# Sticking with Calls and Puts



## warezwana (22 June 2009)

*I am just wondering for the Option junkies here, if it is possible to make it in the world of Options sticking to Calls and Puts?* 
Nothing more, no spreads just basic Calls/Puts....

*No myths, just facts... if anyone has done it, does it*


The reason im asking is my wife and I as total newb's started virtual trading in January... Before the 1st week of January I knew NOTHING and I mean nothing... (well I knew a Call meant up - Put meant down) after attending an Optionetics introduction seminar, you know the free 2 hour flash n dash sales pitch.

*Late in Dec *I was virtual trading 'stock' (but trying to trade Options, i just couldnt understand about the option coding vs stock ticker) using OX virtual platform...
*1st week* of Jan saw me figure out *how to buy/sell options*...
*....Time to reset my virtual account...*

*2nd week* saw some wins but mostly losses (still didnt figure out that the results were delayed from when i hit sell and the $100 or so profit I was expecting kept turning to losses)
*2nd-7th week* saw a total of 56 closed trades (and YES I still have the saved 'Account Activity') maybe 10-15 more trades still on the board but possibly losers, I cant remember but they were NOT CLOSED.

My account started at $5000 but I borrowed more and more as time went so I could keep placing new trades and not have to wait till I closed the positions. I think at the most i'd borrowed 25k.. at the 7th week I had profits of $11'700US

Now my wife posted similar results.. I think from memory she placed around 35 closing trades and in those 5 weeks or so had pushed her account to just under $7000US profit.

We both have our saved Activity and like I said they clearly show winners *and* losers. What I don't get is how can this be beginners luck.. I have tried finding a way that will show me that between us we posted 80-90 closed trades and the $18'000 or so profit is all just begginers luck! But I just cant find the logical explanation that says 'yeah, begginers luck'

I cant help but think how it could have been had we let the winners run with trailing stops and cut our losses off sooner as we didnt know about stop losses or trailing stops... All we did was 'buy/sell'...

I'd really be interested if I can get some experienced answers?
Glad to post our Activity list if its just too unbelievable.... tell me or prove to me it's begginers luck, cos its killing me 

p.s the trades were all placed and closed between 05 Jan 09 - 10 Feb 09


----------



## cutz (22 June 2009)

Sorry warezwana,

I'm trying to make sense of what you have just written,

Are you only going long on calls and puts?

Maybe throw up your log as you hinted so we can check it out, personally i've never gone straight out long then close as a strategy, apart from having a play with MQG (day trading oppies as opposed to the stock) recently but i didn't hold overnight, gave that up after a couple of days.

Only spread, i prefer a steady income rather than trying to pick direction and a big winner, although i may put on a bias which often turns out that an initially neutral position would have been preferable.


----------



## warezwana (22 June 2009)

cutz said:


> Sorry warezwana,
> 
> I'm trying to make sense of what you have just written,
> 
> Are you only going long on calls and puts?




What I want to know is... IS there anyone out there who buys Calls when they think the market will go up and/or buys Puts when they think the market will fall....

No other strategy just Puts and Calls, I guess you could say my trade times were 'swing trades' and held either minutes-maybe worst case 1-2weeks so short term trading... oh and make profit


----------



## warezwana (22 June 2009)

Just a few....



