Options Strategies

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ginger
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Options Strategies

(For DIMWITS, HALFWITS, FULLWITS ...and everywhere in between!)

So. Here we are. This thread is born of a need that a group of us regular moms felt that we are ready to step up our investing to the next level. We sure find ourselves in perilous times. Many of us are doing all that we know to do. We buy and store extra foods, water, medicines, all kinds of basic supplies. We buy precious metals when and if our budgets allow. Most of us probably have a few shares of gold and/or silver miners. We sell extra household stuff on Ebay or Craigslist to come up with money to help fund any purchases of the above because our regular household budgets are already stretched with raising families. I didn't think that there were that many like me who still can't seem to make the physical stack grow; or who can't seem to accumulate very many mining shares; and who feel somewhat uneasy in the pit of their stomach because we sense that the Great Keynesian Experiment is accelerating to its end and we are not so ready. But after hearing a few moms just like me speak out.... I realize I am not alone. We are worried and we are in a hurry to do more and to achieve more with our limited fiat.

So.. HERE WE ARE! ...We want to add trading options and calls (and for those who are braver than me..selling them too) to our list of ways we are trying to achieve our above mentioned goals. We feel the need to step things up a bit and this is yet another avenue to 'get us there'. ...Stepping things up a bit, however, does not mean that we aren't careful or thoughtful or don't know what we are getting in to. We know the risks. We will individually assess any information put forth and decide for ourselves if we want to adopt another persons' approach. Every trade is not for every one. Personally, I have extremely limited fiat and will have to make small gains and try the 'rinse & repeat' strategy. So, the purpose of this thread will be to have a formal place to see if we can band together in laying out our options strategies, get and give ideas, help ourselves while hopefully helping others who stop here.

Ask questions, give advice, post helpful information garnered from this site and others, lay out your strategies, be willing to accept critique so that you can prevent making mistakes ..and above all.. ....be thankful for what we already have because, honestly, it's not mine anyway ..what little I have is entrusted to me by Him and He knows our needs and will care for us accordingly whether we make gains or lose everything. ...(Which.. uh.. hopefully won't happen!:)

Come one, come all! This thread started by the DIMWITS (Desperate Investing Moms Who Intend to Trade) welcomes WITS of all persuasions!

(And if we're really lucky.. maybe we'll attract a few really seasoned traders who lurk around this blog who will stop in from time to time to give us the benefit of their wisdom and/or to keep us from falling off a cliff if we are about to:)

Let's Do This! Smiley

Edited by admin on 11/08/2014 - 06:16
ginger
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I'll start by saying that I

I'll start by saying that I bought my first call options on the last day of March using my start up capital of $1K. Made some really good gains throughout the month of April, in fact tripling my money. ...I then proceeded to lose almost all of my gains in that hateful month of May that followed. Boy oh boy did I learn some lessons though! ..So it was not a completely without-value experience. I have since added some more money to my options trading account and I have since lost more. LOL. .....Nothing ventured nothing gained? Yeah. ...Soo.. I learned me some MORE lessons. Today, I sit with the following options:

(2) Nov11 $140 GLD puts (bought today as 'insurance') ...dumb?.. not sure but it's up a small amount already

(2) Nov11 $12 SVM calls (down substantially but I have time on my side... right?.. RIGHT???:)

(8) Nov11 $7.50 UXG calls (down substantially but again... "  "   "  " .............."..........."????:)

......and... ....I have some UNG Jan12 calls. ....I am embarrassed to tell you how many. ...I have LOTS of UNG calls. ...JUST LOTS. ......I bought them because I have a really good feeling about UNG. .....The TROUBLE is I'm not sure if my 'good feeling' is going to have enough time to manifest itself into gains should UNG take longer than Jan12 to really start to move. .....Pray for me. ...I know I'm praying for me. ..LOL.

That's basically it. ...I do have some more 'dry powder' that is coming to my account probably by Friday of this week and I have a list that I have made of calls that I want to buy. ....I am waiting a bit longer.....well, besides the fact that the money won't be in there until Friday.....but I am waiting to try to see where this correction goes. I DO NOT stress over trying to call the exact bottom. Stewart Thomson has taught me that. ...But I do want to get a feel for where the correction is going before I pull the trigger on buying with my very limited fiat.

I will post the calls that I am thinking of sometime this week.. ...I feel GREAT about the Fall and this next group of calls.. ...But... .....nothing is for sure.. you know.. ..NOTHING is guaranteed.

