or Connect
HotStockMarket › Forums › HSM Stock Forum › Stock Market Today › Stock Market Today: February 11th - 15th
New Posts  All Forums:Forum Nav:

Stock Market Today: February 11th - 15th - Page 18

post #341 of 446
Quote:
Originally Posted by Mark Vierra View Post

On a personal note, I've been attentively following options.

Trying to get a feel for the price action.

I've come to a preliminary conclusion that reaffirms the "there are no free lunches."

It looks to me that you really have to be spot on in time and strike to have any meaning for someone like me.

 

You mean there aren't "Jackpots" around every single corner? laughing.gif

post #342 of 446
Quote:
Originally Posted by Rock Sexton View Post

 

You mean there aren't "Jackpots" around every single corner? laughing.gif

post #343 of 446

Ha! Just like everything else in life, it takes attainable and reasonable goals based on hard work to get ahead.

Get rich quick no matter how dressed up in logic always ends up based on luck and are for the suckers, IMO.

In the same way lottery tickets are for the people that are not so good at math and looking for that short-term entertainment value

that a few bucks can bring in for that euphoric rush "Ohh!, this could be the lucky numbers".laughing.gif

Quote:
Originally Posted by Rock Sexton View Post

Quote:
Originally Posted by Mark Vierra View Post

On a personal note, I've been attentively following options.

Trying to get a feel for the price action.

I've come to a preliminary conclusion that reaffirms the "there are no free lunches."

It looks to me that you really have to be spot on in time and strike to have any meaning for someone like me.

 

You mean there aren't "Jackpots" around every single corner? laughing.gif

post #344 of 446
Quote:
Originally Posted by OldFart View Post

X must be on x +2.5%

sheesh...3.5% noweek.gif

post #345 of 446

HAL & SLB gone ape

post #346 of 446
Quote:
Originally Posted by Mark Vierra View Post

Ha! Just like everything else in life, it takes attainable and reasonable goals based on hard work to get ahead.

Get rich quick no matter how dressed up in logic always ends up based on luck and are for the suckers, IMO.

 

+1

post #347 of 446

RIG also gone mad...FSLR too...stocks gone wild day

post #348 of 446

I'd imagine we will be seeing a test of 151 on the SPY sometime soon. That area also coincides with the monthly POC and weekly pivot. I would add longs at that point and cover shorts there:

 

post #349 of 446
Quote:
Originally Posted by OldFart View Post

RIG also gone mad...FSLR too...stocks gone wild day

Add CenturyLink to that list with their dividend cut.

post #350 of 446
Quote:
Originally Posted by Bishop View Post

Add CenturyLink to that list with their dividend cut.

ouch

post #351 of 446
Quote:
Originally Posted by Mark Vierra View Post

On a personal note, I've been attentively following options.

Trying to get a feel for the price action.

I've come to a preliminary conclusion that reaffirms the "there are no free lunches."

It looks to me that you really have to be spot on in time and strike to have any meaning for someone like me.

I can see how daytraders can make out pretty good, but no saving grace for an under 25K account.

However, I am still entertaining the SPY put as a hedge for my remaining longs, but see that I should wait until

price comes to my 1540 comfort level and the order I have for the 1-lot UPRO to sell at 111$ (1/3 of my remaining position).

That way I'll have better price, time and odds that a correction will (I hope) make a winner out of the insurance policy.

A correction could happen at any time but If my plan goes well I think in a few weeks to mid-April for

mid-term highs to be put in and an optimal time to buy a put if the market does correct henceforth.

I've noticed an imbalance in call/put option price and wonder,

Does this mean there are more traders that think the same as me and there will be a correction is why puts are more expensive than calls?

Options are subject to supply and demand, right? Or the MM will write as many of whatever you want like candy out of their pocket?

 

There's no way I'm going to shell out more than 200$ for a put so I've been looking at exp. time/strikes accordingly.

Maybe put prices won't be as attractive as I think as the market continues higher because of increased demand/bets on a correction.

Knowing myself I'll chicken out at the last minute, maybe too expensive for my account at this time.

 

Generally the Put/Call ratio is used to determine which way traders are leaning. For SPY there are roughly 2 puts for every call out there right now. 

 

 

 

 

You are 100% correct in that with a call or a put your time and strike have to be spot on. The rewards are very high, but the probabilities are very small and the position works against you as time goes on. Below the white line is the current price behavior for the option and red is price at expiration. The white line moves closer to the red line each day until they are equal on option expiry day. The red ticks are the breakeven prices. For an April 152 put the breakeven drops from 152 to 149 just over 8 weeks. Again the rewards here are very high, but the probabilities are skewed very much against you.

 

 

 

 

Here is the profit/loss graph for a time spread (aka a calendar spread). Here you are still buying the same April 152 put, but you are also selling an equal number of next week's 152 puts. I did all the P/L graphs for 10 contracts, so you would be long 10 of the April 152 puts and simultaneously short 10 of the February 152 puts expiring next week. Here is the P/L graph for that trade. Again the white line will move to meet the red line until they are the same line on expiration day (next friday). Notice how in this trade the white line rises each day. Your max profit on this trade is $540, which is obtained if SPY closes at exactly $152 next Friday. Trade cost is $2470 (not including commissions) for the 10 contract spread. 20% isn't bad for a week's work. Breakeven points are 151 and 153 next friday so you have some wiggle room. You can tweak the strikes or the ratio to "lead" the underlying a little if you like, but that's getting a little more advanced. 

 

Holding just 10 of the April $152 puts (the trade above) would cost you $3140 and if SPY finishes at exactly $152 next Friday you would be looking at a loss of $91. See why buying just plain vanilla calls or puts doesn't make much sense?

