Calls and Puts for Income | Stock Discussion Forums

SiliconInvestor

register

Strategies & Market Trends | Calls and Puts for Income

Previous 10 | Next 10

To: Robohogs who wrote (4823)	2/20/2011 10:47:54 AM
From: Robohogs	of 5710

Anyone else having trouble in this mkt? I have sarted going bi-directional after starting mainly as a put seller. The problem is that the short calls are murder in a strong trending mkt. Playing some of the higher vol stocks, i had several move 20+ % straight up after a 4-5% headfake down. Adjusting collars for move 1 kills int move 2. I can never decide whether to stay and figt or take losses. If i take losses stock often reverses as I get out. And if I stay in, it keeps going. I had 2-3 losses of 3% of portfolio value this last cycle but ended up 5-6% on sheer number of winners despite the big losses and another loss equal to 2% related to put spreads on indices given my overall bearish inclinations. I flipped from uber long to flat in Sept/Oct which has made life tough in this rampaging bull which has gone 100+ days wthout more than a 3 day correction if memory serves. Partof the above is selective memory as the big losses stand out due to human psychology but feels like I never get it right despite trading around broken positions. I may return to roots of only selling puts on companies with cash equal or more than the strike. Also I would include what I call anti- bankruptcy plays, i.e., selling Cal 2.5 and DAL 2.5 puts back when stocks were mid-single digits. Last part of this strategy is selling calls against obvious bankruptcies which worked well for me in TMA and CIT but killed me due to a stampede before the bk in ABK. This also worked well in some over-hyped bios (CTIC to name one, MNKD as another). This did kill in HGSI which went to 2.5x my favorable expectation on trial results. I was working with house $ there though due to previous call buys into my target. Jon

Share	Recommend \| Keep \| Reply \| Mark as Last Read

To: Robohogs who wrote (4822)	2/20/2011 5:42:43 PM
From: dealmakr	of 5710

Hi Jon, I like doing NP's and CC's on beaten up stocks like KLIC,BRCD,XRX,EK etc that the market has cast aside as long as the risk/reward is there and prem is enough. Also do NP's on quite a few others like CSCO,GE for longer durations. Etrade not doing weekly options has me rethinking my business with them, have been with them since they took over Brown &Co. No execution problems, but when your an options trader you need every edge possible and the weekly series has become very important to me and I use Ameritrade to put on the positions there. You have to wonder why with Citadel a huge options MM they don't have this capability. The new webisite was to me a total disappointment as it just slowed things down a lot. Sometimes when things ain't broke you shouldn't try and fix them. As far as trading troubles on stuff, I can feel the pain when my naked calls are exercised and the machines just keep ratcheting things up. Was exercised on 2/11 naked calls for 4500 IWM @ 82 and sold the 82 puts for 2/19 for .56. With all prem recieved short puts and calls am now under water, but not by too much, also going into this weekend will be short another 3500 IWM @ 83 and 2000 SPY @ 134 via options expiration, so you can see where my bias lies as far as the market goes. This market is ignoring too many issues with the absence of fear and when the turn comes a lot of froth will be taken out IMHO. Haven't traded the others that you mentioned Like SKX,MMI, but always on the lookout for opportunity. Good trading dealmakr

Share	Recommend \| Keep \| Reply \| Mark as Last Read \| Read Replies (1)

To: dealmakr who wrote (4825)	2/20/2011 9:12:17 PM
From: Robohogs	of 5710

Thanks Deal, How is Ameritrade vs Etrade in terms of special mtce requirements? I missed a good trade last month due to a stock being a 50 percent of strike/mkt value requirement when stock has had moderate vol and high IV. And because I run margin tight esp at end of cycle, I had to pass. How careful are you on margin? How do you determine position sizing? I ask because I had one position last cycle which was notional equal to 1/3 of equity with 10 percent cushions both directions. A 45 percent spike had me down 7% of account value which was only that good due to repairs (stock at that point was 25% above all-time highs on over-hyped earnings and a fake buyout story). I used another play (a 35% margin requirement near the upper strike but with 90 percent of profits made) to clean up margin and then the super-losing position spiked down 15 percent. I got to down 5% YTD at one point and it looked like first losing month since April. The down spike recouped 5-6% of account value, a few good new trades (although I skipped two great trades in old faves which would have added 1-2% overall), and theta then brought me back to PLUS 7 percent for the year. So even without the down spike I would have been back to flat for month and slightly up for year. And I knew it would be close even when I was down 5% YTD given the expected worthless inventory in my account. But nice recoveries in MMI (to upside) and in MMR and MIPS (both to downside) added a few percent. Of course after holding for whole period, I closed MIPS mid-afternoon Friday and MMR late morning at reasonable profits only to see both spike down causing me to miss a few grand of profits. I can never get these close-outs right. I almost closed out the short put side of a short MMI $30 straddle but did not as it was unclear which side of strike MMI would close and it did spike late to $30.03, but funnily enough more of the short puts (which was half the size of the short calls) exercised against me than short calls. Add in 0.5% of "fun" lottery plays on expiry Friday which went worthless (should have known GOOG would pin as it does every big option expiry - always pins to noonish price which is almost always a strike). I go into so much depth on a few to warn others what can go wrong and to seek response. This position size was not unusual for me, just wrong timing and too much volatility for a position that big. And when I did repair strategies, I probably could have gotten out of a bad trade down 1 percent of account value (after being down 2-3% on the open on the day the trade went awry) but tried to go for profit. Of course some of my biggest gains have come from keeping the risk and even adding depending on conviction levels. Some of the recent trades have been a new strategy meant to target higher vol plays, and I am concluding I need to halve risk size now given how lucky I just got. Jon

