Options, understandings and tactics

By megfk, April 25, 2014

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

Alan – We open here a forum for discussing options. It might be helpful to open the discussion with a copy of the paragraphs that I wrote 4/24 about options. I don’t know how to cut-and-paste that material.

Before I opened this discussion forum, I noticed a question about choosing a stock that might perform well as an option. I’ve already briefly addressed the subject…and would appreciate knowing about the thinking of others.

I have years of experience, but could not pass myself off as an ”expert.” I prefer that this discussion forum be a gathering of investors with an interest in options…with all of those with greater experience contributing things that they have learned. Our goal is to benefit one another.

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861 Comments on " Options, understandings and tactics"

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tcash
Irregular

$RLYP. For biotechlong or anyone with knowledge on this subject. Would there be any advantage to buying back the Jan calls for a profit now and selling them again if the stock rebounds?

Thanks for any help I’m new to covered calls

SoGiAm
Irregular
$Love (#Love) Delivers – Southwest Airlines LUV – NYSE By Bottarelli Research Published Thursday, April 21, 2016 Today’s tip is straightforward enough: Southwest Airlines LUV – NYSE has risen 41% since February in anticipation of a strong quarterly report today. And indeed,it delivered upside surprises on both quarterly revenue, which grew 7.50% year-over-year, and quarterly earnings, which picked up an astounding 182.10%. However, everyone was obviously expecting this “surprise.” So now that they have it, it’s time to sell the news. LUV Bottarelli Research Tip: Looking to LUV’s technical chart, we see a typical retracement from this position at the… Read more »
SoGiAm
Irregular
$MTU -Possibly the Most Unusual Trade of the Year Mitsubishi UFJ Financial (MTU – NYSE) By Bottarelli Research Published Friday, April 22, 2016 On Monday, we told you to keep an eye on Kraton Performance Polymers KRA – NYSE when a trader bought 37 times the daily volume of calls traded. Since then, KRA has rallied every day and is 7.3% higher. Today we witnessed an even-more outlandishly large trade hit the tape in Mitsubishi UFJ Financial MTU – NYSE when a trader bought 20,000 MTU June 5 calls for $0.55 each. MTU Bottarelli Research Translation: Never heard of MTU?… Read more »
SoGiAm
Irregular
$DAL nada – Delta’s Tray Tables are in Their Upright and Locked Position Delta Air Lines (DAL – NYSE) By Bottarelli Research Published Monday, April 25, 2016 Airline stocks had been market darlings for much of the spring recovery. That was up until last week when the entire sector got smoked off some bad earnings reports and lower-than-expected PRASM (Passenger Revenue per Available Seat Mile) numbers. Now as we enter a new week, airlines are lower once again but a deep-pocketed trader is buying the dip using Delta Air Lines DAL – NYSE. Earlier today this customer bought 5,000 DAL… Read more »
SoGiAm
Irregular
$AAPL – AAPL’s Disappointment is the Time to Bite Apple (AAPL – NASDAQ) By Bottarelli Research Published Wednesday, April 27, 2016 Apple AAPL – NASDAQ released earnings after the close yesterday, and while all of Wall Street had low expectations, the numbers posted still disappointed. Shares of AAPL traded lower seven of eight days leading up to this announcement, and today marked the steepest tally as the stock tanked 6.8%. All told, AAPL has now sold off 14.6% from its recovery highs of just a few weeks ago. The outlook may look bleak for AAPL, but it’s times like this… Read more »
arch1
Irregular

In my view the market is presently saturated and unless $appl comes through with some unique breakthrough technology improvement why would someone trade in their current Iphone, Iwatch or computer? They no longer have the visionary Steve Jobs
at the helm to spur this, so I would be most hesitant to make a bet like that. Still it is a difference of opinion that creates a horse race. Do your DD.

SoGiAm
Irregular
$TRIP nada- Calls, puts, straddles, strangles — we often see traders buying all sorts of options leading into an earnings announcement, looking for a big score. That’s why it’s so interesting when you see the opposite, as happened earlier today with TripAdvisor TRIP – NASDAQ. One customer sold to open 5,000 TRIP May 64 straddles for $8.00 apiece. TRIP Bottarelli Research Translation: Just as a refresher, selling a straddle means you’re selling both calls and puts on a 1-to-1 basis. This trader sold 5,000 May 64 calls and 5,000 May 64 puts. It’s a bet on volatility, not direction. TripAdvisor… Read more »
kingmoonracer
Irregular
kingmoonracer

Buy $ESPR @ $13.57
Write $ESPR 19 May $13 Call at $1.39

10% profit in two weeks if shares get called away
$12.18 cost basis (<52 week low) if options expire
This is a trade around a core position. I do no plan on holding the trading shares after 19May

Buy $RLYP @ $14.05
Write $RLYP 19 May $14 Call at $1.41

10% profit in two weeks if shares get called away
$12.64 cost basis if options expire
Replacing shares sold at ~$23 (lucky). I really don't trust the price action on this one. Might trade out of it after I sleep on it.