USO
01/16/2009	O	STC	.UBONE - USO FEB 31 Put	6	$3.10	$14.95	$1,845.03	
01/16/2009	O	BTO	.UBONE - USO FEB 31 Put	6	$2.85	$14.95	($1,724.95)	120.08
*Total Realized Gain/Loss for USO	$120.08*
V
02/05/2009	O	STC	.VBW - V FEB 47.5 Call	5	$6.10	$14.95	$3,035.03	
02/05/2009	O	BTO	.VBW - V FEB 47.5 Call	5	$5.20	$14.95	($2,614.95)	420.08
*Total Realized Gain/Loss for V	$420.08*
VIX
01/28/2009	O	STC	.VIXNQ - VIX FEB 47.5 Put	1	$5.80	$14.95	$565.04	
01/23/2009	O	BTO	.VIXNQ - VIX FEB 47.5 Put	1	$4.40	$14.95	($454.95)	110.09
*Total Realized Gain/Loss for VIX	$110.09*
VMC
01/13/2009	O	STC	.VMCNM - VMC FEB 65 Put	2	$10.20	$14.95	$2,025.03	
01/08/2009	O	BTO	.VMCNM - VMC FEB 65 Put	2	$7.90	$14.95	($1,594.95)	430.08
*Total Realized Gain/Loss for VMC	$430.08*
WFC
01/20/2009	O	STC	.WFCNE - WFC FEB 25 Put	2	$6.90	$14.95	$1,365.04	
01/16/2009	O	BTO	.WFCNE - WFC FEB 25 Put	2	$7.90	$14.95	($1,594.95)	-229.91
*Total Realized Gain/Loss for WFC	($229.91)*
WTW
01/13/2009	O	STC	.WTWMF - WTW JAN 30 Put	3	$3.60	$14.95	$1,065.04	
01/09/2009	O	BTO	.WTWMF - WTW JAN 30 Put	3	$2.80	$14.95	($854.95)	210.09
*Total Realized Gain/Loss for WTW	$210.09*
XCO
01/12/2009	O	STC	.XCOBB - XCO FEB 10 Call	5	$1.35	$14.95	$660.04	
01/07/2009	O	BTO	.XCOBB - XCO FEB 10 Call	3	$2.15	$14.95	($659.95)	
01/07/2009	O	BTO	.XCOBB - XCO FEB 10 Call	2	$2.10	$14.95	($434.95)	-434.86
01/28/2009	O	STC	.XCOCB - XCO MAR 10 Call	10	$2.25	$15.00	$2,234.98	
01/26/2009	O	BTO	.XCOCB - XCO MAR 10 Call	10	$2.10	$15.00	($2,115.00)	119.98
*Total Realized Gain/Loss for XCO	($314.88)*


----------



## jackson8 (22 June 2009)

warezwana said:


> What I want to know is... IS there anyone out there who buys Calls when they think the market will go up and/or buys Puts when they think the market will fall....
> 
> No other strategy just Puts and Calls, I guess you could say my trade times were 'swing trades' and held either minutes-maybe worst case 1-2weeks so short term trading... oh and make profit




hi 
maybe check out this blog
http://blog.emilov.com/

he quite often purchases calls and puts outright but as to whether you can make a consistent profit is another question
requires a lot more investigation than just asking people whether they can make money or not
some probably do and just as many probably dont

the ones who do are experienced traders who probably have  many years of trading up their sleeves and may have lost large amounts before finding their trading niche


----------



## cutz (22 June 2009)

warezwana said:


> What I want to know is... IS there anyone out there who buys Calls when they think the market will go up and/or buys Puts when they think the market will fall....




OK gotcha warezwana,

No i don't because i can't predict the market.

Say i was able to predict the market i think i would use futures instead. 

Maybe someone else could help you out there.


----------



## ivant (22 June 2009)

cutz said:


> OK gotcha warezwana,
> 
> No i don't because i can't predict the market.
> 
> ...




Generally those who play the directional trade use futures, no doubt. It just ends up being cheaper. I know some people who do use index options with directional trades, but their main purpose is to cut risk against underlying assets. E.G. covering a net long futures position on the SPI. The options game is more if you are stuck in a thin sideways pattern with no implied volatility and are expecting a move out of the pattern. Or alternatively, you think that it will break into a range. To cut it short, you are betting on volatility more than anything else with options. Of course, you also have the VIX which can be the futures trade. Having said all that, you can go crazy, go long a call or long a put on its own. If you want to maximise your gain when you are bullish you can write a call and buy a call at different strike prices (bull call). In summary of my long pointless rant, the advantage of options is you can play different strategies  Its a slightly different game


----------



## mazzatelli1000 (22 June 2009)

ivant said:


> The options game is more if you are stuck in a thin sideways pattern with *no implied volatility *and are expecting a move out of the pattern. Or alternatively, you think that it will break into a range.




How is this possible - i.e. no implied vol?
What you describe afterwards is directional, nothing to do with vol [whether stat or implied]



ivant said:


> If you want to maximise your gain when you are bullish you can write a call and buy a call at different strike prices (bull call)



You actually cap your max gain with this spread


----------



## mazzatelli1000 (22 June 2009)

In response to the OP:

I don't know any derivative traders who are long calls/puts exclusively to make a living. Because of other variables implicit in option pricing if you want to take delta bets, as others have already alluded - it is better to take it in the spot market or utilise a linear derivative.

