Options Strategies

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Thu, Aug 25, 2011 - 10:43am
Eric Original
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Uh-oh!! Not a call option virgin anymore!!

Just bought 5 Jan '12 42 GDXJ calls. $2.00 each. That's $1,000 at risk. Fingers and toes crossed.

Ginger, this is all your fault!

This isn't a metals blog anymore. It's a right wing circle jerk, masquerading as a metals blog.
Thu, Aug 25, 2011 - 10:48am
Irene
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Eric

If you're not in the money by Jan '12, I'll eat my hat!

Thu, Aug 25, 2011 - 10:52am (Reply to #22)
Sterling
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Not to put you on the spot or

Not to put you on the spot or anything but what's your exit strategy if you don't mind me asking?

Can I offer you a drink? How about this expensive prostitute?
Thu, Aug 25, 2011 - 11:08am (Reply to #24)
Eric Original
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exit strategy

No way I'll be holding until January. I'm looking at this as (hopefully) a fairly quick in and out. If GDXJ gets back to around 36 I'll take a look at it and consider just cashing in my chips.

Reasonable? Or am I thinking too small time? I think if I make $300-$400 bucks, that's a win.

This isn't a metals blog anymore. It's a right wing circle jerk, masquerading as a metals blog.
Thu, Aug 25, 2011 - 11:23am (Reply to #25)
Sterling
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Agreed. I definitely would

Agreed. I definitely would sell no later than a few days before Christmas. Thin volume and funds rebalancing after the first of the year.... I bet there would be a hell of a drop in premium unless the calls are deep in the money by then.

$300 to $400 on a $1,000 risk is definitely a win especially for a few short months. It won't take much for them to get that high.

My problem is that I tend to get a little bit greedy and try to hold out for a bit more and then they move against me. That's where the self-discipline thing comes in handy!

Can I offer you a drink? How about this expensive prostitute?
Thu, Aug 25, 2011 - 11:28am
Joseph Lawrence
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Thanks for the new thread.

Appreciate the new forum Ginger - I have been trading options in SLV and GLD for the last two years and was hoping to see more on the boards here. I have had my hat handed to me many times, but overall I am up significantly for the year (over 2X my starting account). I very rarely use spreads and am mostly directional being long puts or calls. One big thing that I have learned to do with options is that unless you are very good with timing, is to buy expiry longer that your anticipated hold times. Also, I have learned to be very careful when buying into volatility as the vega can be more damaging than gamma if you over look it. Time decay is also the worst in the last two weeks up to expiration for what it is worth.

With all that said, I will certainly be lurking here and if I can add anything I will certainly try. (NOTE: I have only traded options for 2 years. What I have learned, I have learned the hard way :) )

Thu, Aug 25, 2011 - 11:35am (Reply to #26)
Eric Original
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Yeah, I don't want any part

Yeah, I don't want any part of that last month before expiration. The time value in the premium drops like a stone.

For now I'm just swimming against a mild current (time decay). By Christmas I'd be like a salmon trying to jump up the falls. No Thanks.

This isn't a metals blog anymore. It's a right wing circle jerk, masquerading as a metals blog.
Thu, Aug 25, 2011 - 11:59am
ginger
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Oh.. ...and thanks for the

Oh.. ...and thanks for the reminders/caution on the time decay.. ...That's another key mistake I keep making. ...Held Aug11 HL calls (10) past being $70 up for them with only 2 weeks to go!.. ..S*T*U*P*I*D! ugh.. ....over the final 2 weeks.. ........ ...well.. ....expired worthless.

...I'm a believer now in not holding too long.

Thu, Aug 25, 2011 - 11:59am
wisesilverwolf
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Why buy SLV when you can buy AGQ?

First let me introduce myself and options background... I started trading options about 2 years ago with TradeMonster. My account is well in the GREEN so I took out some profits around Xmas 2010 and converted some of my trading profits for hard assets.

Until recently I was trading Silver Wheaton (SLW) since it gave good leverage to the price of silver. This year though SLW (and all the miners) have been underperforming compared to the price of silver... so although I have a core stock holding in SLW which I plan to hang on to for a few more years until silver is above $200, I have stopped buying options on SLW due to the disconnect between it and the silver price. I will probably trade SLW in the future when it starts performing "sensibly" :)

Now I trade AGQ... simply buying OTM call options. When silver moves up AGQ moves up x2. If you are trading options it is because you want extra leverage to the silver price.... so instead of trading SLV why not trade AGQ options instead and get double the leverage?