SoGiAm
Irregular

$ESPR, RLYP long long, Thankey kmRacr 🙂 The devil’z in the detailz…Ben 🙂

kingmoonracer
Irregular
kingmoonracer

Shoot – My math is bad. $ESPR has only about a 6% upside and $RLYP 9.6%

SoGiAm
Irregular
Here is my follow up on the topic of “options” and “short selling discussion” with things I have learned over the years. While not a “novice to options” I am certainly not an expert either. Please know me a “C+” option-player and short-seller and consider C+ a low ranking for such difficult and important games. http://www.stockgumshoe.com/2016/05/microblog-nobodys-folder/comment-page-1/#comment-4810734 Desire to improve skills was my primary reason to suggest discussions of options and shorting. Besides, I strongly believe, we all need to know a little about options and a little about shorting even if we never use them! For surely others players use… Read more »
SoGiAm
Irregular

Is NVDA Overdue for a Rewind? NVIDIA (NVDA – NASDAQ): http://www.bottarelliresearch.com/trades/2016/05/26/nvda-overdue-rewind

SoGiAm
Irregular
Hupitate
Guest
Hupitate

In my frail experience now is not to sell premium. I have had best results selling premium only when IV is higher. In this low IV environment I use calendars, debt and some credit spreads, to take advantage possibly coming IV expansion. IV tend to be mean averting, but it may take time. In low IV environment forces premium sellers take directional assumption and hope to be right. Staying mainly in cash atm waiting higher IV.

Hupitate
Guest
Hupitate

In my frail experience now is not time to sell premium. I have had best results selling premium only when IV is higher. In this low IV environment I use calendars, debt and some credit spreads, to take advantage possibly coming IV expansion. IV tend to be mean averting, but it may take time. In low IV environment forces premium sellers take directional assumption and hope to be right. Staying mainly in cash atm waiting higher IV.

kingmoonracer
Irregular
kingmoonracer

I tried a buy write on $RDUS last fall and bailed out for a small loss when things turned negative. I am at it again. I think the stock should be fairly well de-risked at this level with the FDA acceptance for filing of their NDA for abaloparatide.

Buy $RDUS @ $36.97
Sell $RDUS Oct $40 Call @ $6.50

SoGiAm
Irregular
SoGiAm
Irregular
SoGiAm
Irregular
Any of These Acquisitions Could Happen Overnight Any of These Acquisitions Could Happen Overnight This is urgent… All five of our sharp paper tip-offs are receiving significant takeover chatter. Here’s the latest… Tip-Off #1: This stock quietly continues to set new highs every day, and sharp paper just bought 2,000 more June calls. This means something big could happen this month. Tip-Off #2: Daily takeover speculation has triggered a series of major price spikes, all while the CEO keeps downplaying the rumors. This is typical behavior just before a major acquisition is finalized. Plus, sharp paper just bought another 6,000… Read more »
arch1
Irregular

ben Be careful here. Some readers might think you are promoting and endorsing ripoff news letter.

sharonschreiner
Irregular
sharonschreiner

Read the link. Wow, the guy will make a cool half a million if he gets his subscribers per year. Kinda reminds me of some of the biotech CEO’s….you win, they win, you lose, they win….

arch1
Irregular

🙂 🙂 🙂

SoGiAm
Irregular
5 4 Tuesday – Benzinga’s news desk monitors options activity to notice unusual patterns. These large volume (and often out of the money) trades were initially published intraday in Benzinga Professional . These trades were placed during Monday’s regular session. International Paper Co (NYSE: IP) Jul16 41.0 Puts: 2250 @ Above Ask! $0.90: 2353 traded vs 242 OI: Earnings 8/3 $41.97 Ref Lifelock Inc (NYSE: LOCK) Jul16 15.0 Puts Sweep: 1900 @ ASK $1.00: 1900 traded vs 75 OI: Earnings 8/3 $14.55 Ref Smith & Wesson Holding Corp (NASDAQ: SWHC) Jun16 21.0 Puts: 4438 @ ASK $0.40: 4890 traded vs… Read more »
arch1
Irregular

ben I am curious . What do you make of this ? Was this just one person expecting a downturn in the market soon or is this more than one person? What is your thinking on this? Should we prepare for a drop from unknown cause or is this truly an abberration?

