iPhone product is banned in the US, and it causes Apple to shed $100 of it's stock. Well guess what...those couple cents options you sold would now be costing you $20+ each, putting you in a big hole. So they make sure they lock in money from you incase you need to pay out all of that.
 
mGrunin said:
That's the problem with selling naked options. The brokerage will end up holding a crapload of money. That is done for insurance. Let's say during that day news came out that for some crazy reason the iPhone product is banned in the US, and it causes Apple to shed $100 of it's stock. Well guess what...those couple cents options you sold would now be costing you $20+ each, putting you in a big hole. So they make sure they lock in money from you incase you need to pay out all of that.
Click to expand...

right, and this seems to be the only downside to this (but still, why doesn't some simple "stop loss" tactic work actually?)
so if you post some plays here on how to mitigate that issue then I will definitely look into it
 
A stop loss is something you set up after you own the position. All it does is sell the position when it hits X price. It's just a different way of setting up how you want to close your positions and has nothing to do with how you open them.

So I opened positions in GDX and LNKD. One thing I don't like about this week is that because Nov's monthly is actually this week's weekly, for our calender spread we need to reach out all the way to December for our long leg. Because of that, the price difference between our short and long leg are extreme. This can affect out profitability.

Either way, take the trades at your own risk. Keep in mind that you have to deal with the nasty bid/ask spread right after you buy it, so you'll probably spend today and tomorrow digging yourself out of the neg just from the spread.

XvBgD.gif
 
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