No lack of OPTIONS

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PebbleTrader
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Postby PebbleTrader » Wed Feb 20, 2013 4:37 pm

"To keep it simple we will just talk about longs for a monent. Buying a single call option is a long play"

Here is how I remember Call = Long, Put = Short:

I think of "Call" like I'm going to "Call" someone up on the telephone, so "Call UP".

I think of "Put" like I'm going to "Put" someone down, or make fun of them, etc, so "Put DOWN".
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Postby aliassmith » Wed Feb 20, 2013 4:42 pm

Ya when I first started with options about 18 years ago I had to remember it like that. Although later when we do spreads a call position can be short. :) BTW don't get to excited about the 18 years ago. I am no GURU. I failed with options miserably and my broker got me messed up. This was before online trading was really popular.
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Postby rushN4 » Wed Feb 20, 2013 4:42 pm

aliassmith wrote:
aliassmith wrote:Alright then, I wouldn't be discussing options by myself.

Start with a few definitions.
BUYING a Call option gives you the RIGHT to request the underlying at an agreed upon STRIKE PRICE, if the option is In The Money (ITM). You pay a premium for that right.


To keep it simple we will just talk about longs for a monent. Buying a single call option is a long play. As you can see in the basic MO 101 pic i posted of zline setup a call option could be used instead of buying the underlying and using a stoploss. Have you ever had your stoploss hit and then price went your direction? The call option has a defined risk and no need for a stoploss.


what would be better on a simple pattern like this.....Buying a Call where time decay shrinkes the OPtionsprice every Day a little but you have unlimited Profit potential. Or Selling a Put where time Decay is Working for you but your Profit is limited to the Option Premium

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Postby lazygeorge » Wed Feb 20, 2013 4:43 pm

nice analogy PT...

Is that woman for real...or is it just hyped up to plug TOS? :D

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Postby PebbleTrader » Wed Feb 20, 2013 4:44 pm

"as i understood it she trades wide Index Strangles with a delta of 5(%) so there is a 95% chance that these Option will be ATM on expiration and that means that she collect the full Premium 95% of the time."

That sounds about right.

I think it was a smart move for her to move away from individual stocks to the largest indexs.
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Postby aliassmith » Wed Feb 20, 2013 4:45 pm

rushN4 wrote:
aliassmith wrote:
aliassmith wrote:Alright then, I wouldn't be discussing options by myself.

Start with a few definitions.
BUYING a Call option gives you the RIGHT to request the underlying at an agreed upon STRIKE PRICE, if the option is In The Money (ITM). You pay a premium for that right.


To keep it simple we will just talk about longs for a monent. Buying a single call option is a long play. As you can see in the basic MO 101 pic i posted of zline setup a call option could be used instead of buying the underlying and using a stoploss. Have you ever had your stoploss hit and then price went your direction? The call option has a defined risk and no need for a stoploss.


what would be better on a simple pattern like this.....Buying a Call where time decay shrinkes the OPtionsprice every Day a little but you have unlimited Profit potential. Or Selling a Put where time Decay is Working for you but your Profit is limited to the Option Premium


Well Selling a naked put could be done depending on your financial situation and your broker. Selling a naked put has limited profit and unlimited loss.
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Postby lazygeorge » Wed Feb 20, 2013 4:48 pm

"wide Index Strangles"

I suppose aliassmith will eventually get round to explaining these...its all a bit alien to me when you go beyond talking about CALLS and PUTS :)

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Postby Dillinger » Wed Feb 20, 2013 4:59 pm

aliassmith wrote:
rushN4 wrote:
aliassmith wrote:
aliassmith wrote:Alright then, I wouldn't be discussing options by myself.

Start with a few definitions.
BUYING a Call option gives you the RIGHT to request the underlying at an agreed upon STRIKE PRICE, if the option is In The Money (ITM). You pay a premium for that right.


To keep it simple we will just talk about longs for a monent. Buying a single call option is a long play. As you can see in the basic MO 101 pic i posted of zline setup a call option could be used instead of buying the underlying and using a stoploss. Have you ever had your stoploss hit and then price went your direction? The call option has a defined risk and no need for a stoploss.


what would be better on a simple pattern like this.....Buying a Call where time decay shrinkes the OPtionsprice every Day a little but you have unlimited Profit potential. Or Selling a Put where time Decay is Working for you but your Profit is limited to the Option Premium


Well Selling a naked put could be done depending on your financial situation and your broker. Selling a naked put has limited profit and unlimited loss.


selling cash secure puts is a great way to collect a little extra money while you are waiting for a stock/commodity to get down to the price you would like to own it at.

The only difference between a nake put and a cash secure put is you have enough money in your account to actually buy the shares if price drops to that level and you get assigned.

I only sell puts on things i have the money to buy if assigned and at a level i wouldnt mind owning it incase you do get hit.

aliassmith
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Postby aliassmith » Wed Feb 20, 2013 5:08 pm

Dillinger wrote:
aliassmith wrote:
rushN4 wrote:
aliassmith wrote:
aliassmith wrote:Alright then, I wouldn't be discussing options by myself.

Start with a few definitions.
BUYING a Call option gives you the RIGHT to request the underlying at an agreed upon STRIKE PRICE, if the option is In The Money (ITM). You pay a premium for that right.


To keep it simple we will just talk about longs for a monent. Buying a single call option is a long play. As you can see in the basic MO 101 pic i posted of zline setup a call option could be used instead of buying the underlying and using a stoploss. Have you ever had your stoploss hit and then price went your direction? The call option has a defined risk and no need for a stoploss.


what would be better on a simple pattern like this.....Buying a Call where time decay shrinkes the OPtionsprice every Day a little but you have unlimited Profit potential. Or Selling a Put where time Decay is Working for you but your Profit is limited to the Option Premium


Well Selling a naked put could be done depending on your financial situation and your broker. Selling a naked put has limited profit and unlimited loss.


selling cash secure puts is a great way to collect a little extra money while you are waiting for a stock/commodity to get down to the price you would like to own it at


https://www.tradeking.com/education/opt ... ecured-put

It has its place for sure, but not recommended for new options trader.

I was considering this as a way to trade without a stoploss and have risk control. https://www.tradeking.com/education/opt ... /long-call
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aliassmith
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Postby aliassmith » Wed Feb 20, 2013 5:17 pm

Well I didn't have a pic of an uptrend but a call option can be used to buy the dips of an up trend. The real discussion about them is when should we buy them? Which one should we get, ITM, ATM, OTM, FOTM? Thats when your account size is a factor and DELTA.
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