Whether it is beginners luck - it will be more clearer after thousands of trades


----------



## warezwana (22 June 2009)

mazzatelli1000 said:


> In response to the OP:
> 
> I don't know any derivative traders who are long calls/puts exclusively to make a living. Because of other variables implicit in option pricing if you want to take delta bets, as others have already alluded - it is better to take it in the spot market or utilise a linear derivative.




Thanks for your answer, the Delta bets?...what did you mean by this... Are you saying that im basically placing my trade on a guess as to the direction of Delta?



> Whether it is beginners luck - it will be more clearer after thousands of trades




We have just under 100 exited trades in that 4-5 week period, 10 trades with one person,.. ok I could swallow this as lucky trading but 2 people and nearly 100 trades!!! this is why im trying to find out if it is a natural begginers luck trading that happens often and IF people can actually trade in this way month in month out with some degree of consistant gains....


----------



## mazzatelli1000 (22 June 2009)

warezwana said:


> Thanks for your answer, the Delta bets?...what did you mean by this... Are you saying that im basically placing my trade on a guess as to the direction of Delta?




Directional bets



warezwana said:


> We have just under 100 exited trades in that 4-5 week period, 10 trades with one person,.. ok I could swallow this as lucky trading but 2 people and nearly 100 trades!!! this is why im trying to find out if it is a natural begginers luck trading that happens often and IF people can actually trade in this way month in month out with some degree of consistant gains....




If it works for you, then continue to do so 
4-5 weeks is not statistically significant to infer that you will be able to trade this way across varying market conditions
My experience is all option traders I know, don't trade options like they would the spot.
I personally use them to make gamma, vega, kurtosis and vol skew bets.


----------



## Cartman (22 June 2009)

warezwana said:


> * $18'000 or so profit is all just begginers luck! But I just cant find the logical explanation that says 'yeah, begginers luck'
> 
> I cant help but think how it could have been had we let the winners run with trailing stops and cut our losses off sooner as we didnt know about stop losses or trailing stops... All we did was 'buy/sell'...
> *



*

hey Warez,  --- something u need to ponder (for starters) --- no monetary commitment = no psychological commitment --- 

if it was real money, and u were losing, would u have kept borrowing/pumping more money in?? ----*


----------



## warezwana (22 June 2009)

cutz said:


> Sorry warezwana,
> 
> I'm trying to make sense of what you have just written,
> 
> ...




Sorry my wife just pointed out I SHOULD have said.. Buying Calls/Selling Puts


Newbies.. pffffft


----------



## warezwana (22 June 2009)

Cartman said:


> hey Warez,  --- something u need to ponder (for starters) --- no monetary commitment = no psychological commitment ---
> 
> if it was real money, and u were losing, would u have kept borrowing/pumping more money in?? ----




I do think of that but I also think of the fact that I was taking profits early and running with the cash rather than letting the winning trades run and also i wasnt selling out of the losers as fast as I could have and knew nothing about placing stop losses. So potentially things could have been better, hense why im wondering if anyone trades this way! Not to mention that I was very very new to it all and self learning.

Still interested to know if there is anyone and or if it can be pointed out how it can be beginners luck on so many trades...


----------



## mkelpie (22 June 2009)

Hi OP.

I'm in the same boat as you, a total newb in options.

I've got a large buy and hold portfolio, and also shorter term stuff and have recently turned my attention to buying calls. After 5 weeks, 20 trades I'm ahead on all, but chalk that up to beginers luck.

I'm also going to an Optionetics free seminar, and have a couple of options books to get thru.

Oh yeah like you also, I've closed out too soon and missed $$ but really don't care at this stage


----------



## Grinder (22 June 2009)

Warez, it's not my cup of tea but.. hey.. if aint broke.. 

check out elitetrader forum, you'll find a few under the journal section that play it your way.


----------



## alphaman (22 June 2009)

Anything is possible, but I really would not pay attention to performance over just one month.


----------



## warezwana (23 June 2009)

mkelpie said:


> Hi OP.
> 
> I've got a large buy and hold portfolio, and also shorter term stuff and have recently turned my attention to buying calls. After 5 weeks, 20 trades I'm ahead on all, but chalk that up to beginers luck.




 Feels good doesn't it  Good luck with it all...



> I'm also going to an Optionetics free seminar, and have a couple of options books to get thru.




Are you plannning on doing their course?


Warez, it's not my cup of tea but.. hey.. if aint broke.. 



			
				Grinder said:
			
		

> check out elitetrader forum, you'll find a few under the journal section that play it your way



Thanks for that I'll check it out...