I also subscribe to the newsletter service at SKOptionsTrading.com and although I do not mirror their trades exactly I find it helpful to have someone else other than the Turd giving me their trading tips. It's very easy to make and lose money with options... so I find paying for some good advice makes me more money than the subscription costs.

Timing is everything with options so you have to keep your eye on them. One day can be the difference between a winning trade and a losing trade in these volatile markets.

Thu, Aug 25, 2011 - 12:00pm
ginger
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I am SO thankful that so many

I am SO thankful that so many of the TALENTED turdites have checked in here!! ....(I was afraid that I would be in here listening to the echo of my own voice ..and that Maryann and Terri and I would financially devastate each other with our circle of advice to one another ..lol)

K.. ....I did sell my gdx the day you spoke up about it. (TY!..I learned) ...I bought at .12 and sold at .32. ..It was the first thing I've done right w/calls since May. ..BUT.. ...now I'm humble, cautious, hopeful ...careful. ..SIVR looks good. ...although they don't give many choices ..spet, oct.... too close ..dec or mar12 seem expensive.. But you get what you pay for no doubt with this vehicle so it is on my seriously considering list. .............I hear you on the time.. I will buy TIME on this next round. ...I am considering: sivr, uxg, gdx, gdxj. ...Does anyone suggest any of the dollar or bond or equity short funds? ...Or stay strictly with the gold/silver calls? I may add more longer ung calls also. Got a thing for ung apparently. "/ ............(Eva Cassidy ...AGREED!.. ..My 14 yo is a new fan as well)

EricO! ...You BOUGHT calls!!?!!! :O .......well.. ..that makes me HaPpY! :D ...gdxj is a must buy for me either tomorrow or next week. ....I predict that you will not rue the day you made this buy. I hope I am right..... because if you are unhappy I will be in that same boat with you!

Oh.. so much good info offered here by everyone. ..Thank you from the bottom of my heart guys.. ..I read everything. I and others here are going to prosper because of you.. TY!

Thu, Aug 25, 2011 - 12:06pm (Reply to #28)
kjm
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I think you'll be okay

I think you'll be okay Eric....at least I sure hope so.

Just one observation for those considering Gdx or Gdxj calls. Last week when all was rosy, the cash was really pouring into the large caps, not so much the small caps, so I think in the short term at least Gdx will do better. If you want to go Gdxj, give yourself lots of time.

Thu, Aug 25, 2011 - 12:09pm
ginger
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Hello Wisesilverwolf! ...I

Hello Wisesilverwolf! ...I know this may sound like a newbie mistake ..or at least very naieve ..but AGQ at least for me ..seems very expensive for calls. I think that is what attracts many to the SLV and related vehicles. AGQ is trading at about $210 right now and 1 $350 contract is priced at $19.00 ......I do understand though that this vehicle really moves when it gets moving so the volatility can make you a killing ...or lose you a killing. ...I think that is what keeps some of us out of it though. ...The calls are awfully high. Also.. the volume doesn't seem as much as on some of the other plays.. ??

Am I looking at it all wrong? You've obviously done alot right in your trading so I'd definitely like to know more.

I agree that you need mentors ..whether it's subscription or otherwise.. to help with trading decisions...

Thu, Aug 25, 2011 - 12:12pm
ginger
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kjm ...Do you think that gdxj

kjm ...Do you think that gdxj will 'catch up' with the money into juniors if/when the silver spot takes off? ....I guess that's an obvious 'yes' answer there. ...Some smart guys out there are saying that silver is on the edge of a huge move to the upside. GDXJ could turn around pretty quickly this Fall.. ?....

Thu, Aug 25, 2011 - 12:13pm
wisesilverwolf
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Options Charts? HELP

Anyone know a service/website to view option prices in a chart? I would love to see the prices over time in a chart and compare this to the underlying asset... otherwise I am just using best guesses to what the previous and future prices are/will be.

Thu, Aug 25, 2011 - 12:18pm
rock collector
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Bought some GG Calls Wednesday

Bought some GG calls Wednesday.
One each of the following:
GG 01/21/2012 50.00 C @ $4.45
GG 01/21/2012 52.50 C @ $3.40
GG 01/21/2012 55.00 C @ $2.60
GG 01/21/2012 57.50 C @ $1.88 Also bought 1 - NGD 01/21/2012 12.50 C @ $1.50
I did not quite catch the lows of the day though.

I figure this current smackdown/manipulation in Au will be relatively short lived and does not reflect the actual fundamentals. The Jan expiration on these calls gives me ample time (150 days) to be proven correct.
I definitely plan to sell these call before January arrives. If they are doing well by mid December, that would be the prudent time to sell them if I don't sell them earlier.
More than once I have gotten into big trouble hanging on to call options with less than one month til expiration. If there is any sort of beatdown in that last month, you will have almost no time to recover.
If anything like that does happen, I can try to rescue the situation by rolling out (rollout) the option a few months further.
GLTA and be careful!



