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My 2012 Blog for High Risk/Returns Option Plays

post #1 of 29
Thread Starter 

 

 

    Hello, my name is Ryan, Im new to the site and am going to attempt to chronicle my 2012 year of trades...this will be in part to instill some additional accountability in my trades but also I welcome any thoughts and feedback from the community ect...

 

  As for a brief history of experience; Ive always had an interest in financial matters and the nature of economics,  from an early age I have dabbled in basic stocks.  More recenly I discovered and attempted to trade the forex market with what i would consider unsustainably good results, I have since put the money to good use (in my mind anways) and have distanced myself from that market though I still find it intriguing.  More recently Ive had a bit of an obsession with options, I absolutely love the flexibility in the options market as a medium of investment...my actual options trading experience is limited to less than 12 months.  Ive recently opened an account with a new (to me) broker and would basically like to blog about my trades, perhaps sharing my sentiments at times and asking opinions others...

 

  I expect my trading style and trade choices to be a bit controversial at times as they are often high risk though offset by potentially larger returns,  my personal preference leans towards basic directional vertical spreads so expect that to comprise the core of my trades with the occasional sideways/nondirectional strategy mixed in as well.  Also, though many of my trades will be high risk, there may very well be moderate to low risk trades mixed in as well.  As far as time lines for my trades its likely going to be all over the place as I like to look for short, mid, and long term potential trades.  Ill likely be allocating around $12k to this venture so obviously im not some big player.  Ill be looking to contain my individual position debits to the $200-$400 range for the time being though some may be notably larger.  Ill also not be setting any crazy lofty goal as tempting as that may be, as I consider myself to be a major rookie still and could quite possibly fail quite quickly,  that said I think it should be an interesting ride and I hope to gain in experience to say the least.

 

 I have a number of potential trades on the burner at the moment, though ill be starting slow and rather conservatively (monitarily anyhow).  Ill likely enter my first trade on this account sometime around the middle of this upcoming trading week. 

 

  In closing; thankyou for reading and hopefully ill be able to at least provide you some non-traditional entertainment.  Also, please excuse any spelling and/or grammar problems now and in the future as I will not be proofing/spell checking these posts.

 

  If anyone cares to comment Id love to here anyones thoughts on the short and long term prospects of Nike (NKE), Alcoa (AA), and Peabody Energy (BTU)...just 3 of the stocks Ive been considering some plays on if anyone has any specific opinions on them Id love to hear.

post #2 of 29

hey welcome to HSM.  read as much as you can on these forums.  there are some good traders that are willing to share their experiences.

Listen to both sides of the coin.

 

Why do you like NKE, BTU, AA?

 

post #3 of 29

good luck. I know you said that you like to look at short/mid/long term trades. What do you use to determine how long to stay into a trade?

post #4 of 29

NKE is releasing earnings this Thursday. I expect them to beat projections. Holding APR 115 calls @ 1.61. The bullish trend has been going on for a while now. I think NKE should be a great long term prospective. Nike should continue it's success with major support from the Jordan line and fitness footwear. Also, the fuelband has sold out in less than 8minutes. It should be a large contributor to Nike's success once they make more of it...

post #5 of 29
Thread Starter 

depending on the structure of the trade/position i will sometimes have a max risk and target reward ratio, however to be honest the very structure of many of my vertical spreads dictate some pretty high risks...obviously the spreads themselves will almost if not always be structured to a limited maximum risk, however i fully expect that i will suffer significant to complete losses on some positions...all the more reason for taking rather small positions. 

 

thanks for your thoughts on nike, yes its one i liked for a longer hold as well.  as to why i like alcoa and btu i just feel they are statistically undervalued and have large upside potential, btu i could see moving well this year, my issue with alcoa is i just dont think the housing/industry markets are going to be conductive to any significant run in the next 24-36 months...that said i do expect it to trade pretty stable and chip up just not what im looking for

 

its looking like ill be making some small but aggressive short term plays on AAPL and BTU tomorrow if my wire gos through on time as it should.

post #6 of 29
Quote:
Originally Posted by themoneygame View Post

depending on the structure of the trade/position i will sometimes have a max risk and target reward ratio, however to be honest the very structure of many of my vertical spreads dictate some pretty high risks...obviously the spreads themselves will almost if not always be structured to a limited maximum risk, however i fully expect that i will suffer significant to complete losses on some positions...all the more reason for taking rather small positions. 