SoGiAm
Irregular
SoGiAm
Irregular
Sharing post: Author: Ex CBOE Market Marker Comment: So I have no idea how I got sucked into watching the video but I did. I owned a seat on the CBOE and traded many hundreds of thousands or even a millions of option contracts over the years as a market marker and for my own account. In short the “system” is selling naked PUT options which is the EXACT SAME THING as doing a covered call. So if you buy stock and sell the call option this is the inverse of it. Does that make sense? As a poster above… Read more »
arch1
Irregular
If this guy was indeed a floor trader he certainly is confused as to the meaning of the language he is using and the assumptions he is drawing. Perhaps when traders stood on the floor of the Chicago exchange with handfuls of orders actual trades may have been a little different. He is assuming that you must trade at the bid or ask price to buy/sell a put. With computerized trading a very large number of trades are in the midpoint area between the two. I have had many trades fill by entering a limit order near the midpoint, giving… Read more »
SoGiAm
Irregular

Thank you Frank…Your instruction is much appreciated. – Ben

SoGiAm
Irregular

$ETSY n p – NASDAQ) Follow-Up: Etsy Creates 130% in 2 Days for Sharp Trader http://www.bottarelliresearch.com/trades/2016/08/01/follow-up-etsy-creates-130-2-days-sharp-trader Ben

SoGiAm
Irregular
Bank of America is Handing You a Short Bank of America (BAC – NYSE) by Bottarelli Research Tuesday, August 02, 2016 Fear is in the wind this morning where certain big banks are concerned. Yesterday, KBW’s Frederick Cannon and Allyson Boyd spoke about the dangers poised by a new Glass-Steagall bank bill: Investors should not view the reinstatement of Glass-Steagall as a potential way to unleash value in large banks, however. A Congressional approach to breaking up the banks would not be based on economic value creation, but be based on the politics of applying penalties to the largest banks.… Read more »
SoGiAm
Irregular
Is $TWTR Crying Wolf or Taking Flight? Twitter (TWTR – NYSE) by Bottarelli Research Thursday, August 04, 2016 Perhaps no stock in the market has tantalized investors over the past few years quite like Twitter TWTR – NYSE. Despite hundreds of millions of loyal users, the social media company hasn’t been unable to monetize this valuable legion. The stock, to put it lightly, has felt the effects. Now after missing earnings again last week, TWTR fell 14.6%. But just when traders left it for dead, shares quickly rebounded and already closed the earnings gap — a strong signal of a… Read more »
SoGiAm
Irregular
$BMY Free-Fall is a Prescription for Patience Bristol-Myers Squibb BMY – NYSE tanked this morning following a failed trial for its cancer drug Opdivo. It’s not unusual for a pharmaceutical company to drop 15% in a single session due to disappointing drug results, but BMY isn’t just a flash-in-the-pan stock with a couple drugs in the pipeline. Prior to today’s open, it sported a market cap north of $125 billion. But where some see misfortune, sharp traders tend to see opportunity, and someone with deep pockets and plenty of time is buying this free-fall. Earlier today this customer picked up… Read more »
SoGiAm
Irregular
#CELG via Tipranks.com – Analyst Eric Schmidt from Cowen & Co. reiterated a Buy rating on Celgene (CELG), with a $150 price target. Article > Eric SchmidtEric Schmidt Cowen & Co. 4.9 stars Analyst Analyst Out of Five Stars Average Return: +24.2% per rating Success rate: 57% (88 out of 154) Celgene Corporation (CELG) Remains Top Pick at Cowen Following Meeting with Management August 8, 2016 Schmidt reiterates a Buy rating with a price target of $150, marking a nearly 30% increase from where the stock is currently trading… BenzingaPro ‏@BenzingaPro 3h3 hours ago $CELG Option Alert: CELG Sep16 120… Read more »
SoGiAm
Irregular

