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David,
Can you further elucidate your meaning that further ITM options have more
octane? i.e. more movement, therefore more profits, and/or more loss?
My question derives from looking at, for instance today's OEX puts and their
current range. The OEXUN put at 470, way OTM, had a 33% range from low to
high, whereas the OEWUH put at 540, almost ATM, had only a 18% range, and as
you go into the ITM puts the percentage range was less and less. I'm
calculating these percentages strickly based on money in ratio to money out.
Isn't that correct? So on this basis, the very OTM OEXUN had a much better
return on investment if gotten in near the low than the ITM puts. And this
particular put, OEXUN has a sizable OI also.
Please correct my understanding, or enhance it so that I understand your
point.
Cool Trading,
George Van Noy
jorxj@xxxxxxxxxxxx
-----Original Message-----
From: David Donhoff <deltaforce@xxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Wednesday, August 19, 1998 10:30 PM
Subject: Re: market/oex update: NOT hindsight
>Gary,
>
>I LOVE your enthusiasm.... AND "word to the wise;" do be cautious with the
>way you choose your options' strike prices and expiration dates.
>
>As you see in my e-name, I AM into the "Delta-Beta" stuff. A good way of
>thinking about options (especially OEX options) is that the closer to ATM
>(At-The-Money) or deeper ITM (In-The-Money) the option is, the more
>HORSEPOWER and higher OCTANE it has. The farther OTM (Out-of-The-Money) it
>is, the more immature and weak it is.
>
>You COULD "afford" more OTM options... since they SEEM to be cheaper, but
>they would be significantly weaker in movement (profits and losses) than
the
>ITM or ATM options. In truth, looking at "bang for your buck," the OTM
>options are usually NOT the way to go for short term traders who are
>confident in direction and timing.
>
>If you're very certain about your direction and timing predictions, I would
>buy the options 1 to 2 strikes IN-The-Money (even if you can afford less of
>them), because as the market moves, they will kick HEAVY profits directly
>into your account.
>
>Remember, trading options IS playing with fire! Use stop-losses carefully,
>because if your prediction is wrong... very wrong, and the market goes the
>OPPOSITE direction, the horsepower you just harnessed will take AWAY your
>cash just as quickly (faster than the weak, immature Out-of-The-Money
>options).
>
>OTM options are best used by SELLING them, for the purpose of their
decaying
>into profits by us buying them back at a fraction of what we sold them for
>(either naked selling, or covered calls or puts.) In the OEX, Puts tend to
>be artificially overpriced, and therefore better for those selling to
>collect premium (that's Theta Decay.) In the stocks, it's usually the
CALLS
>that are falsely overpriced (because the public loves them, but doesn't
>usually understand them), which is why Covered Calls have become so popular
>in this Bull Market.
>
>As a rule of thumb, only SELL options for premium-collection with 4 weeks
or
>less of time left before expiration. If they are stock options, and go
>In-The-Money during the last week, roll them forward (buy back and sell the
>next month) on Monday or Tuesday before expiration... don't wait, or you
>COULD be surprised by an early exercise (really a nasty surprise if it's
>never happened to you before.)
>
>Good luck, and welcome to the gun-slinging brotherhood of aggressive option
>traders... AND take it from a fellow brother... be VERY careful in the
>beginning as you learn, so you don't have to take those "time-outs" that
>happen when we temporarily run out of capital from "lessons learned" from
>the live markets.
>
>All the best, and Aloha,
>Dave
>
>-----Original Message-----
>From: khanitha <charlie@xxxxxxxxxx>
>To: BobRABCDEF@xxxxxxx <BobRABCDEF@xxxxxxx>; RealTraders Discussion Group
><realtraders@xxxxxxxxxxxxxx>
>Date: Tuesday, August 18, 1998 5:48 PM
>Subject: market/oex update: NOT hindsight
>
>
>>
>>If anyone cares,
>>
>>i bought 1 aug 520 call at 11.5 (yes, i'm kicking myself for not buying
the
>>540's!!!,
>>it would of been more bang for my limited buck, oh well) my goal was 552
on
>>the oex.
>>i will try to take profit at 30, which will be around 550, today it
settled
>>at 24.
>>then i am loading up on 510,520,530, maybe even 490 puts (sep).
>>if it were you, what strike would you chose if the goal is 450, maybe 410
>>before
>>expiration. bottom line, i want the biggest "multiple" of 3k to ?
>>Anyone do that delta, beta stuff? all i want to know is this: if
tomorrow
>>we have a big up day again and the 520 sep put is down to 6 and i get 5.
>>then if we go to 460,
>>the "6" goes to atleast "60" for atleast 10 times my investment.
obviously
>>i want
>>more than that, but i notice some even deeper out of the money have a big
>>premium.
>>anyone: through out a strike to me, which will have the BIGGEST % gain if
>>we go to 460 or lower, i'm loading up an hour or so after the open
>>tomorrow, so please e-mail me asap!!!
>>thanks
>>gary
>>hawaii
>>
>>----------
>>> From: BobRABCDEF@xxxxxxx
>>> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>>> Subject: Re: oex powerplay update
>>> Date: Monday, August 17, 1998 1:26 PM
>>>
>>> Feedback...11.5?..why did you wait so long to get onboard?
>>>
>>> BobR
>>>
>>> In a message dated 98-08-17 18:49:25 EDT, charlie@xxxxxxxxxx writes:
>>>
>>> << Subj: oex powerplay update
>>> Date: 98-08-17 18:49:25 EDT
>>> From: charlie@xxxxxxxxxx (khanitha)
>>> Sender: owner-realtraders@xxxxxxxxxxxxxx
>>> Reply-to: charlie@xxxxxxxxxx
>>> To: realtraders@xxxxxxxxxxxxxx (RealTraders Discussion Group)
>>>
>>> Hi rt's
>>>
>>> here goes: I bought one 520 aug call at 11.50 today $1,150.oo it
>>settled
>>> at 15 or so.
>>> my goal is in the 30's, currently an order to get out at 33. then load
>>up
>>> on sep puts
>>> later this week or early next week. Fantasize with me a moment :)
>>------
>>> It hits 33 on thurs/fri then i buy 520 sep puts for around 6 in about
a
>>> week (5 of them with the 3k), then the market crashes and the oex is at
>>400
>>> before mid-sep, and the 520's are at 120!
>>> 20 times 3k equals 60k starting with $1,150.................
>>> stay tuned.......
>>> feedback to all rt's appreciated......
>>> gary
>>> hawaii
>>> >>
>>>
>>
>
>
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