 

thanks for your thoughts on nike, yes its one i liked for a longer hold as well.  as to why i like alcoa and btu i just feel they are statistically undervalued and have large upside potential, btu i could see moving well this year, my issue with alcoa is i just dont think the housing/industry markets are going to be conductive to any significant run in the next 24-36 months...that said i do expect it to trade pretty stable and chip up just not what im looking for

 

its looking like ill be making some small but aggressive short term plays on AAPL and BTU tomorrow if my wire gos through on time as it should
 

id focus on getting good entry points as well.  use support/resistance.. indicators and historic price action.  if you dont already.

and no need to take a complete loss on a trade..  set stops.  minimize your losses.  ive been guilty of selling winners to early and holding losers too long.

thats something thats hard to learn. 

 

 

btu is maybe a little undervalued at 8 PE.  but AA is at 20 p/e.  if the economy grows faster or world demand picks up then this will move these companies up.

they look ok for long term plays.  BTU bounced off 30 nicely so if it gets back down there again it could be a good buy. 

killabee has a good entry on those calls.  up $50 each already

 

 

post #7 of 29
Thread Starter 

ok so i woke up early (pacific time) to watch the market today,  my bank messed up my wire which made it take several hours longer than it should have to process so i watched in dissapointment as a nice position i was looking for on Apple opened up on the initial opening selloff...nowhere to get in by the time my funds showed up as it was rallying back and actually closed the day up a good deal.  i also couldnt figure out what i wanted to do with BTU so i left it alone.  towards the closing bell i took a small position on Citigroup as it took a slight dip...i thought i knew what i was doing on this spread but im still very green in real-trade options trading and am now questioning if i %$^$ed up big time on the execution somehow?  if you can figure out what i may have done wrong pls let me know you wont hurt my feeling even if i look like a complete moron lol...the spread was supposed to be based on C keeping its bullish momentum or at worst going neutral untill friday expiration at which point the spread was supposed to maximize profit with C at $38.00+ for like 40%...like i said im starting to think i fudged this spread...eek.gif

 

this is it as it sat today (3-20-12)

 

 Securities
Symbol  Description  Stock  Qty  Avg Price  Price  Change  Value  Gain/Loss $  Action
C MarWk4 37 Call  CITIGROUP INC NEW  38.08  4  $1.29  $1.24  0.47  $496.00  -20.00  Trade | Roll | Sprd | Chain | More
C MarWk4 38 Call  CITIGROUP INC NEW     -4  $0.61  $0.61  0.25  ($244.00)  0.00  Trade | Roll | Sprd | Chain | More
Total:       $252.00  -20.00  
Total Gain/Loss:      -20.00  

 

some of the figures look to have skewed slightly to the right of their colums sry

 

ya so if you see my mistake(s) pls let me know, if you have any form of criticism positive or negative also would be helpful, if negative please be constructive in telling me what i did wrong and what you could/would do differently

post #8 of 29

id suggest dont trade options until u know what your doing.  thats constructive right? 

Have you traded options before?

 

i dont really do spreads but looks like u have a vertical spread for the weekly 37 and 38 calls.

im confused on why you have a loss of $247 on the 38's unless the premium just melted away before close.

 

 

post #9 of 29
Thread Starter 

mostly paper trades on options thusfar...thx and suggestion noted but i do expect to potentially make some mistakes lol

 

loss of $247? think you might be lining up the figures wrong as i said they are skewed to the right of the colums...the debit on this spread was $496 and the credit was $244 for a net debit of $253...the standing loss on this position as stated thus far is -$20.00  ...the reason im wondering if i messed up is that upon pluggin this one into this software program now im getting differed stats/results than i came up with on paper hmm.gif  ...if somone is able to tell me what the max profit and max profit range on expiration (3-23-12) should be on this spread to see if it matches with my original numbers that would be useful haha

post #10 of 29
Thread Starter 

[4x(38-37)x100] -252= $148 max profit realized at expiration with a base price over the $38 strike...?confused.gif or so i thought...though if this software projection is correct im not accounting for something

post #11 of 29

I personally do not do spreads often, but interested in seeing how this goes for you. Good luck!

post #12 of 29
Thread Starter 

well the maybe good news today is i talked to a support person about the software issue and he said it seems to be a problem with the software and the spread should me correlating with my earlier projections...ok weird but well see how that gos...the bad news is C Citigroup dropped a bit and got stuck in this annoying 37.55-37.85 channel for the majority of the day and was just really resisting ending the day 38+ again, this gos against my anticipations so well have to see how it behaves tomorrow and i may need to exit the trade at a loss.