$LYB – LYB Attracts Another Infusion
LyondellBasell Industries (LYB – NYSE)
by Bottarelli Research
Monday, August 08, 2016
http://www.bottarelliresearch.com/trades/2016/08/08/lyb-attracts-another-infusion Chart: comment image

SoGiAm
Irregular

$PANW – Palo Alto Networks Collects its Largest Options Position
Palo Alto Networks (PANW – NYSE) by Bottarelli Research
Tuesday, August 09, 2016: Article and Chart http://www.bottarelliresearch.com/trades/2016/08/09/palo-alto-networks-collects-largest-options-position (image):
comment image

tyler123dogfiddle
Irregular
tyler123dogfiddle
I wonder if anyone could answer a very basic question about option expiration. A few weeks ago I sold 4 ARWR calls with a strike price of $7 which were due to expire yesterday. Typically ARWR then put in an unexpected sprint up which means that the calls were in the money all day yesterday by around $0.50. I have been expecting to be assigned but have heard nothing from my brokers Interactive Brokers. I know the holder has to exercise by 4.30pm on the expiration date but does anyone know if there’s a time-scale for IB letting the writer… Read more »
arch1
Irregular

Normally if the option is at least one cent over strike price in your case the underlying stock is assigned. If the counter party,,, the one who bought your calls,, instructs to not exercise they would not be. You have no way of knowing, sometimes for a day or even two, to see if the stock was assigned. You should be notified before the market reopens. It would be a rare event to not be assigned. imo

tyler123dogfiddle
Irregular
tyler123dogfiddle

Thanks Frank, I’ve now received notification of assignment and my shares have been removed from my account.

kingmoonracer
Irregular
kingmoonracer

It feels like Buy/Write has been my most successful strategy this year so I submit to you this one:
Buy $ ESPR @ $9.65
Sell Call 16Dec $10 @ $0.92
Max gain 13% (6 wks)
Downside protected to $8.73
Hoping it goes back to $100

SoGiAm
Irregular

Is This the Next Semiconductor Company to Get Bought?
TTM Technologies (TTMI – NASDAQ) http://www.bottarelliresearch.com/trades/2016/12/12/next-semiconductor-company-bought
comment image

No position, free subscription

SoGiAm
Irregular

$FIS np – FIS Attracts Unusual Call Buying
Fidelity National Information Services (FIS – NYSE)
http://www.bottarelliresearch.com/trades/2016/12/15/fis-attracts-unusual-call-buying

Lulu
Irregular
Shorting info from Armstrong Economics…. MYTH: Short-selling causes panic declines. Throughout history, whenever the stock market crashes, the majority blame short positions for causing the panic. This has been the root cause of government investigations during every panic. Reality: A short position in stocks is created by borrowing stock and then selling it on the market. Therefore, every short position actually results in a long position. The first is the long position from whom the short borrows; the second is the long position created by the person who bought the stock from the short seller. So at any given time,… Read more »
doomie
Irregular
doomie

Hi. This may not be the relevant forum to post so please direct me if it isn’t. Is anyone familiar with the Market Data subscription types? I am using IB and subscribed to the “US Value Bundle” as I don’t do day trading but I cannot find any explanation of what is actually included in the package. Quotes show as “delayed” in the TWS app and book trader does not work. Any help or link to a page with explanation would be much appreciated. Thanks.

alanh
Guest
alanh

Hi: Its as good a place to ask as anywhere. Delayed simply means what it says….the market data youre seeing is delayed by ~15mins. But Id suggest you call IB as they are infinitely knowledgable and v helpful….theyll guide you better than anyone here.

doomie
Irregular
doomie

Thanks. I thought the with the “value” data you get real-time prices but it doesn’t appear so. Will need to find out what is the difference between the “value” and “free” market data packages they offer as atm I don’t see any. Couldn’t justified paying $30/mth for market data when I don’t do day trading.

tyler123dogfiddle
Irregular
tyler123dogfiddle
$BIOC I’m sure that this is a question with a very obvious answer so apologies in advance. As expected , I have just been assigned at expiry of the March 2.5 BIOC puts which I sold last September. I sold 10 puts but just after that there was a 3 to 1 reverse split and so I have now been assigned not 1000 shares as originally expected but 340. My question is will the total price which I have paid for the shares have been calculated based on the number of shares actually assigned (340) or on the number of… Read more »
tyler123dogfiddle
Irregular
tyler123dogfiddle

Can now answer my own question – I was obliged to pay for 1000 shares at the strike price , for which I received 340 shares in return.

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