----------



## jackson8 (23 June 2009)

hi warezwana

just wondering what you are refering to when you say you are virtual trading
have you opened an account with a broker and are doing paper trades only
or is your virtual trading somehow linked to the optionetics course

if the virtual trading is linked to the course i would expect that there would be a bias towards the platform showing consistent profit  imo


----------



## wayneL (23 June 2009)

Howdy folks, thought I'd stop by for a chat (A few PMs piled up in my inbox... I will catch up with those )

Right! Whether you can trade options strictly buying calls and puts. Of course you can.

Whether or not it works better than trading shares can only be determined after the fact and will vary from trader to trader. If I'm going for a straight out swing trade, most of the time I'll just trade the shares, going for the options when I think it will enhance things.

As with everything, I see in terms of greek risks/rewards plus a couple of other things. Here are what I consider.

When buying straight out options we are buying delta and gamma. So if you normally buy in 1000 share lots, your delta exposure, if long, is 1000 deltas.

To get the same delta exposure you have to buy more options. To get 1000 deltas with an ATM option, you have to buy 2000 options (2 x ozzie contracts). This exposes you to other risks and potential rewards.

1/ Contest risk - because of the wider spreads in most options, and possibly higher transaction costs (depending on broker), the options will have higher contest risk. That means if you buy the option and immediately sell it with no move in the underlying, it is going to be a much costlier exercise than straight out shares. Advantage shares.

2/ Gamma - This work in your favour with the option. If the trade moves strongly in your favour, gamma is going to get you even longer if your in calls (ie your delta will increase) and even shorter if your in puts(-delta will increase). Likewise if the trade moves against you, gamma will make you less long and less short (delta and -delta reduces). - Advantage options.

3/ Time decay - Long options are a depreciating asset. The longer you hold, the more that extrinsic value fades away. - Advantage shares.

4/ Vega risk - Changes in implied volatility will add or subtract extrinsic value from your options. If you're long options, you are also long vega, ergo, long on volatility. - Advantage... depends.

These above considerations should also be taken into account when selecting which strike and expiry. There are a lot more decisions to make if you are trading the options that don't apply when trading shares. 

Some boohoo the greeks when swing trading options, but I still think you should know them; at the very least you will know how you got screwed... or where that windfall came from... and whether the option is the better vehicle than the shares, or visa versa.


----------



## wayneL (23 June 2009)

Addendum...

I don't think it's the optimum way to trade options, I prefer spreading.


----------



## Sean K (23 June 2009)

wayneL said:


> Addendum...
> 
> I don't think it's the optimum way to trade options, I prefer spreading.



 OMG!!!

Who is this guy?


----------



## warezwana (23 June 2009)

jackson8 said:


> hi warezwana
> 
> just wondering what you are refering to when you say you are virtual trading
> have you opened an account with a broker and are doing paper trades only
> ...




*My virtual trading is with OptionsXpress* yes I have set up an account. As for Optionetics...no I dont use any of their software and, pffff once I did their course my trades ran straight into the losers bin. For the first month after their course *EVERY and I mean every* trade failed. After getting over the HUGE mind game, I believe I am on my way to coming back to better trading. Basically it was ignore everything they said and get back to my trial and error style of learning, mixed in with 18 hours a day reading things online. So sorry to anyone on this forum who reads my posts or questions... Must be frustrating I am sure for the experienced.



wayneL said:


> Howdy folks, thought I'd stop by for a chat
> Right! *Whether you can trade options strictly buying calls and puts. Of course you can*.



This is encouraging coming from you Wayne.. Good to hear!



wayneL said:


> Whether or not it works better than trading shares can only be determined after the fact and will vary from trader to trader. If I'm going for a straight out swing trade, most of the time I'll just trade the shares, going for the options when I think it will enhance things.
> 
> As with everything, I see in terms of greek risks/rewards plus a couple of other things. Here are what I consider.
> 
> ...




 *Why did I learn Russian (Русский язык)...  I should have learnt Greek instead* 




wayneL said:


> Some boohoo the greeks when swing trading options, but I still think you should know them; at the very least you will know how you got screwed... or where that windfall came from... and whether the option is the better vehicle than the shares, or visa versa.




I am trying to understand them and the  way they effect my trades, this IS good advice Wayne for sure... 
Thanks for your time.


