[gatorfast]

Originally Posted by RandomHero

That's a blanket statement and simply untrue.

There are several options strategies that can actually help to DECREASE your risk.

I understand that. But the fact is that options are simply too complex for the average investor and most people end up getting burned.

[RandomHero]

Originally Posted by gatorfast

I understand that. But the fact is that SOME OPTION STRATEGIES are simply too complex for the average investor and most people end up getting burned.

I fixed it for you.

Perfect example:
Writing covered calls

Hypothetical Situation: Your cost basis on Apple is $400/share. It's currently at $500 and you think it's topped out. You could sell it and realize a 25% gain, or write (sell) a covered call. You can choose your exit price based on which option price you write ($495, $500, $505, etc).


If the option is exercised, you sell at the strike price (we'll say $500), earn 25% from selling your position as well as the premium from writing the call.

[gatorfast]

Originally Posted by RandomHero

I fixed it for you.

Perfect example:
Writing covered calls

Hypothetical Situation: Your cost basis on Apple is $400/share. It's currently at $500 and you think it's topped out. You could sell it and realize a 25% gain, or write (sell) a covered call. You can choose your exit price based on which option price you write ($495, $500, $505, etc).


If the option is exercised, you sell at the strike price (we'll say $500), earn 25% from selling your position as well as the premium from writing the call.

Trust me, I understand what you are saying. I was simply adding on to the comment of another poster who stated they were new to investing and had questions about an option strategy posted.

On another note, unless you have a lot of capital invested, enough to acquire hundreds of shares of any company, writing options wont yield that much money.

[Vanity]

Bombs away. Still bullish SPX. Expecting next major event (non farms) to be a sleeper. Markets go higher from here, VIX will continue to sell off IMO.

[Inspired]

Who's shorting UVXY?

[F1Venom]

Now that I think about it, I could just buy some puts a couple months until expiration and then just roll them over to some expiration even further out to not be so dependent on theta and just time burn. I am expecting a huge correction though. The run up we have seen in 2013 will be the complete opposite in 2014.

[Vanity]

Originally Posted by F1Venom

Now that I think about it, I could just buy some puts a couple months until expiration and then just roll them over to some expiration even further out to not be so dependent on theta and just time burn. I am expecting a huge correction though. The run up we have seen in 2013 will be the complete opposite in 2014.

Unless you know when and how virulent this downturn move is going to be, you will lose money going short as an amateur. Holding a long term short position (with some exceptions) is one of the many reasons why people's accounts blow up. Shorts are meant to be quick, precise, targeted bets against the market. Timing, timing, timing is the key to shorts. Either you're too early to the bet and blow up your position, or you hold too long and get short squeezed like crazy (because keep in mind, the biggest moves up in a market occur in bear markets).

Being early is the same as being wrong.

[F1Venom]

I'll enter when I see confirmation that the bull market is over. I think I'll look for divergence in MACD and price over the next several months and sooner or later, bullish power and momentum will fizzle out. I've already noticed it with some banking stock (GS? i forgot which one) and I think there will be negative divergences happening on a broader scale.
Besides MACD, are there any other good indicators to watch for divergence? I've heard following volume is important but I don't really understand it in more complex senses.

[Vanity]

Originally Posted by F1Venom

I'll enter when I see confirmation that the bull market is over. I think I'll look for divergence in MACD and price over the next several months and sooner or later, bullish power and momentum will fizzle out. I've already noticed it with some banking stock (GS? i forgot which one) and I think there will be negative divergences happening on a broader scale.
Besides MACD, are there any other good indicators to watch for divergence? I've heard following volume is important but I don't really understand it in more complex senses.

First rule about trading is there are no concrete rules. Only probabilities. Macd divergences are sometimes right, sometimes wrong. You will need a bunch of things telling you the same thing. Volume isn't usually a key element in top calling, more so for bottoming (large volume capitulation, for example).