Thu, Aug 25, 2011 - 12:24pm (Reply to #33)
wisesilverwolf
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RE: Ginger

Yes AGQ calls/puts are more expensive... but just buy less of them :)

I generally look where the volume for the day is trading and buy at that area. Generally these are the round numbers like 200, 250, 300, etc.

There is not a lot of volume but there are a decent number of BIDS and ASKS. There will always be a buyer when you want to sell AGQ options... maybe just not at as nice a price as you like.

The difference between the BID and ASK is more than in SLV or SLW... so you lose a bit of money there... but when you are up 200% in a few days or a week this is less of a factor. For example just before the smashdown this week I managed to sell my SEPT 250 calls at a nice profit - but looking at todays price they are worth 1/3 what I sold them for. If I had bought some puts before the takedown this week I could have tripled my money in a few days. (however I am always a bit scared to buy PUTs in gold and silver in case something crazy happens like CME defaults, WW3, etc).

Thu, Aug 25, 2011 - 12:40pm (Reply to #34)
kjm
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A lot of funds obviously are

A lot of funds obviously are still nervous about committing large amounts of capital into gold stocks for whatever reason, but when they do, they always go with the blue chip large caps and profitable intermediates. As these stocks start to run up in price, more cash will start flowing downhill into the juniors. Even when gold hit 1900, it never had much effect on the juniors. If silver breaks out it will help gdxj, but it will still probably underperform gdx for a month or two.

Thats my take anyhow.

Thu, Aug 25, 2011 - 1:06pm (Reply to #35)
rock collector
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Re: Options Charts? HELP

Schwab StreetSmart offers 2 ways for you to view historical option data. Your brokerage should offer something similar.
First, Schwab offers in a descending column format, date and closing price of the option and the closing price of the stock (sorry, no intraday charts available). You can scroll down to past dates and see where the option was priced when the underlying stock was at a certain level. Don't forget to factor in how much time is remaining on the option when it was priced. If you go back several months you might see an slightly inflated option price. An option with 6 months remaining usually has a larger premium than one with two months remaining.

Using GG for example you can look back to Aug 22 when GG was $53.95, the Jan 2012 55 Call was priced at $5.05. On Aug 24, GG closed at $48.57 and the Jan 2012 55 Call was priced at $2.76.
A 9% drop over two days in the price of the stock resulted in a 45% drop in the option price. Comparing the movement and relationship of the option price to the underlying stock price is pretty crucial. It's very handy to be able to look back a month or two but sometimes the historical data only goes back so far.
The 2nd tool Schwab offers is a visual chart that tracks the option price movement to the stock price movement using an overlaying graph line. This charting tool has tabs for different time periods. I almost always use the longest: the 9 month chart. (charts of 3mo, 1mo, 1week are also available). One thing I try to look for on this visual chart is when the option price hasn't kept up with the stock. Often they follow each other in lock step. An option may be a little underpriced (i.e. a bargain) if it lags.

In any case, I feel I need to have strong conviction about the underlying stock and where it is going (and knowledge of where it has been) as a prerequisite for getting involved with its options. I have been less successful buying/selling options in stocks that I did not know as well as others. Stick with what you know best and if you are new to this keep it pretty small and by all means take solid profits when you can.
Hope this helps and good luck!

Thu, Aug 25, 2011 - 1:16pm
margaritatime
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MargWitt

I'm a Dimwitt and a Margwitt! Besides, I heard this is where all the cool people hang out. Thanks for starting this forum Ginger!

Thu, Aug 25, 2011 - 1:29pm
Maryann
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Very helpful info Rock Collector

That information on charts was so helpful. Thank you very much! I am going to my Optionshouse and see if I can find it.

I am looking at NGD. I have two calls in my virtual account that are doing very well- I wish I had them in my real one! So, I am trying to figure out what to buy. Ewe58 mentioned buying NGD calls today as well.

I had bought a TRE and a GPL but that was before I figured out the best thing to buy is a stock that is pretty consistently going up. Duh! I do have some time on them so maybe I can break even? At least it was just a tiny amount of money.

Ginger, you are right that if it was just us we'd be pretty pathetic, although you are rocking along and will be playing with the big boys long before me!

Thank you to all who are taking pity on us and posting your knowledge and lessons learned!

Ginger, hope all is well with you and your family with that storm a'comin!

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