 

BTU had minor down day and i picked up a small position bull call spread with may expirations

 

  Order Symbol Description Bid Ask Action Qty Type Dur Exc Fill    Fill Time   Create /
Cancel Time
Status  
show/hide 13072751 BTU BTU May12 31 Call / BTU May12 32 Call 0.44 0.54   3 / 3 Market DAY ISE       Filled XpressSavings Trade

 

Security Qty Cost Basis Current Value
BTU May12 31 Call 3 $723.00 $672.00
BTU May12 32 Call -3 ($567.00) ($528.00)

 

 

the total debit on this spread was $156 and on expiration this spread should offer the following profit potential of +$144 if expiring above $32...this graph isnt exactly accurate for the losses though as the spread can be exercised other ways to negate the loss, all the same it relys heavily on BTU holding and slightly increasing in value, im not 100% sure what early/loss exit ill take on this one if things arent developing properly but ill figure that out tomorrow and itl likely be based on several different time points in the option life.

 

i really dont have any other trade plans this week, i need to get this problem with the C spread figured out first and see how i exit that trade, next week theres a few straight call options i may want to buy but ill have to see how things are shaping up.  hopefully i can figure out for sure what my issues are with the C spread tomorrow and ill post on here when/if do and/or i i exit it early for a loss.

post #13 of 29
Thread Starter 

ugh...just made a post but i dont think it processed correctly...if not ill post tomorrowmad.gif

post #14 of 29
Thread Starter 

ok so the sort of good news is that it would appear (a theory reinforced by a support rep on the phone today) that the issue is with the software not my spread, however i still am confused about it and cant say 100% that my original projections were accurate so well see how it plays out on the C spread.  the bad news is the damn market stalled today and C got stuck in this 37.55-37.85 channel really resisting breaking back through the 38 and ending the day at 37.8...we need this sucker over 38 on friday so if things arent looking too optimistic today (thursday) im gonna be looking for a exit for a loss.

 

BTU had a mildly down day and i took a very small spread position (bull call) with May expirations.  the net debit was $156, the trade maximizes profit if BTU is sitting over 32 at its may expiration for a profit of $144.  this spread relys heavily on BTU remaining fairly stable and inching up a bit, i havent formed a solid exit/loss plan yet but im working on one for the position that will likely have multiple exits based on several time points.

 

BTU May12 31 Call 3 $723.00 $672.00
BTU May12 32 Call -3 ($567.00) ($528.00)

 

 

post #15 of 29
Thread Starter 

i have no real plans for additional trading this week i want to see how things pan out on this possibly botched C spread as well as keep an eye on the market sentiment.  if things look good bullish theres a few straight long call buys i might want to make next week as well as keeping my eyes open for enticing spreads on the financials.

post #16 of 29
Thread Starter 

ouch, well the market really killed me today,  C opened substantially weaker and while i left it in what appeared to be a slight comeback channel (i was up late working last night and haaad to sleep) i came back to renewed bear action as it dropped further and missed any possible exit...well glad i kept things very small and limited this week, i had really anticipated the bull trend of the market to carry through to friday and that was unfortunently not the case, gonna have to take the weekend and maybe mon and tues to try and figure out what to do next.  pending a miracle on C this week the spread will likely be a total loss.  not the best start on this account so gonna have to do much better next week(s) koolaid.gif

post #17 of 29
Thread Starter 

sucks that the bullish run couldnt continue through the week but it happens,  waiting for a miracle to bale out my position tomorrow but if not ill post the loss, still hanging on to the BTU spread as i still it has potential.  still wishing i had gotten in on that AAPL spread i wanted on the tues morning selloff, still woulda pocketed a nice profit on friday, oh well #$%^ happens horse.gif

post #18 of 29

be careful with the weeklies..  if u pick it wrong it can go south fast as u noticed.

look a month or 2 out so you have room to catch up if u time it wrong.

post #19 of 29
Thread Starter 

yeah i need to come up with some rules for various expirations, the C spread was too ambitious for such a short window, i definently got caught up in the bull momentum the financials showed in the last few weeks and earlier this week, i should have taken a deeper ITM spread or further out expiration. 

post #20 of 29
Thread Starter 

so our C spread basically expires/was closed

 

03/23/2012 Buy To Close 4 C MarWk4 38 Call $0.01 ($11.57)
03/23/2012 Sell To Close 4 C MarWk4 37 Call $0.15 $52.43

 

 

so we took a loss of -246.28

 

the BTU spread is down a bit but its a May expiration and im still mildly optimistic on it.

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