----------



## Cartman (23 June 2009)

wayneL said:


> Howdy folks, thought I'd stop by for a chat (A few PMs piled up in my inbox... I will catch up with those )
> 
> There are a lot more decisions to make if you are trading the options that don't apply when trading shares.
> 
> Some boohoo the greeks when swing trading options, but I still think you should know them; at the very least you will know how you got screwed... or where that windfall came from... and whether the option is the better vehicle than the shares, or visa versa.




its a miracle !!!  ---- 

the Messiah returneth from his meanderings in the wilderness (that would be England), to impart more knowledge to the lost traders of the arc ---

we beseech u to stay for a while oh great teacher and tell us what the heck we are all doing wrong !! 

Oh great "Wayne of Wimbledon" --- show us the way !!

Welcome back Wayne !!   ---- ps i'm pretty sure everyone thought u had carked it ----- were u resurrected..... or just hiding from the authorities ??


----------



## mkelpie (23 June 2009)

warezwana said:


> Feels good doesn't it  Good luck with it all...
> 
> 
> 
> ...




Not a chance. I'd much prefer to spend my money on books. I'm only going because the seminar is 500m from my front door


----------



## warezwana (23 June 2009)

mkelpie said:


> Not a chance. I'd much prefer to spend my money on books. I'm only going because the seminar is 500m from my front door




Smart, smart move... off to a sensible start


----------



## Grinder (23 June 2009)

wayneL said:


> Addendum...
> 
> I don't think it's the optimum way to trade options, I prefer spreading.




me too.

welcome back from the hiatus, hope all is well. Your've been sorely missed mate.


----------



## mkelpie (23 June 2009)

warezwana said:


> Smart, smart move... off to a sensible start




BTW, how's it been going for the last week?
I'm stuck with some BHP that I'm going to take a bath on, but have some CBA that should offset it.


----------



## warezwana (23 June 2009)

mkelpie said:


> BTW, how's it been going for the last week?
> I'm stuck with some BHP that I'm going to take a bath on, but have some CBA that should offset it.




Apart from buying some AAPL and COF yesterday which Ill be up tonight to check on and watch, I have just some old spreads which I hate through not knowing enough about them. SBUX one WAS doing well till I let it run to the flip side  .... and just a few real old trades that became losing lessons about setting stop losses at the beginning 

3hrs till opening, can't wait... I love trading and I cant understand why someone would do it if it wasnt exciting. Thats like going to work to a job that sucks.... Why do it!
Off to bed to read 'Catching the Wolf of Wall Street'... definately need some log off time, it's been a big computer/online week....


----------



## wayneL (23 June 2009)

I didn't know I'd be missed, there are plenty of good options brains on ASF these days. 

Re straight out calls/puts vs spreading, there is a great chapter in Cottle's book called "Managing the Beast" or something like that, where he argues that adjusting positions rather than simply entering and exiting.

In his example a long call if adjusted and metamorphosed as time goes by:


long call ==\/
bull call spread ==\/
long call ==\/
bear call spread ==\/ 
ratio spread ==\/
reverse ratio spread ==\/
long guts strangle ==\/
long straddle ==\/
synthetic long put ==\/
ratio straddle

I trade like this when short gamma, rather than the predominently long gamma example, but it is food for thought and what you can do from a simple call, if you want to.

It seems that most traders who've been around a while (i.e. have survived) will use spreads at least some of the time. Most also prefer short gamma strategies... selling premium in on form or another.

Still, there are a few who stick to only long calls and puts.

It goes without saying, but be very careful to discern the difference between "claims" and reality. The option world is riddled with the former with no reference to the latter.


----------



## polartw (28 June 2009)

for swing trading, long call/puts have more advantage over shares or cfds.

1. limited risk when your bear. if you short share or cfd you have unlimited risk vs long put where risk is limited.
2. roll up/down technique much more efficient in taking profit while maintaining exposure as opposed to selling part of your holding of share/cfd.
3. time decay can be minimized by avoiding too close to expiry 
4. vega will affect a bit of your profit/loss but usually not too worrying if you only long calls/puts and trade in a short time frame.

options are the better instruments compared against cfd and shares, even just for straight calls/puts.


----------



## cutz (29 June 2009)

polartw said:


> for swing trading, long call/puts have more advantage over shares or cfds.




Yeah i dunno about that,

I assume you're trading the ASX because you have mentioned cfds but i tend to disagree with you there.

To obtain a delta of one you need to trade a face value of twice assuming your trading where the most liquidity is, then if the trade goes against you and you need to get out in a hurry (i.e stop loss), it could turn out to be a bruising affair, i.e. if the market swings hard the MM's may pull their quotes while they assess the situation.