Vypuero
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Hi

oddly enough bought SLW calls today for $40 at .80 - since I think by then silver will be back up and with it SLW.  I am not experienced with options the timing is odd on them.  My last one worked - barely!  I bought some SLV calls just before they went up and made some money - like a few days before they looked dead.  In fact, since I didnt sell them fast enough I bought the SLV and you have a day to sell it back - because they were in the money.  It worked well the delay made it go up more.

I understand most people sell much earlier.  My plan this time is if silver pops, and so does SLW, I will sell some to get my $ back then see what I can do from there.

Maryann
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Lets do this...

Ginger, thanks so much for taking the lead on this!!  Today I got my Stuart Thompson subscription for his updates and junior miners.  I must admit looking over the site I felt overwhelmed and in "over my head."

However, I am determined to learn this and will begin reading tomorrow.  I need to learn basic stuff like how to determine a good option price for a stock.  I do know after reading Santa that it's best to purchase calls several months out to give you time to be right.  Also, you need to sell them halfway from when you bought to when they expire.  I suppose this is due to the time decay?

And I'm still trying to figure out the relation between open interest to price....

Tomorrow I'll post what I have...must get sleep.....smiley

ginger
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Hey Vypuero ...SLV is how I

Hey Vypuero ...SLV is how I tripled my $ back in April. ...I surely think you can still make lots of $$ in both SLV & GLD.. ...I just get a little nervous about what everyone is saying about those vehicles imploding some day. ...I like GDX & the juniors GDXJ now.. ...Will probably buy calls in both ..next week(?)

When is expiry on your SLW? ....$40 for .80 sounds like an excellent buy!

Ned Braden
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ewc58 posted about AEM 85s

Calls 'bout a week ago. Jan '12 85s bought @ .45. Had uneasy feeling yesterday and dumped them @1.90.

Makes todays carnage slightly more bearable. FYI, those calls closed today over 1.00; indicating to me that maybe the miners actually ARE coming into their own. Guess we'll see.

GLTA

ginger
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Maryann... I'm headed out

Maryann... I'm headed out too.. ...Haven't even had supper yet! :O

..Anyway.. ...Don't be overwhelmed with Thomson.. I am just loving him so far and you know that I only subscribed yesterday! ....We can talk about it all :]  .....I do not understand all the charts and TA ..BUT........his daily blog pieces are worth their weight in gold. ...Just start there and read that and then branch out from that point. It will take me a while to get through all of the archived stuff too. ...I love him for the direct no-nonsense blog pieces just as much as anything!

Nite all... .... ;)

ginger
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Ned Braden ...I wrote down

Ned Braden ...I wrote down ewc's post/calls when he was making them.. ..I did NOT have funds to follow him on that though I wanted to because he's someone who KNOWS.. and I felt he would do well with them.

Wow.. ..CONGRATS on your gains! ..That is what we all want to do here!! !! :)

murphy
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@ Ginger

I also would like to start learning options. Will be lurking around now that I've got your forum in my thread. Thanks for starting this, great idea.

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Strangle those PMs

With the volatility we've seen in the last few days, I think the last thing anyone expects is for prices to stay where they are.

Natural strategy in those circumstances would be a strangle. Buy an OTM put and OTM call. If we get significant jump or drop in prices, the one side of the trade makes up for the premium lost on the other side. Of course if your underlying holds steady for the option term, you lose. But neither gold nor silver seem to be in a mood for that these days.

I'm not sure what to expect for tomorrow, but given how the markets reacted to the last FOMC, Jackson's Hole is likely to cause a big move one way or the other.

Vypuero
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September options - so not a whole lot of time

The date is pretty close but with the volatility we have, I believe we will be up by then. I was thinking also of getting in-the-money options.  Less leverage but also less risk.

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I played a hunch that GDX was

I played a hunch that GDX was close to bottoming today so bought Oct 63,64 and 65 Gdx calls.

Just a few words of advice. Its very difficult to consistently make money in options because the deck is in favour of those who sell the options, not the buyers. So don't commit more than you're willing to lose and you will lose gauranteed. The trick of course is for your winners to greatly exceed your losers and with experience hopefully your winners willbe more frequent.

Some good advice and reminders in this thread,way to go Ginger.

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Here's to learning something

Here's to learning something new!

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Sterling
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I'm in

I'll be happy to answer any questions anyone may have - or help explain some strategies if anyone gets tripped up on how options work.