 

 

 

Now Mark, you're a pretty smart guy so I know you're going to bring up the fact that the chances of SPY closing at $152 on the nose next Friday are slim to none. Right you are. A much more likely scenario is you shutting the trade down next Wednesday or Thursday and rolling your short options forward another week so you can do it all over again. Here is how the trade would look next Wednesday (red line is price on Wednesday):

 

 

 

With SPY at $152 you are looking at $173 profit with breakevens at $153.10 and $150.84. That's no $540, but it's still a 7% return which IMO isn't half bad for a week long trade (2 days of which are the weekend and you worry about nothing) and the chances of SPY being between $151 and $153 next wednesday are much higher than the chances of you picking a closing price for SPY next Friday in order to make a vanilla put trade work.

 

Last but not least, keep in mind I just threw together this trade really quickly since you were looking at SPY to demonstrate a point. It's not really the most ideal trade for SPY considering we've been in an uptrend so if anything you would want to lead the trade forward some (if you think it's going to go up) or down some (if you think we're due for a pullback). You still have to read the charts, but at least this way you are stacking the odds in your favor. 

post #352 of 446

I'd be careful watching put/call ratios as they don't tell the whole story since options can be sold or bought. I wouldn't look into them too much.

post #353 of 446
post #354 of 446

Wow!, GR that's a lot of usefull info to digest , thanks for putting that together.

@07 What's your take on the uneven price that I previously mentiond?
Am I off by thinking the predominate perception is "correction coming soon", by puts more expensive than calls?
Does supply demand affect options?
Gonna take a nap, but I'll be digesting this later (hate doing this on my phone). 
post #355 of 446
Quote:
Originally Posted by Mark Vierra View Post

Wow!, GR that's a lot of usefull info to digest , thanks for putting that together.

@07 What's your take on the uneven price that I previously mentiond?
Am I off by thinking the predominate perception is "correction coming soon", by puts more expensive than calls?
Does supply demand affect options?
Gonna take a nap, but I'll be digesting this later (hate doing this on my phone). 

 

Np thumbup.gif

 

Quote:
Originally Posted by o7media View Post

I'd be careful watching put/call ratios as they don't tell the whole story since options can be sold or bought. I wouldn't look into them too much.

 

Truth be told I rarely look at it. It's certainly no crystal ball, but it comes in handy once in a while. 

post #356 of 446
Quote:
Originally Posted by Mark Vierra View Post

Wow!, GR that's a lot of usefull info to digest , thanks for putting that together.

@07 What's your take on the uneven price that I previously mentiond?
Am I off by thinking the predominate perception is "correction coming soon", by puts more expensive than calls?
Does supply demand affect options?
Gonna take a nap, but I'll be digesting this later (hate doing this on my phone). 

 

It's because of the implied volatility. The puts are priced higher because there's a higher IV on them due to the fact that the markets are so high.

 

Basically traders are seeing more downside potential than upside potential at this point in the markets.

 

The IV on the 147x puts you highlighted is about 14.91% versus the IV on the 157x calls you highlighted is only 9.94%. If you were to raise the volatility on the calls to match that of the puts (14.91%) then those calls would have a theoretical value of $2.67 versus the current $1.33 value.

 

And they would be higher than the puts ($2.67 vs $2.33) because they are closer to the money. 

 

If SPY is at $152.21 (according to your image) then those 147x puts are $5.21 OTM. While the 157x calls are only $4.79 OTM. 

post #357 of 446

Thanks 07, great answer and I wasn't far off in my assumption.

Quote:
Originally Posted by o7media View Post

Quote:
Originally Posted by Mark Vierra View Post

Wow!, GR that's a lot of usefull info to digest , thanks for putting that together.

@07 What's your take on the uneven price that I previously mentiond?
Am I off by thinking the predominate perception is "correction coming soon", by puts more expensive than calls?
Does supply demand affect options?
Gonna take a nap, but I'll be digesting this later (hate doing this on my phone). 

 

It's because of the implied volatility. The puts are priced higher because there's a higher IV on them due to the fact that the markets are so high.

 

Basically traders are seeing more downside potential than upside potential at this point in the markets.

 

The IV on the 147x puts you highlighted is about 14.91% versus the IV on the 157x calls you highlighted is only 9.94%. If you were to raise the volatility on the calls to match that of the puts (14.91%) then those calls would have a theoretical value of $2.67 versus the current $1.33 value.

 

And they would be higher than the puts ($2.67 vs $2.33) because they are closer to the money. 

 

If SPY is at $152.21 (according to your image) then those 147x puts are $5.21 OTM. While the 157x calls are only $4.79 OTM. 

post #358 of 446
Quote:
Originally Posted by Mark Vierra View Post

Thanks 07, great answer and I wasn't far off in my assumption.

 

No problem. I wouldn't think of it as a correction coming soon, but more as downside protection for the option writers.

post #359 of 446
Thread Starter 

off-topic, a meteorite has crashed into russia this morning... an estimated 500 people hurt or dead...

 
here's the vid-
 
 
also if i'm not mistaken i believe we have a member here by the name of z-oldeurope that is from around there? certainly hope he's okay...
 
although completely unrelated, but it is kind of eerie since apparently there is an asteroid named da14 that is set to pass by real close to earth later today i believe...
 
this is what dec. 21st, 2012 should have looked like i guess... that would have been something!
post #360 of 446

 

they say that the meteorite had nothing to do with the asteroid...Me thinks something is smelling fishy...Myans were off by a few months?...Joke

New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: Stock Market Today
HotStockMarket › Forums › HSM Stock Forum › Stock Market Today › Stock Market Today: February 11th - 15th