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LB
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LB
August 4, 2010 10:47 am

TheStreet.com’s OptionsProfits:

Indiscriminate and irresponsible selling of Premium. High probability trades picking up pennies in front of speeding trains.

Example1: (Wed Aug 4th, SPY 112.8)

“”We are selling more weekly puts on the SPY and adjusting our cost basis.

SPDR S&P 500 ETF
Sell to open SPY 1 Aug 109.0 PUT (O:SPY\10T06\109.0) at 0.14″”

Max win $14 – 5% drop in SPY to end this week would lose $184 – good risk/reward?

Example2:

“”I am using the recent sell off in Waddell & Reed to accumulate shares and write puts.

Waddell & Reed Financial Inc.
Buy 500 shares of WDR at 23.84
Sell to open WDR 5 Mar 22.5 PUT (O:WDR\11O19\22.5) at 2.25
Sell to open WDR 5 Mar 30.0 PUT (O:WDR\11O19\30.0) at 7.1
Sell to open WDR 5 Mar 25.0 PUT (O:WDR\11O19\25.0) at 3.5″”

Would be interesting to learn how this ‘structure’ was developed. Random picking of Puts to leverage up.

Also use misleading terms & spin recommendations to look less risky than they are. Example:

“”We are fashioning a buy/write on shares of PSS.

Collective Brands Inc.
Buy 1000 shares of PSS at 15.56
Sell to open PSS 10 Mar 17.5 CALL (O:PSS\11C19\17.5) at 1.55
Sell to open PSS 10 Mar 17.5 PUT (O:PSS\11O19\17.5) at 3.5″”

Only the first 2 parts of this is a buy/write, the put sale just turns this whole thing into the equivalent of selling of 2 puts. I doubt very much they would get many takers with simple “Sell 2 Puts” recommendations.

Percentage of winners to losers is going to look pretty good for this recommendation site but it is down to a complete lack of responsibility and concern for their investors. When one of these high probability low dollar winners turns into an extremely large high dollar loser I very much doubt they will care about the investor that just blew out.

It is shocking that the likes of Peak6 & LiveVolPro (who provide commentators & recommendations) would condone this type of behaviour.

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Steve
Guest
Steve
August 18, 2010 6:57 am

I’m not sure it has to do so much with being irresponsible as it is a lack of creative ideas. As an aside few people follow their recommendations as there is almost no volume on the strikes they recommend.

Joe
Guest
Joe
August 27, 2010 10:03 am