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I traded options as a market maker and traded my own money. There is a difference between that and trading for someone else. I was able to retire in 1985, so I do know about options trading.
By definition the majority of the options will go out worthless. All the calls above the expiration price and all the puts below the expiration price go out worthless. Because my options went out worthless doesn't mean that I lost money.
An example. Say the greater fool theory works and GOOG looks like it should go out at 460+/-. If I sell the 440/450 put spread for 1.25 credit and the 480/470 call spread for a 90 cent credit I have a total credit of 2.15, These are prices that are currently doable. If GOOG goes out on expiration day between 250 and 270 I get the credit. Guess what My long options would go out worthless. Did I lose money on the positions. No. what it did allow for was a limited risk and limited margin. Margin is only applicable to one side. The side with the greatest risk. In this case the call side. Why do the spreads instead of just being naked short? Ask those traders that lost millions in 1987 why you shouldn't do that.
Ira
www.thetradersguide.net
----- Original Message -----
From: Ben
To: realtraders@xxxxxxxxxxxxxxx
Sent: Monday, February 12, 2007 2:24 PM
Subject: Re: [RT] google
most people who just buy options wind up loosing money
cboe statistics says 80%
there are however ways to still makes money with options
and
the more you read ,the more the uneducated gets confused,
the hard thing for most people, Is to understand , how, when the stock moves, up or down, it effect their position,
example
say you are bullish in xyz stock
the stock is at 30
you buy July 35 calls
sell June 40 calls and sell July 25 put
buy 20 put, this is even with credit that added money to your account!!
this is a win if it goes down and win if it goes up,
the problem comes when you need to REPAIR the position
say the stock drops to 25,
now you are a loosing on your short 25 put
and loosing on your long 35 calls
also
making money on your 20 put and on your short 40 calls
did one compensate for each other? sometimes yes and sometimes no
there is MUCH more then meets the eye in options
and after 30 years I am still in first grade
Ben
----- Original Message -----
From: Ira
To: realtraders@xxxxxxxxxxxxxxx
Sent: Monday, February 12, 2007 4:58 PM
Subject: Re: [RT] google
Depends for what reason you hold long options for long periods as they can be the road to riches. It is always the voice of the uneducated that comes up with these sayings.
Ira
www.thetradersguide.net
----- Original Message -----
From: Mark Simms
To: realtraders@xxxxxxxxxxxxxxx
Sent: Monday, February 12, 2007 1:32 PM
Subject: RE: [RT] google
Of course. Any "fool" would have sold them already for a huge profit.
A Chinese philosopher and trader once said: "Holding long options for long period of time = path to poor house"
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From: realtraders@xxxxxxxxxxxxxxx [mailto:realtraders@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] On Behalf Of Ira
Sent: Monday, February 12, 2007 1:48 PM
To: realtraders@xxxxxxxxxxxxxxx
Subject: Re: [RT] google
As of Sunday the greater fool theory says 460+/- on expiration, unless there is a great shift in open interest.
Ira
www.thetradersguide.net
----- Original Message -----
From: Mark Simms
To: realtraders@xxxxxxxxxxxxxxx
Sent: Monday, February 12, 2007 9:39 AM
Subject: RE: [RT] google
Funny, but Guy Adami on CNBC's "Fast Money" called it right with a rec for GOOG 450 puts 2 weeks ago.
March expiration I believe.
Great call.
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From: realtraders@xxxxxxxxxxxxxxx [mailto:realtraders@xxxxxxxxxxxxxxx] On Behalf Of Ira
Sent: Sunday, February 11, 2007 6:21 PM
To: realtraders@xxxxxxxxxxxxxxx
Subject: Re: [RT] google
Sorry the target number is 452.88 with interim support at 454.39. I have numbers all the way down to 434. With the downside pressure so over extended I doublt that it will go much further without a pause.
Ira
www.thetradersguide.net
----- Original Message -----
From: Ira
To: realtraders@xxxxxxxxxxxxxxx
Sent: Sunday, February 11, 2007 10:00 AM
Subject: Re: [RT] google
If you are correct why not just buy 20 of the 470 calls at 11.80 the current offer. They have a theoretical value of 14.69 with a delta of 45. For $2360 you can control about 100 shares until March. With Expiration Friday you could sell the Feb 470 calls for 2.70 to reduce your cost and if price rallies into Friday the spread will increase in value. Greater fool theory seems to indicate that GOOG should go out at about 460.
If I remember correctly I have a projected low on the stock of 458. I will have to check that later.
Just one mans opinion. Ira.
----- Original Message -----
From: Ben
To: astrofin@xxxxxxxxxxxxxxx ; ntt-list@xxxxxxxxxxxxxxx ; realtraders@xxxxxxxxxxxxxxx
Cc: vincent
Sent: Sunday, February 11, 2007 9:28 AM
Subject: [RT] google
is it time to buy
you say you can not afford it too expensive to trade,,, WRONG
just trade 50 shares
say you bought 50 at 461 your total output $23050 plus comm
if it only go up to 471 you made 500 minus comm
you put stop loss at 456 or just $5
long term trading suggests we are near a bottom
see gif
right way to trade it
After it makes a lower low on monday you watch it climb
you put a buy stop at $5 above the mondays low
stop loss is mondays low
real objective is about 475-485
Ben
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