Share	Recommend \| Keep \| Reply \| Mark as Last Read \| Read Replies (2)

To: Robohogs who wrote (4826)	2/20/2011 9:37:13 PM
From: Robohogs	of 5710

I just audited my account and it is nice to see cash withdrawal power back up to half the account value but I did not fully realize I was going to get sooo long with exercises. I daytraded what would have been a getting short MMR into getting long (pretty large size), had another mediocre daytrade flip on me near the close (puts exercised into me for pretty large size), and had the aforementioned MMI deliver me shares when I thought I would be getting short (very moderate size but the flip is pretty darned big). I did renew my 1-2% of account value SSO put spreads (which lost me 20% of premium paid in the upspike late Friday while the long lotteries all misfired). Oh well. The net impact of all of this has me much longer than I was with a bunch of short calls closed out and the new longs (which are about 125% of the value of the delta of the put spreads added adjusted for the leverage in SSO). And I still expect a washout soon. Jon

Share	Recommend \| Keep \| Reply \| Mark as Last Read

To: Robohogs who wrote (4826)	2/21/2011 8:07:33 AM
From: dealmakr	of 5710

Hi jon, I get portfolio margin capability from both Etrade & Ameritrade so it allows me quite a bit of leverage if desired. Position sizing is difficult (especially when you think that you are right LOL), but you have to trade the size that you feel comfortable with and weigh the what ifs all of the time to adjust your risk parameters. One position representing 1/3 of equity for me is just too large a risk and usually don't go for anything more than 10-maybe 15% of portfolio on any trade and only if it can be hedged or is extremely liquid like SPY,IWM etc, where this week I have an overly large short position, but only against cash not margin and can be rehedged easily. Going out on margin is something that I have stayed away from mostly over the past few years as its not worth the risk/reward ratio that I use. Have been through the ups and the downs over the years most of my trades are like singles or doubles like Pete Rose and not swinging for the fences like Barry Bonds, but thats just me. More higher percentage plays that use a lot of theta and are farther away from the action are where I usually like to dabble for recurring income when writing NP's and can put on a lot of positions using portfolio margining, but like anything else they have to be monitored every day for risk adjustment. I guess that the best thing that I can sum up in trading strategy is management of risk and trying not to get too greedy and have the market take away all of your profits when things go against you too much. There will be winners and losers in trading and when things are going well its harder to think about the things that can go wrong, but they are out there all of the time just waiting to crush you. Good trading dealmakr

Share	Recommend \| Keep \| Reply \| Mark as Last Read \| Read Replies (1)

To: dealmakr who wrote (4828)	2/21/2011 10:49:00 AM
From: Robohogs	of 5710

Thanks Deal, The main reason i have not used portfolio margining is the forced risk control of less margin. On your high percentage stuff are you using margin? Do you stick with 4-5 weeks and less? I have been playing wit different things and concluded to go lower risk and smaller. In one recent strategy, the losses on high risk trades swamped the winners. My only saving grace was 2-3 huge winners, one a naked straddle and a few naked short strangles. My selection has been good - trades passed would have been killers. I did make 2-3 lapses, the biggest of which I described. I also got stubborn shorting education. Thank goodness for winners. Jon

Share	Recommend \| Keep \| Reply \| Mark as Last Read \| Read Replies (1)

To: Robohogs who wrote (4829)	2/21/2011 5:22:01 PM
From: dealmakr	of 5710

"The main reason i have not used portfolio margining is the forced risk control of less margin" jon, Portfolio margin in the account gives you access to more margin capability not less and you then have to be real careful of not getting into trouble by being overleveraged. The account is stress tested for volatility and around a 15% move up or down and margin is then adjusted, also there is a minimum account valuation applied and the account has to be approved. Here is some info on porfolio margin; nyse.com On a lot of the higher percentage trades that I put on mostly NP's for income, will go out in timeframe as far as 6-9 months, lower percentage trades like weeklies close to the strikes are shorter durations. When trying to do the trades on stocks like BRCD, I try for putting on and adjusting positions every month for income until the risks to me outweigh the rewards. KLIC @ 5-6 was a much better play and could put on a larger position more comfortably than KLIC @10, so out it went and the next batter will come to the plate, theres always another player. One thing about the market is that it has a very unforgiving nature when it comes to being right or wrong, the market is always right at that particular point in time. Profits or losses can come from your own vision of the future, so give your glasses a wipe, clean your computer screen, turn on some good tunes, grab a bourbon(only after market hours of course) and be flexible in your thinking. So try and post some trades when you do them. Good Trading dealmakr

Share	Recommend \| Keep \| Reply \| Mark as Last Read

Previous 10 | Next 10

Copyright/IP Policy

Copyright © 1995-2013 Knight Sac Media. All rights reserved.