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John
I've seen similar strategies used trading futures. Used them myself many
years ago without a lot of success. I've found it sort of like kissing your
sister. Yes it does limit your risk, but it substantially limits your
profits as well.
Let's see if I understand you. If you write your call option at $15.00, you
make $1,500. Then you would have to buy a call option further out at, let's
say $10.00. That way you have nothing invested (you actually make $500 less
commissions) and as long as the market moves the way you think it should,
the further out calls should drop faster than the call you wrote. If the
trade goes against you, you have at least limited your exposure since you
own a call to effectively offset the one you wrote, albeit now under water.
I guess that makes sense, but I'd have to think about it. My first thought
is that as long as we're able to maintain our current probability of
success, are we better off just buying the puts and calls that we want and
not bother writing anything? I really don't know and I am trying to learn
the best approach to use. Today I bought 10 OEXST at $17, while my brother
selected OEZSR Puts.
We'll have to follow this through.
Guy
Paranoia...you only have to be right once to make it all worthwhile!
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of John Sellers
Sent: Tuesday, June 20, 2000 11:23 AM
To: metastock@xxxxxxxxxxxxx
Subject: RE: Selecting options or writing uncovered options
Please consider the placing of the writing of a call option say at value x
and also purchasing a call option at 5 or 10 dollars higher in price to
protect your position with a an approximate maximum loss. This strategy most
brokers feel more protection and should make them more accommodating.
This method can also be used to Puts also. Practice moderation in the
beginning as incorrect positions are costly. I used this approach with OEX
options in the past.
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx
[mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of John Manasco
Sent: Monday, June 19, 2000 3:20 PM
To: metastock@xxxxxxxxxxxxx
Subject: Re: Selecting options or writing uncovered options
Guy
Are you going to write options only on indexes or also on stocks? My broker
requires $100,000.00 and lots of history to write naked index options.
John Manasco
----- Original Message -----
From: Guy Tann <grt@xxxxxxxxxxxx>
To: Metastock User Group <metastock-list@xxxxxxxxxxxxx>
Sent: Monday, June 19, 2000 2:49 PM
Subject: Selecting options or writing uncovered options
> List,
>
> Well, here I come again from our normal position of ignorance.
>
> We're planning on getting more involved with options. For our next sell
> signal that could arrive any day now, we plan on writing SPX Calls and OEX
> Calls in addition to buying SPX and OEX Puts. We have very little
> experience buying options and have had beginners luck with our first 5
> trades. Now we're going to get a little serious here and try to make a
few
> bucks.
>
> We've each budgeted $10,000 for buying options and another $10,000 as our
> exposure writing options.
>
> Now, I'm busy reading my option book, like a good little student. Since
we
> lucked out with our previous trades we're feeling overconfident. :) I do
> have a question regarding buying options (since I haven't gotten to that
> chapter yet):
>
> How should I select what option to buy? Currently I select 'in the money'
> options and look for option months that have a pretty large open interest.
> Is there a formula or a decision process we can apply to pick the right
> option month?
>
> In terms of writing uncovered options, my question is basically the same.
> How do we determine which options to write? I guess, even more important
> is, do we write options that expire out 3 months or would we write the
near
> month options? Again, since we're short term traders and will probably be
> buying these back before they expire, my guess is that we should write the
> near month.
>
> Additionally. my idea is that we should write 'in the money' options with
> pretty good open interest. Again, I'm sure there is a methodology
somewhere
> that would help us make a semi-intelligent decision.
>
> Any recommendations or thoughts would be appreciated.
>
> Thanks,
>
> Guy
>
> Paranoia...you only have to be right once to make it all worthwhile!
>
>
>
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