24 replies to this topic

[scott in Wisconsin]

I'm puzzled by the QLD. It doubles my upside gains on the QQQQ. That's nice. But if I think the QQQQ is going up, why not 4-5 times leverage? I can buy the October 40 calls on the QQQQ for $11.55, when the QQQQ is at 51.45. Essentially no premium for the time. So I can spend $5K on 100 shares of QLD (trading at $108) or on 500 shares using calls, and more than double my exposure. Or I could spend just $1155 to get the same exposure to the upside as I would spending $2500 using QLD. The best part is, I get dollar for dollar on the upside, but if it falls I start to pick up time value, and don't lose a full dollar for each dollar it falls. Sure, I have to roll it over each month. Not a big deal at $8 using Tradeking. Thoughts? Scott

[youmast]

Buy 40th strike and watch what happens next.... Options with no premium get executed pretty fast. Once my put was executed $6+ in the money. To be in options... you have to pay PREMIUM. No free cheese. No idiots on the floor. Good luck

[Drano]

Scott, some people also can't get options approval for IRAs. No choice but to buy equities, and something like QID enables shorting with some leverage.

[scott in Wisconsin]

Buy 40th strike and watch what happens next....

Options with no premium get executed pretty fast. Once my put was executed $6+ in the money.

To be in options... you have to pay PREMIUM. No free cheese. No idiots on the floor.

Good luck

You're confused. I'm buying the Call. I'm the one who decides if it gets exercised.

The person selling me the call can't make me exercise. All he can ever do is try to buy the call back from me.

So as with all call options purchases, I have the right to the upside. All the way til the expiration day.

Any other objections? (I agree that some accounts can't use options, but that wouldn't stop most QLD buyers . . .)

Scott

[youmast]

Oups... you're right. I usually trade spreads (long and short options), and very often my contracts executed before expiration. Yes, that's when I sell options. That is why I used to trade options closer to the strike.

[vitaminm]

if call gets executed u may sell stock immediately if u don't want.
u may buy Nov-40 call at slight higher premium and avoid near term expiration date.

http://finance.yahoo...QQQ&k=40.000000

Edited by vitaminm, 27 September 2007 - 11:25 AM.

[Jnavin]

QLD is an easy way to hedge quickly if I have short positions. It's uncomplicated -- no strike price, no expiration date, just price times 2. I don't have to think about the details.

[scott in Wisconsin]

u may buy Nov-40 call at slight higher premium and avoid near term expiration date.

http://finance.yahoo...QQQ&k=40.000000

Sure, and a little more for December, etc. You just weight the trading costs versus the premium.

You can go out 6 months for a $1 premium. ($40 March calls for $12.50 when the QQQQ is at $51.5)

The premium for October is only about $.15. So do you want to trade that 6 times, or pay the premium all at once? May depend on your trading costs.

And is it smart to pay that $1 premium -- about 2% -- for 6 months upside at 4-5x leverage? If the market goes up 5% in that 6 months, it seems well worth it.

If the market just sits, you will lose your $1, which you won't lose with the QLD.

Scott

QLD is an easy way to hedge quickly if I have short positions.

It's uncomplicated -- no strike price, no expiration date, just price times 2.

I don't have to think about the details.

Sure, but then you could get 4-5x the hedge just by paying the Asked on QQQQ calls $10 in the money.

Not complicated. Go out 1-2 months, count back $10 from the current QQQQ price, and pay the asked. Very liquid and small asked/bid spread.

Just a thought.

Scott

[vitaminm]

I'm puzzled by the QLD. It doubles my upside gains on the QQQQ. That's nice.
But if I think the QQQQ is going up, why not 4-5 times leverage?

I can buy the October 40 calls on the QQQQ for $11.55, when the QQQQ is at 51.45. Essentially no premium for the time



So I can spend $5K on 100 shares of QLD (trading at $108) or on 500 shares using calls, and more than double my exposure.

Or I could spend just $1155 to get the same exposure to the upside as I would spending $2500 using QLD.

The best part is, I get dollar for dollar on the upside, but if it falls I start to pick up time value, and don't lose a full dollar for each dollar it falls.


Sure, I have to roll it over each month. Not a big deal at $8 using Tradeking.

Thoughts?

Scott

Also u may earn money market interest on $3990(5145-1155)

Edited by vitaminm, 27 September 2007 - 11:43 AM.

[NAV]

I'm puzzled by the QLD. It doubles my upside gains on the QQQQ. That's nice.
But if I think the QQQQ is going up, why not 4-5 times leverage?

I can buy the October 40 calls on the QQQQ for $11.55, when the QQQQ is at 51.45. Essentially no premium for the time.

So I can spend $5K on 100 shares of QLD (trading at $108) or on 500 shares using calls, and more than double my exposure.

Or I could spend just $1155 to get the same exposure to the upside as I would spending $2500 using QLD.

The best part is, I get dollar for dollar on the upside, but if it falls I start to pick up time value, and don't lose a full dollar for each dollar it falls.


Sure, I have to roll it over each month. Not a big deal at $8 using Tradeking.

Thoughts?

Scott

Scott,

QQQQ is trading at 51.5 as i type. For the Oct 40 strike, bid 11.57 ask 11.62. If you get filled at 11.60, then you have a time premium of 10 cents, which is miniscule, but not zero. That's always been the case with deep in the money options, which have little time premium built into them.

As for the argument of QLD vs QQQQ calls, yes i don't see anything wrong with your argument. You get more bang for you buck with less risk than by owning QLD. The only downside i can think of is, if you are a very active trader, the bid/ask spread can make it less efficient than trading the QLDs, where the bid/ask spread is more tighter.