And the problem with the statement "I'll enter when I see confirmation that the bull market is over." is that it's never that simple. You'll know it's a top when nobody thinks we will crash or go down. Most important thing for you to know now as a beginner is that the markets are anti-ultilitarian. The least good for the most few. Herd always gets it wrong. You will need the fortitude to hold an opinion contrary to the crowd if you plan on shorting and making a ton of money. By the time you realize the bull is over, those SPX options will have already priced that fear in. And in all things good, I hope you will also know when to stop a losing short if its not going your way.

You sound like you want to chuck some money into a position and risk it all over time decay in the eventuality it pays off. I didn't hear about risk managing the losses on that capital. You will lose it all if this is your method. Better to go bet that money on red or black IMO.

[Inspired]

Originally Posted by Inspired

yup

JCP $12.76
BBRY $10.30
YELP $51.67

I didn't put a lot of thought into this. Just opened a few charts and saw that the daily looks good and picked it.

Oh man, I got killed on JCP. A new hedgefund is taking 10% stake or something like that in JCP.

But my BBRY/YELP doing fantastic..

[RandomHero]

Originally Posted by Inspired

Oh man, I got killed on JCP. A new hedgefund is taking 10% stake or something like that in JCP.

But my BBRY/YELP doing fantastic..

Unfortunately I saw that.

I started a day later but:

8-29 closing prices
ARNA-$6.35
EDC- $60.72
TFM- $48.01

9-4 closing prices
ARNA-$6.55
WDC- $64.85
TFM- $48.01

Average return: 4.05%

[e92tt1986]

would anyone recommend purchasing some shares of apple?
I assume it will rise with the new iphones coming out
and then sell shortly after the craze

[F1Venom]

I expect a nice rally this week and next leading to the event. I think tomorrow it'll hit $510.

[wakeboarder109]

Originally Posted by Inspired

Oh man, I got killed on JCP. A new hedgefund is taking 10% stake or something like that in JCP.

But my BBRY/YELP doing fantastic..

I wish I'd bought some BBRY last week.

[Vanity]

Closed VIX short. Closed spy long. Flat now, waiting for lower re-entry. Retook 20 dma. Key will be 50 dma. Above there and we hit 1680.

[PSUSMU]

Originally Posted by wakeboarder109

I wish I'd bought some BBRY last week.

Wish I didn't sell mine for a massive loss after last ER. I am still holding some options though.

[Vanity]

Nobody trading the SPX lately? It's an empty concert hall in here.

[Vanity]

Originally Posted by Vanity

Closed VIX short. Closed spy long. Flat now, waiting for lower re-entry. Retook 20 dma. Key will be 50 dma. Above there and we hit 1680.

My oh my, glad I closed out yesterday. 50 dma failed spectacularly.

Take it over bears

[e92tt1986]

Originally Posted by F1Venom

I expect a nice rally this week and next leading to the event. I think tomorrow it'll hit $510.

Would you recommend purchasing some shares now and sell in early october?
I think this would be a good idea?
Anyone think otherwise?

[Vanity]

Originally Posted by e92tt1986

Would you recommend purchasing some shares now and sell in early october?
I think this would be a good idea?
Anyone think otherwise?

Just remember that if you lose on that position, no one is going to help you trade back that loss. Ultimately, despite what you read here, do your own research and have your own conviction in your positions.

[Vanity]

Originally Posted by Vanity

My oh my, glad I closed out yesterday. 50 dma failed spectacularly.

Take it over bears

Hit 1664 50dma. Failed test today. Despite the over-reaction to Putin's thing today, markets were bullish enough to rally back afterwards. Omitting that press release, today's BLS# was a sleeper as I thought.

My theory was that there were some VIX premiums being built up leading into BLS today, appears the VIX was not hedging for these numbers. FOMC meeting is where the fear is at, but it will be a non-bearish event. Everyone will tell you taper matters though. It does not.


Above 1664 and we move to 1680. Above there we make new all-time highs and VIX <12.

[Vanity]

Originally Posted by F1Venom

I expect a nice rally this week and next leading to the event. I think tomorrow it'll hit $510.

Still holding those AAPL shares?

Ready to sell them to me?