No lack of OPTIONS

free & uncensored discussion arena for TheRumpledOne

Moderator: moderators

aliassmith
rank: 1000+ posts
rank: 1000+ posts
Posts: 1667
Joined: Tue Jul 28, 2009 9:50 pm
Reputation: 21
Gender: Male

Postby aliassmith » Wed Feb 20, 2013 8:52 pm

SELLING a call option gives you the OBLIGATION to provide the underlying at an agreeded upon Strike price if the price of the underlying is in the money.

You receive a Premium for this OBLIGATION.


This is the next piece of the puzzle.
Last edited by aliassmith on Wed Feb 20, 2013 9:23 pm, edited 1 time in total.
Trade Your Way as Long as It Makes Money!

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

lazygeorge
rank: 150+ posts
rank: 150+ posts
Posts: 157
Joined: Sun Aug 23, 2009 7:01 pm
Reputation: 0
Gender: Male

Postby lazygeorge » Wed Feb 20, 2013 9:10 pm

selling a CALL is the same as buying a PUT?

aliassmith
rank: 1000+ posts
rank: 1000+ posts
Posts: 1667
Joined: Tue Jul 28, 2009 9:50 pm
Reputation: 21
Gender: Male

Postby aliassmith » Wed Feb 20, 2013 9:25 pm

lazygeorge wrote:selling a CALL is the same as buying a PUT?

no i corrected it!
Trade Your Way as Long as It Makes Money!

User avatar
MightyOne
rank: 5000+ posts
rank: 5000+ posts
Posts: 5247
Joined: Wed Dec 10, 2008 6:33 pm
Reputation: 46
Gender: Male

Postby MightyOne » Thu Feb 21, 2013 5:22 am

You BUY a call or you BUY a put for the right but not the obligation to purchase the underlying at the strike price; for this right you pay what is called a 'premium'.

When you SELL a call or SELL a put this is called 'writing' the option.
When you write an option, you collect the premium and take the other side of the option BUYER's position (unlimited potential loss in your case).
-----
When you write an option, without hedging, it is known as 'naked writing'.
While it may sound crazy to write naked call options, it is really not that different from shorting the outright.
That said, your broker will likely not allow you to write naked options!
-----

If you understand your tools then you will know which one to reach for.

Should I trade vanilla, straddles, condors, or verticals? Understand each of them and you will know which one to reach for.

When you hit your button to short a Forex pair, you know exactly what must happen in order for you to profit; option strategies are no different.

aliassmith
rank: 1000+ posts
rank: 1000+ posts
Posts: 1667
Joined: Tue Jul 28, 2009 9:50 pm
Reputation: 21
Gender: Male

Postby aliassmith » Thu Feb 21, 2013 2:43 pm

MightyOne wrote:You BUY a call or you BUY a put for the right but not the obligation to purchase the underlying at the strike price; for this right you pay what is called a 'premium'.

When you SELL a call or SELL a put this is called 'writing' the option.
When you write an option, you collect the premium and take the other side of the option BUYER's position (unlimited potential loss in your case).
-----
When you write an option, without hedging, it is known as 'naked writing'.
While it may sound crazy to write naked call options, it is really not that different from shorting the outright.
That said, your broker will likely not allow you to write naked options!
-----

If you understand your tools then you will know which one to reach for.

Should I trade vanilla, straddles, condors, or verticals? Understand each of them and you will know which one to reach for.

When you hit your button to short a Forex pair, you know exactly what must happen in order for you to profit; option strategies are no different.
Thx for stopping by and giving your description/definitions. Whenever you have time stop by!
Trade Your Way as Long as It Makes Money!

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

aliassmith
rank: 1000+ posts
rank: 1000+ posts
Posts: 1667
Joined: Tue Jul 28, 2009 9:50 pm
Reputation: 21
Gender: Male

Postby aliassmith » Thu Feb 21, 2013 3:03 pm

aliassmith wrote:SELLING a call option gives you the OBLIGATION to provide the underlying at an agreeded upon Strike price if the price of the underlying is in the money.

You receive a Premium for this OBLIGATION.


This is the next piece of the puzzle.


Now my first example is using the basic short range day followed by a large breakout day zline setup as my previous pic showed. I consider BUYING a call option instead of going long. The strike price I consider is in the bottom 25% of the momo candle. This gives you a long position with defined risk and unlimited reward. Some people may say that TIME/Theta will be an issue. We are actually looking for price to move in our favor in the next few bars/days.

Now we reduce our RISK even more by creating a spread. We sell a call option at a FOTM strike price. By doing this we reduce our overall cost for the position creating a https://www.tradeking.com/education/opt ... all-spread
Trade Your Way as Long as It Makes Money!

lazygeorge
rank: 150+ posts
rank: 150+ posts
Posts: 157
Joined: Sun Aug 23, 2009 7:01 pm
Reputation: 0
Gender: Male

Postby lazygeorge » Thu Feb 21, 2013 4:03 pm

Aliassmith can you give an illustrated example please :)

For example a chart showing a hypothetical strike that would be " in the bottom 25% of the momo candle"

And a hypothetical " FOTM strike price" (how far out of the money?)

Sorry for this but like they say...a chart is worth more than a thousand words...or something like that :)

aliassmith
rank: 1000+ posts
rank: 1000+ posts
Posts: 1667
Joined: Tue Jul 28, 2009 9:50 pm
Reputation: 21
Gender: Male

Postby aliassmith » Thu Feb 21, 2013 4:46 pm

lazygeorge wrote:Aliassmith can you give an illustrated example please :)

For example a chart showing a hypothetical strike that would be " in the bottom 25% of the momo candle"

And a hypothetical " FOTM strike price" (how far out of the money?)

Sorry for this but like they say...a chart is worth more than a thousand words...or something like that :)


I hope this pic is worth at least 100 words. Anyway I can't give exact number because you will need to figure out which ones to get based on your needs and value at the time. You may pay $6 for the long call and get a premium of $2 for your Short call https://www.tradeking.com/education/opt ... short-call
Attachments
smallbodymomobuycall.gif
smallbodymomobuycall.gif (3.11 KiB) Viewed 724 times
Trade Your Way as Long as It Makes Money!

lazygeorge
rank: 150+ posts
rank: 150+ posts
Posts: 157
Joined: Sun Aug 23, 2009 7:01 pm
Reputation: 0
Gender: Male

Postby lazygeorge » Thu Feb 21, 2013 5:04 pm

aliassmith wrote:
lazygeorge wrote:Aliassmith can you give an illustrated example please :)

For example a chart showing a hypothetical strike that would be " in the bottom 25% of the momo candle"

And a hypothetical " FOTM strike price" (how far out of the money?)

Sorry for this but like they say...a chart is worth more than a thousand words...or something like that :)


I hope this pic is worth at least 100 words. Anyway I can't give exact number because you will need to figure out which ones to get based on your needs and value at the time. You may pay $6 for the long call and get a premium of $2 for your Short call https://www.tradeking.com/education/opt ... short-call



Thanks aliassmith,that helps alot

User avatar
Jalarupa
rank: 1000+ posts
rank: 1000+ posts
Posts: 1138
Joined: Tue Feb 23, 2010 5:50 pm
Reputation: 2
Location: South Africa
Gender: None specified
Contact:

Postby Jalarupa » Thu Feb 21, 2013 6:59 pm

"our deepest fear is not that we are inadequate... our deepest fear is that we are powerful beyond measure... It is our light, not our darkness that most frightens us..."

I trade using <<FX SYNERGY>>

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.


Return to “TheRumpledOne”