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Bill: You bring up some very good points. I need to get straight with my
broker how I wish to handle the exercise of the short side should that
happen. Right now, all of my positions have much time value. Of course it
doesn't matter if the short options are not in the money. I will instruct
my broker that upon an unexpected exercise to purchase the stock at the
market and deliver it at the strike. Then I can decide wether to sell the
long side of the spread or sell another option against it. I'll let you
know what they say.
I'd like to hear what you think about my other positions.
1. LTXX Bought 10 UTX WE (Nov 25 Put) @ 4 3/8
6/2/00 Sold 10 UTX TX (Aug 22 1/2 Put @ 2 1/16 Spread = 2 5/16
2 XLNX Bought 5 ZIZ AN (Jan70 Call) @ 17
5/30/00 Sold 5 XLW IN (Oct 70 Call) @ 12 3/8 Spread = 4 5/8
3 CMVT Bought 5 CQZ AP (Jan 80 Call) @ 17
5/25/00 Sold 5 CQZ JX (Oct 82 1/2 Call) @ 13 1/8 Spread = 3
7/8
4 ATML Bought 2 YHE AI (Jan 02 45 Call) @ 16 1/2 Spread = 12
5/16/00 Sold 2 AQT HJ (Aug 50 Call) @ 4 1/2
As I write 1. is 1 15/16, 2. is 3 3/4, 3. is 4 3/8 and 4. is 13 1/8 so
two of these four have overcome the initial spread deficit and the other two
have improved from that initial spread loss in fairly short order. The
scariest thing to me is when you first buy your spread you immediately lose
the bid/ask differential and it takes as much as 15 to 30 days to recover it
depending on the stock movement. I detest this drawdown but it is part of
the process.
The AIQ Option Expert program does predict a Stock Price based on their own
formula (black box). I don't use it much but punch in my own expected
price. I look for spreads that will be profitable over a wide range of
stock prices and only on Stocks with excellent upside expectations so I can
hedge a position with long stock if I feel it to be appropriate.
Also I want a BreakEven Probability above 90 %. I examine a range of
projected prices with an upside bias and try to keep the BreakEven
Probability above 90 for that range.
I've been using this software for about a Month
I'm using eDreyfus. Most trades are 15.00 per side, in and out. Their
rates are 1.75 per contract with a 15.00 minimum. I've been happy except
for the one no-fill, and they rectified that the next morning. Their non
spread fills are immediate at the bid or ask and I am considering trying to
leg into my spreads with them as reporting is almost instantaneous. The
danger is of course that you may get caught in a price shift between your
two orders (could be in your favor).
Will enjoy your comments. I'm also going to put this on the list. I hope
other option people will give me their thoughts as well. Thanks Much, Bob
----- Original Message -----
From: <CalaxCorp@xxxxxxx>
To: <rhbishop@xxxxxxx>
Sent: Saturday, June 10, 2000 3:57 AM
Subject: Re: [RT] Re: OPTIONS
> In a message dated 6/8/00 12:39:42 PM Pacific Daylight Time,
rhbishop@xxxxxxx
> writes:
>
> > Subj: [RT] Re: OPTIONS
> > Date: 6/8/00 12:39:42 PM Pacific Daylight Time
> > From: rhbishop@xxxxxxx (rhbishop)
> > Sender: listmanager@xxxxxxxxxxxxxxx
> > Reply-to: rhbishop@xxxxxxx
> > To: realtraders@xxxxxxxxxxxxxxx
> >
> > Bill W.
> >
> > Thanks for your info. I would indeed like to know about Ameritrade's
on
> > line spread order capability. Please send to me privately if you wish
at
> > rhbishop@xxxxxxxx
> >
> > Now for the second part. I'm just somewhere North of a beginner with
> > spreads. I'm using software called AIQ Option Expert which works with
> > either delayed or realtime MyTrack feed. Total Cost delayed 39 / Month
> > Realtime 59/Month (I Think). Takes all the quotes etc for a Stock and
> > computes the best trades for each major strategy. I use for stocks but
can
> > be used for futures option too. I'm impressed for the price but have
> > nothing to compare with. I'm looking for conservative Bull Diagonal
and
> > Time, Neutral Time, and Bear Diagonal and Time Spreads depending on my
> > outlook for the underlying. I'm finding some super ROI figures at
better
> > than 90% Breakeven Probability. Many at 99 to 100% BE. If you have
> > questions I'll be happy to reply. If you have suggestions, I'll be
even
> > happier.
> >
> > Bob
> >
> Hi Bob,
>
> Ameritrade accepts spreads (verticle, time and box) , straddles and
> strangles. Only one to one (no ratio spread). I usually enter as limit
> credit or limit debit orders inside the bid / ask, to get a little price
> advantage. They only accept day orders (not good-til-cancel) for option
> spread orders. Fill reports usually come back by email (because I chose
so,
> otherwise they can fax, mail or call the same day) within an hour, which
is
> not the greatest, but acceptable. I never had price hitting my order
price
> and did not get filled (10 contracts each, on semi-active stocks). When I
> enter the order and push "Submit", the order-entry confirmation request
> screen gives me the read back plus the current market bid/ask and last
price
> traded, for each of the legs of the spread. Since I don't have real time
> option bid/ask data from my data feed, that's what I use to check the
current
> prices. Commission is about $35 (without looking up the exact figures)
per
> side per leg on the internet. Calling live broker is about $45. Options
are
> not marginable in Ameritrade. Cash must be in account before they would
> accept an option order. If you have more questions, please ask or visit
> their web site. So far I like it for position trading. I have not found
any
> faster on-line option accounts (like Level II stuff) that would take
option
> spreads.
>
> You also asked if I had suggestions on your option trading. I do have a
> comment or two on the opton example trade you gave-- long ADI Jan02 90C
and
> short Jan01 95C with net debit of 13 1/8. With current stock price at
about
> 95 and the opton buyer of your Jan01 95C paying about $20 time premium for
> his investment, it is not likely that he will exercise his calls at this
> time. However if the stock price moves up a lot when it gets closer to
> Dec00, the chance of exercise increases significantly. Upon exercise,
> Ameritrade will not notify you ahead of time (I dont know if they can or
any
> other broker will or can) but just liquidates your long Jan02 90C in order
to
> deliver the stock to the short call side. All the remaining time premium
in
> your long Jan02 call will be wasted and you will lose ($95 - $90 is less
than
> the $13 1/8 net debit you paid). Are you prepared for that? How will
you
> prevent that from happening? Or how will you handle that? The delta for
> the Jan02 90C is probably not higher than the short Jan01 95C. Also, the
> stock is at about 105 P/E ratio (extremely high). What is your holding
> period? If long to intermediate term, the high P/E stuff may be dangerous
> (stock price dropping below $90-- maybe that's what you want between now
and
> Jan01, then hope for the stock price to go up by Jan02). But I don't know
> the probability of any of these happening, as much as what I dont know
where
> the stock market will be tomorrow.
>
> So what I am trying to say is-- has the computer AIQ considered all these
> when it gave you the scan for the "best" position?
>
> When you said AIQ gives you a trade with 90% to 100% probability of
breaking
> even, how does it (or what does it do to) estimate the price of the
> underlying stock before or at expiration date ??
>
> The price for AIQ and MyTrack is fantastic. Not much out there can beat
that
> price. I have also considered using AIQ. I ordered the package a few
months
> ago but it is still sitting in a box due to my other more urgent projects.
> How long have you been using AIQ?
>
> Sorry for the long-wind reply.
> Your feedback and comments are welcome.
>
> Sincerely,
> Bill W
>
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