24 replies to this topic

[scott in Wisconsin]

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

Good point. Roughly speaking:

Buy the QQQQ at $5150,
Buy the QLD at $2550
Buy Oct 40 calls at $1150

Same upside. Less downside, since calls would not fall dollar for dollar.

Then put the saved money out at 5% in a MM account.

Scott

[vitaminm]

$1 premium/5months=0.20 premium per month !!!!!

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

[NAV]

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

Same upside. Less downside, since calls would not fall dollar for dollar.


Scott

That is only partially correct. The calls would not fall dollar for dollar as the delta decreases for the lower strikes. That means you would accumulate that (1-delta) as time value, which is insignificant and will anyway decay over time. So in effect, you would dollar for dollar, unless you lose big time, in which case the time value you accrue as a result of low delta will be meaningless cuz you will be licking your loss wounds big time

[arbman]

Scott, the most profitable trades within the daily or weekly range are usually with the delta 0.7-0.8 unless you expect a wild move, then you should go for the premium and buy lower delta...

[vitaminm]

QQQJN Octo 40call

http://quotes.freere...s...mp;x=33&y=8

QQQQ


http://quotes.freere...s...amp;x=0&y=0

call...6 to 11.50 ........ plus interest
stock 45.5-51.50

[Jnavin]

Working Very Hard A martial arts student went to his teacher and said earnestly, "I am devoted to studying your martial system. How long will it take me to master it." The teacher's reply was casual, "Ten years." Impatiently, the student answered, "But I want to master it faster than that. I will work very hard. I will practice everyday, ten or more hours a day if I have to. How long will it take then?" The teacher thought for a moment, "20 years."

[scott in Wisconsin]

$1 premium/5months=0.20 premium per month !!!!!




QQQJN Octo 40call

http://quotes.freere...s...mp;x=33&y=8

QQQQ


http://quotes.freere...s...amp;x=0&y=0

call...6 to 11.50 ........ plus interest
stock 45.5-51.50

Vitamin,
I'm not great at reading minds.

You posted twice on this topic, without making any point I could fathom.

And now until March exp. is 6 months, not 5.

Please, spell it out. WHAT are you trying to say??? Humor me.

Scott

[vitaminm]

$1 premium/5months=0.20 premium per month !!!!!




QQQJN Octo 40call

http://quotes.freere...s...mp;x=33&y=8

QQQQ


http://quotes.freere...s...amp;x=0&y=0

call...6 to 11.50 ........ plus interest
stock 45.5-51.50

Vitamin,
I'm not great at reading minds.

You posted twice on this topic, without making any point I could fathom.

And now until March exp. is 6 months, not 5.

Please, spell it out. WHAT are you trying to say??? Humor me.

Scott

Then $1/6month =0.17 premium per month one may loose if stock stays at same level

Did u study the above link charts for your option?

[scott in Wisconsin]

call...6 to 11.50 ........ plus interest
stock 45.5-51.50


Then $1/6month =0.17 premium per month one may loose if stock stays at same level

Did u study the above link charts for your option?

Ah, is your point that while the QQQQ went up $6, the options only went up about $5.5?

So the QQQQ went up 14% while the option went up 90%

That's good leverage. Limited downside.

And remember, the $40 call was not so far in the money back when the qqqq hit $45.5, call at $6.

Are you suggesting we only go $5 back in the money, and do even better?

So now we should buy the $45 call, rather than the $40, and buy twice as many?

The real question is, how far back does one go, to reduce the premium, while keeping good leverage. If you don't in-the-money very far, you get killed if the stock just sits.

Scott

[vitaminm]

SPy/sfbjj oct140call

in the money call in last aug 15-17


http://quotes.freere...s...mp;x=37&y=6

spy

http://quotes.freere...s...mp;x=36&y=6

spy gained $12 while call option did $6