20 replies to this topic

[hedgehawk]

QID Trader, as a directional options trader you must be correct about 3 variables: Direction, Price and Time. I input your trade into a probability calculator and it came out to a 10.92% chance of the QQQQ touching 43 and a 9.3% chance of hitting your break even point by expiration. That means that if you placed this trade 10 times in a row, you would hit one time. Or 10 out of 100 times you would be correct. Based on this probability, you can only afford to wager 10% of your funds to cover the draw down. The strategy being that the one win will exceed the losses on the 9 losses. Generally, you make a play on calls/puts you should have a 80% or greater chance of a profit. Below is an url to a probability calculator. If you are so bearish on the market a better strategy would be to sell the QQQQ OTM calls say the April 45 Call for .27 (bid at close). There is 59% chance the calls you sell will expire worthless. The advantages of selling the calls is that for the most part it is a directionless trade and you dont care if QQQQ goes up or down just as long it stay below 45.00 by April expiration. So you only need to be right about 1 variable vs 3 variables in your trade. BTW, an excellent book on options is Option Volatility and Pricing by Natenberg. Its like over 10 years old but second to none when it comes to trading options. Good Luck.


http://www.optionvue.../marketvue.aspx

[Rogerdodger]

AA Didn't light any fires tonight.
EIA Petroleum @ 10:30ET
Fed Minutes tomorrow at 2ET
Would it be too much to ask the $VIX to put in a couple of white candles back up to the top BB aka mid July?

http://stockcharts.com/c-sc/sc?s=$VIX&p=D&yr=1&mn=0&dy=0&i=p75881869177&a=27927380&r=6277.png

[caspary]

QID Trader, as a directional options trader you must be correct about 3 variables: Direction, Price and Time. I input your trade into a probability calculator and it came out to a 10.92% chance of the QQQQ touching 43 and a 9.3% chance of hitting your break even point by expiration. That means that if you placed this trade 10 times in a row, you would hit one time. Or 10 out of 100 times you would be correct. Based on this probability, you can only afford to wager 10% of your funds to cover the draw down. The strategy being that the one win will exceed the losses on the 9 losses. Generally, you make a play on calls/puts you should have a 80% or greater chance of a profit. Below is an url to a probability calculator. If you are so bearish on the market a better strategy would be to sell the QQQQ OTM calls say the April 45 Call for .27 (bid at close). There is 59% chance the calls you sell will expire worthless. The advantages of selling the calls is that for the most part it is a directionless trade and you dont care if QQQQ goes up or down just as long it stay below 45.00 by April expiration. So you only need to be right about 1 variable vs 3 variables in your trade. BTW, an excellent book on options is Option Volatility and Pricing by Natenberg. Its like over 10 years old but second to none when it comes to trading options. Good Luck.


http://www.optionvue.../marketvue.aspx

One doesn't have to wait for expiration. e.g. if tomorrow QQQQ drops say 1-1.5%, I bet you those puts might even double in price i.e. 100% gain. They could be closed tomorrow, one has to be quick and on stand-by to do so, or limit order to close . Having said that, personally I would have bought ITM puts or sold OTM calls like you suggested.

[SemiBizz]

Or just buy QID in brute force

[hedgehawk]

QID Trader, as a directional options trader you must be correct about 3 variables: Direction, Price and Time. I input your trade into a probability calculator and it came out to a 10.92% chance of the QQQQ touching 43 and a 9.3% chance of hitting your break even point by expiration. That means that if you placed this trade 10 times in a row, you would hit one time. Or 10 out of 100 times you would be correct. Based on this probability, you can only afford to wager 10% of your funds to cover the draw down. The strategy being that the one win will exceed the losses on the 9 losses. Generally, you make a play on calls/puts you should have a 80% or greater chance of a profit. Below is an url to a probability calculator. If you are so bearish on the market a better strategy would be to sell the QQQQ OTM calls say the April 45 Call for .27 (bid at close). There is 59% chance the calls you sell will expire worthless. The advantages of selling the calls is that for the most part it is a directionless trade and you dont care if QQQQ goes up or down just as long it stay below 45.00 by April expiration. So you only need to be right about 1 variable vs 3 variables in your trade. BTW, an excellent book on options is Option Volatility and Pricing by Natenberg. Its like over 10 years old but second to none when it comes to trading options. Good Luck.


http://www.optionvue.../marketvue.aspx

One doesn't have to wait for expiration. e.g. if tomorrow QQQQ drops say 1-1.5%, I bet you those puts might even double in price i.e. 100% gain. They could be closed tomorrow, one has to be quick and on stand-by to do so, or limit order to close . Having said that, personally I would have bought ITM puts or sold OTM calls like you suggested.

