OK, so the vacation rerun pile is getting a little thin here … thought you might be interested in seeing all of the many ads that have been sent in the past year promising that you can get cash payouts that are better than dividends, and easy as pie.
These ads all tout one version or another of an options trading strategy … for your reading pleasure.
California Overnight Dividends
Secretive Price Fixing Ring Snatches Cash
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Wow Thank You for the Newsletter magazine website !
once again STOCK GUMSHOE RULES!
Selling covered calls (what all these refer to!) is a dangerous game. I can’t think of anything more dangerous than selling calls naked. Hmm… umm.. besides playing with futures, there isn’t!
Sure, you have the stock but would you really part with it? Better ask yourself that question and ensure your alter-ego gives you an honest answer.
Actually selling covered calls is one of the less
risky options strategies. Selling covered calls is the only options play that you can do with an IRA account. Getting called out of your stock ends in the most profitable outcome for that strategy.
Selling a covered call is equivalent to selling a naked put. Both strategies have exactly the same risk profile. Selling options can be a profitable strategy if you know how to manage the risk you have undertaken, but you are definitely “swimming with the sharks.”
At one time Jeff Clark, of Stansberry Research, edited “Advance Income” for under $100./yr. (My last issue is dated 04/08, believe it!)
Today the option based income report goes for $4k/yr. It’s much more actively traded of course, but Jeff has been “light’s out” in 2008!
According to Porter Stansberry, they might doubled the cost again. For those who are comfortable with this type of income trading, how comfortable are you paying $8k/yr. for the service?
For us TA’s, it might work best to use the $8K for the option premiums outright & use our own entry/exits. Just don’t get greedy, that 50% rule would satisfy me most of the time.
What say you other TA’s?
Thank you, thank you! I’m new to trading and you have put this all across in the most understandable language yet. I had not heard of Implied Volatility. No one has ever brought that up. Before I begin, I am trying to get a handle on the risk side. But on the time aspect, I just thought that picking a longer expiration date would lessen the risk by giving more breathing space.
Your examples were great, re: Purchased calls. Would love to see how it would be different via option selling. Sorry about the paraphrasing.
Now, on ‘delta’ I gather that 20% of traders then are in-the-money, but I don’t see the correlation between the 50/50 probability and the word delta.
On those who try to ‘time’ the market, are you suggesting that they are running out of time? Getting in too late, after the price has gotten too expensive?
I like your style. Would love to follow any recommended reading or study material. Many thanks again for the detail and the depth.
Remember that option IV may go up or down. The underlying price of the security may also go up or down. But the time value of options will ONLY go DOWN. This is the option seller’s primary advantage. So each day the option seller is making money on that component of the option price regardless of the other option pricing components. In the last 30-45 days until expiration, this advantage is dramatic.
However, when I say “time the market” I mean stock pickers who try to time the highs and lows of price swings while disregarding the option’s IV level. The option’s value may be inflated significantly due to high IV levels, yet the stock price may be relatively “low”. This is why the price of a stock can go up, yet the corresponding price of calls go down (as option IV declines).
“Delta” is simply a Greek word used to describe the probability associated with an option’s price at a given point in time that it will expire in or out of the money. It is one of “the Greeks” that is used to describe option pricing concepts. Others are Theta, Vega and Gamma.
If you’re interested, go into the Gumshoe forum and check out option threads where I have posted. There, you can whisper me your email address and I’ll send you a 3 part comprehensive options course that will answer all of your questions. It’s the best FREE resource on option trading that I have ever seen….and I’ve read all of the books….well, most of them.
I want your free option s 3 part comp. Options report please
Please send me the free 3 part options report optionztrading@gmail.com thanks
Ok. I get the theme now. Look at the ‘whole’ picture. The guys who are timing the market are only looking at the stock price, to their detriment. Just like the guy in the earlier examples, who put in 10% to risk, based solely on the input figure and not the potential bigger figure of a loss! I’m getting there. Include ALL risks. Bet small. Spread it out.
Yes, I did want to ask of other works of yours, as I’m sure there must be more and not to belabour this point any further. And yes, I have come across ‘the Greeks’ as another tool or point to further investigate.
Will go dig up in the other threads. Thanks a million for the time.
Curtis.
Actually there are lots of option trades you can do in an IRA; it depends mostly where you have your account. In mine, I can buy calls and puts, and I can sell covered calls. In my brother’s account (different firm), he often sells cash-covered puts on stocks he wants to own.
Learn more about the Greeks here. Did you visit the site with a free options trading course? – As they say: “You make money whether the market goes up, down or sideways”
Hi spreadtrader,
I am interested in finding some option screening software that you mentioned here. Where can I learn about them?
Thanks
I think your passing comment about money management is very significant. I myself have been caught by tipsters’ promises of fantastic returns, only to find that you need to invest the whole of your fund in a winner every time to achieve those results – and they don’t only recommend winners!
Hey Spead Trader,
thanks for all the info on Options. These have always fascinated me. Could you email me more about that course you mentioned?
You’re really right that people will waive their flag about wins, and barely mention the losers.
rfydnorg@gmail.com
Hi spreadtrader,
Im new here & I just saw the options post.
could you also send me the 3 part comprehensive options tutorial you spoke of?
I have traded stocks & commodities for yrs but more seriously lately.
I am always looking to learn
thanks.
Spreadtrader, I appreciate your posts and would be most grateful if you’d send me your options course. I’ve decided that this is the year I take responsibility for my own money versus allowing others to have their way with it. It is so sad that so many of us, because we were busy trying to make a difference in another area, discovered too late that we’d left the fox guarding the hen house—and were essentially robbed at the midnight hour. By the way, I have discovered that people on the internet who are supposedly wanting to help authors succeed seem to also over-promise, under-deliver, and over-charge for their products. Fortunately, just as I like to think that I am helping people at minimal cost to them, Travis is doing the same via this site. And of course, it is also the gem it is because it attracts people such as yourself who share your expertise with the rest of us. So again, I thank you—and I look forward to receiving the course via email: DrDianeEngland@PTSDRelationship.com
Spreadtrader, I appreciate your posts and would be most grateful if you’d send me your options course. I’ve decided that this is the year I take responsibility for my own money versus allowing others to have their way with it. It is so sad that so many of us, because we were busy trying to make a difference in another area, discovered too late that we’d left the fox guarding the hen house—and were essentially robbed at the midnight hour. By the way, I have discovered that people on the internet who are supposedly wanting to help authors succeed seem to also over-promise, under-deliver, and over-charge for their products. Fortunately, just as I like to think that I am helping people at minimal cost to them, Travis is doing the same with this site. And of course, it is also the gem it is because it attracts people such as yourself who share your expertise with the rest of us. So again, I thank you—and I look forward to receiving the course.
Think I posted in the wrong place just now…I’m interested in the tutorial…would you please send it? I appreciate your time!
Dear Spreadtrader,can u also forward me the option course my email is m2051az@aol.com thanks
Hello Spreadtrader, I'm new at learning options trading. Please forward me your 3 part options tutorial. Many Thanks.
Darlenka@telus.net
Hello Spreadtrader, looking to get back into options. please could you send me your options course – brixton@optushome.com.au . Many thanks, Andrew