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Kumanari
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SIVR

go with sivr instead of slv though custodians are  the same (the morgue) they hold more ag .you can't escape the banksters as they are clearing house for most ....lost my words ..you know amertrade scottrade ..trading houses. I'm glad you started this forum mahalo ladies gotta hele family dinner upcountry. just skimmed thru..... buy more time G dec at least. Did you get a chance to sell whatever it was you were talking about yesterday? Minds flying too much to do Buy time buy time I just barely made it on my oct calls. I would NOT sell calls, I sold a 1900 @ 1780 and it scared the black off my ass, never again. It sucks to see your profits on your cover vortex on what you sold. I'm almost out now another day like today and I'm clean. I'm out

Eva Cassidy UNREAL!!!!!!!

a HUI HOU MALAMA PONO KAKOU

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Question on options on SLV and GLD for Sterling

Sterling - where do I locate the actual contract language on SLV and GLD options?

I read a story about Asian BOS taking positions from SLV and GLD and demanding delivery.

But, I have never been able to locate the actual options contract language.

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SLV and GLD

Since options contracts are written and bought by private parties through and independent exchange, I don't think there is any contract language provided by the ETF's themselves. 

The contract is basically this: I write a call and you buy it; it expires in the money;  I have to sell you the shares (I have to buy them on the open market if I don't already own them).  Now that you own the shares, the contract language that you would find in the ETF's prospectus would then apply to the actual shares. 

I don't see how you can take physical delivery of the metals by buying call options.   Also, I believe that with the GLD and SLV, you have to own a set percentage (or more) of the shares as defined by the prospectus to even take delivery.

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kudos

I'd like to do some options, I understand the underlying principles and a few basic spread strategies, but all I have ever done is futures and the minimum order for a silver contract is 5k ounces, also, because of the volatility the silver options have become prohibitively expensive for a small fish like me.

It sounds like I should really branch out beyond the futures world. But in the hope it might help another as so many turds have helped me, I'll throw out what little I know just for the sake of discussion:  (feel free to correct me at any point here!)

Looking at some options prices, oh i don't know lets say December Gold on the comex. Looks like a strike price of 1800 call will cost me $153. But the contract is for 100 ounces so the actual price will be $153 x 100 = $15,300.00 

Now, IF Gold closes above $1800 in December, my profit will be however much over 1800 it closes multiplied by 100, minus the cost of the option itself.

scenario 1) gold goes to 1850, I make $50 x 100 = $5000 profit, but the option cost me $15,300 so I actually lost $10,300 right? Wait no that can't be right, let me try again

scenario 2) gold goes to $1799 in December, my option is not exercised and expires worthless, I just lost $15,300.00 (this one was easier to figure out)

scenario 3) gold goes to $2000 an ounce in December (woo hoo!) Profit for me equals $200 x 100 ounces = $20,000, but the option itself still cost me $15,300 so my net profit is only $4,700 amirite?

disclaimer: I'm bad at math

Eric Original
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Great thread Ginger

I'll be lurking.

Who knows?  Maybe I'll actually just go ahead and buy a call one of these days.

For now, thinking about selling a put on UGL today.  Put some pretty fancy premium in my pocket.

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Kudos Ginger!

What a great idea you had to open a forum for newbie traders.  Good job and congratulations!

I just opened an IB account to buy gold shares, which of course, given the carnage I won't be doing right away.  And I think I have to pass a test or something before they let me trade futures.  So I'll be studying up and hopefully joining all of you after I've passed (that is IF I pass, lol!)

Good luck to all.

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@silverbleve

I have traded stocks and commodity futures for a long time.  But, like others, I haven't done calls/puts much.  I just started them about 6 months ago.

With that proviso, I think the error is that when you bought the call for $153, at the end, you neglected to sell the options contract.  If the price goes up from your strike price, then the further away from the strike price the higher the price of the call.  Therefore, when you close the contract, you make money on the difference in the price of the buy/sell.    Most of us are not going to go to expiration with the call, we will get out of it before the delivery.

On the other hand, if the price of the commodity moves against you, and you have bought a call,  then price of the call goes against you also.  If you get out early, then you lose the difference in the buy/sell of the call price.  If you go all the way to expiration, you lose the entire amount of your call.  However, that is one of  the attractions of options, in that you don't lose more than the premium on you spent.

The above is for simple buy/sell of call.  A put is slightly different, but it can become much more complex if you engage in a straddle, a butterfly, a bull spread, or several other strategies.

Again,  I am no expert, I am trying to learn, and am hopeful that some truly experienced individuals will chime in.

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