Yes, i agree a sell limit order at say .15 +/- .01 based on vol is best exit strategy. $42.65 is a 2 standard deviation move and $42.92 is break even (not incl commissions) so the odds of the QQQQ making a 2 standard deviation move in the next 1.5 weeks is a 5% chance. Much better odds in Vegas.

[J.Bilkins]

I've been seeing alot of people buyng options on 5-10 dollar stocks lately. Seems not only amateur but complete beginner for the most part...I only mess with lunch money with options but seems that most pros I have listened to try to always stick do the much higher priced stocks.....deltas first, betas second? Any specifics on Implied volatility etc. used by many here? Never got a coment on DNDN yesterday so figured nobody was any good at options...I couldn't figure out the action myself so stayed away....

[Rocketman]

Wow, 25 years old eh?, and your name is Greg Guts? I sympathize with you and felt compelled to tell you, I have been trading Options since 1987 and I have been there and done exactly that in my earlier years, going for the glory and adrenaline rush, etc. With all due respect to the fracman, he has been calling for that Same decline for the last 3 weeks I believe, his expected High could also occur right on OE Day 4/20-23, where I have the most important turn for the April Month and just like in his 1966 fractal. Your options would then expire worthless, what would you do then? OK, here's a scenario forecast for you: sideways to UP into 4/12-13, then a One day potential mini Plunge Pullback into 4/16 around 10-11 am LOW, before we rally once again into 4/20-23 Highs. If you still have your Puts by 4/16 Low, then I would get out by the 10-11 am Low. All Fwiw and Good Luck. Ian Hey All, I took the plunge today and bought a sizeable chunk of April 43 QQQQ Puts. Wish me luck! I figured if the Hankster is right (and I am pretty confident that he is) then this is a once in a lifetime opportunity to strike it rich in a few days. I am expecting a 10 bagger at least. If so yours truly will be riding around in a new Beamer next week Come on F8 Crash! [/quote]

[denleo]

One guy bought puts and generated so much interest and responses. So what, he bought puts? If he bought out of the money calls, nobody would even care. Right? Bearish talk sells (generates a lot more interests). Like in the news -- there is always something bad or potentially bad. Why? Because who the hell would watch 30 minutes of "Today was a good day and nothing bad happened, and nothing bad will happen"? Same here. But some people think this is sentiment. Now I will tell you what happens next. He sees the market down tomorrow (big maybe) and sells those puts. I guarantee you that. Denleo

[securelstmile]

QID Trader, as a directional options trader you must be correct about 3 variables: Direction, Price and Time. I input your trade into a probability calculator and it came out to a 10.92% chance of the QQQQ touching 43 and a 9.3% chance of hitting your break even point by expiration. That means that if you placed this trade 10 times in a row, you would hit one time. Or 10 out of 100 times you would be correct. Based on this probability, you can only afford to wager 10% of your funds to cover the draw down. The strategy being that the one win will exceed the losses on the 9 losses. Generally, you make a play on calls/puts you should have a 80% or greater chance of a profit. Below is an url to a probability calculator. If you are so bearish on the market a better strategy would be to sell the QQQQ OTM calls say the April 45 Call for .27 (bid at close). There is 59% chance the calls you sell will expire worthless. The advantages of selling the calls is that for the most part it is a directionless trade and you dont care if QQQQ goes up or down just as long it stay below 45.00 by April expiration. So you only need to be right about 1 variable vs 3 variables in your trade. BTW, an excellent book on options is Option Volatility and Pricing by Natenberg. Its like over 10 years old but second to none when it comes to trading options. Good Luck.


http://www.optionvue.../marketvue.aspx

I just want to thank you for that very educational post. Good stuff!

[OEXCHAOS]

One guy bought puts and generated so much interest and responses. So what, he bought puts? If he bought out of the money calls, nobody would even care. Right? Bearish talk sells (generates a lot more interests). Like in the news -- there is always something bad or potentially bad. Why? Because who the hell would watch 30 minutes of "Today was a good day and nothing bad happened, and nothing bad will happen"? Same here. But some people think this is sentiment.

Now I will tell you what happens next. He sees the market down tomorrow (big maybe) and sells those puts. I guarantee you that.

Denleo

I just feel compelled to comment whenever I see somone loading up on a wild speculation, long or short, against the trend. It's not the direction, it's the approach that generates my response.

Mark