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MightyOne
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Postby MightyOne » Sat Mar 09, 2013 6:19 pm

FinTrader wrote:In your example, where you bought 10 contracts at a price of 90 and bought additional 10 contracts at a price of 100, how many calls do you write with strike price of 95?
20 (the full position)?

What are you doing, if price is further rising? Your profits won't increase because you've written calls. So you have to buy new contracts and sell calls again, at what prices?


"... So you have to buy new contracts and sell calls again..." -FinTrader

No, no you don't :lol:

Our focus is the survivability of SPACE & income through SIZE and WRITING.

"... Your profits won't increase because you've written calls..." -FinTrader

Your profits, from long Futures, won't increase when price moves sideways or down either.
Take into consideration the fact that options expire & how likely it is that price will just go vertical instead of:

a) price moves sideways/down and expires below:
the options are worthless and the payday is yours.

b) price moves sideways/up and expires above:
we don't receive as much as we could have but we still get paid.
the thing that bothers us the most is if we cannot quite reach our
original stop position (00) when we reenter; in this scenario, reentering
for 16 lots would give us 25% more 'stop space'.

c) price moves down:
If we spent $6000 on puts then we would need the 20 calls to decline in
price by $300/ea before we could offset our writes; this should easily be covered by the options intrinsic value.
reducing our contract size to 16 would push back our stop by 25% of the remaining space and the 8 puts would then 'over cover' our position equal to 16/8 or twice the remaining space.

Covers and Collars are our main strategy, not our only strategy.

If you don't understand the Space Wars strategy then this will probably seem like the dumbest thing you have ever seen in print.

:lol:

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FinTrader
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Postby FinTrader » Sat Mar 09, 2013 9:15 pm

Ok, I think I understood.
You are going to write the calls only IF you see or expect the price going sideways or down. In case the options get executed, you reenter.

Thank you.


PS: What's "Space Wars"... (just kidding :wink: )

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Postby FinTrader » Sun Mar 10, 2013 10:42 pm

MightyOne wrote: I think that professionals speak negatively about DOTM options because they do not want YOU to buy them; legging into DOTM spreads can lead to a profit potential that is beyond your imagination.
What happens if you buy 100 DOTM calls for $10 and then hedge with the $20 higher strike (after a favorable move/inc. volatility) for $12?
1) you get a credit of $200
2) you have a chance at $400000 (100 winning vertical spreads).
Even if you have a 3% chance :D ...


Hi MightyOne,
could you please explain this a little bit in more detail? An example would help.
Thank you in advance.
/Fin

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MightyOne
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Postby MightyOne » Sun Mar 10, 2013 11:39 pm

I don't understand what you need explained.

If you buy 100 DOTM calls and later generate a credit then you have money in hand and the opportunity of 100 winning vertical spreads.

While the options are likely to EXPIRE WORTHLESS they are NOT necessarily likely to expire worthless before you can generate a credit by legging into a spread.

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Postby PebbleTrader » Mon Mar 11, 2013 3:25 pm

Thanks MO.
Life is just a journey

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Postby PebbleTrader » Tue Mar 12, 2013 3:53 am

MO,

I have a gift for you, check your gmail :)
Life is just a journey

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MightyOne
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Postby MightyOne » Thu Mar 14, 2013 1:58 am

PebbleTrader wrote:MO,

I have a gift for you, check your gmail :)


Thank you =)

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Postby PebbleTrader » Mon Mar 18, 2013 5:44 pm

I have taken a detour and have been studying "futures / commodities" since I don't have much of a background / experience in that either.

Also been reading more and more on options, latest book I'm reading is "Option Volatility & Pricing - Natenburg"

My accelerated learning approach is always to read from many different sources / authors as each one describes things in different ways and in varying details.
Life is just a journey

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Postby PebbleTrader » Tue Mar 19, 2013 12:26 am

ICTK13, for example, I can't figure out how to see what prices were over the past many years? I tried ICTK12, ICTK11, ICTK10, etc.

How do I see what the historical prices have been?

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RicG
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Postby RicG » Tue Mar 19, 2013 1:05 am

Hey PT,

Is that a futures chart that you're asking about? I trade futures (CL and NQ), but don't recognize that symbol. If your question is futures related I might be able to help.

Ric

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