----------



## skyQuake (29 June 2009)

cutz said:


> it could turn out to be a bruising affair, i.e. if the market swings hard the MM's may pull their quotes while they assess the situation.




Yup, MM's aren't know for their altruistic quotes and spreads...

Thats why firms like Optiver, IMC, Tibra etc can pay their guys 6 figures+ every yr.


----------



## investedz (29 June 2009)

Hi warezwana

Congrats on the wins. Yes they do feel good.

Just letting you know I do some swing trading with options (only because my account won't let me short trade options yet). I did make some losses in the beginning, and didn't quite have the "beginners luck" as you did. 

Later on I started getting better at the tech/fundamental analysis, which definitely boosted the profits.

As for your question on "beginners luck", my definition of luck is: If you place a trade without analysing the risk and reward potential, and hope it will win, and believe it wont lose.... and you end up winning.

Whether it is luck or not, maybe you do have a niche for the current volatile patterns in the markets that are happening now (in theory maybe it is a beginner's luck season?). Though as pointed out there are many seasons in the market, and it may soon change. (Maybe start of new financial year?). Different seasons means different results.

Some food for thought: One could walk a tight rope with no safety net. Beware the sudden change of wind.


----------



## warezwana (2 July 2009)

investedz said:


> Hi warezwana
> 
> Later on I started getting better at the tech/fundamental analysis, which definitely boosted the profits.
> 
> Whether it is luck or not, maybe you do have a niche for the current volatile patterns in the markets that are happening now (in theory maybe it is a beginner's luck season?). Though as pointed out there are many seasons in the market, and it may soon change. (Maybe start of new financial year?). Different seasons means different results.




Good point on the 'Market Seasons'.. something I have been thinking about lately but something I wonder how or where I can learn these trick tips of the trade.... anyway good point.

My past trades I guess you would say would be based on looking at a chart and going with a trend but the last few weeks has seen me working with AmiBroker and trying my best to get something sorted to help pave the way...

Time will tell I guess with AmiBroker but hoping I will sort through the codes and end up with a successful system.


----------



## freebird54 (2 July 2009)

I have been trading for years but only the lower risk selling puts [happy to buy] and selling covered calls.
Net profit 10,000-20,000 year.

I stick to the top ten/most traded/most volatile for premium i.e compare premium per share value [thus stock you have to buy for covered calls]

Is there a list anywhere that compares volatility/premium per $ invested for say the top 10 stocks? and updates often?

thanks.


----------



## emilov (3 July 2009)

Hey Guys,
Just wanted to add my 2 cents.

Firstly and generally, if it ain't broke, don't fix it. In other words, if what you are doing is working for you and you are happy with the profits, stick with it.

That said, there is another nice saying: don't confuse brains with a bull market. I've done that and lost. I'd had 20 successful trades in a row, not a single loss. I made 50k in 1.5 months and I thought I was god. Then I lost it all in 3 weeks because I'd come to believe that I couldn't miss. One thing is certain when trading: the market ALWAYS turns and changes. You have to know what you'll do in any unexpected situations, because they tend to occur often.

Long story short, keep doing what you are doing, but apply stringent money management and discipline (cut those losses short), always. And you should be fine.


----------



## cutz (3 July 2009)

emilov said:


> Hey Guys,
> Just wanted to add my 2 cents.
> 
> Firstly and generally, if it ain't broke, don't fix it. In other words, if what you are doing is working for you and you are happy with the profits, stick with it.
> ...




Sorry to hear about that emoliv,

Problem is something may appear not broke for a while before you may get creamed playing with options,

Also it seem a lot of beginners get comfortable with naked puts + covered calls till a big loss undoes months worth of profits as you pointed out.

As it's been mentioned somewhere, naked option writers eat like chickens but **** like elephants.


----------



## mazzatelli1000 (3 July 2009)

LOL

How often does this point come up, and how many people don't listen until they get whipped by a fat cat of nine tails? 
And even then they don't change


----------



## emilov (3 July 2009)

Oh sure, I absolutely agree, when I was making profits, it appeared not only not broken, but glossy and polished .

That is why I insisted on applying stringent money management and discipline. And whoever sells naked options without UNDERSTANDING 100% the risks, well, they deserve to be creamed. 

Like that one guy in "Market Wizards" who was making heaps of cash selling naked calls and then, in one terrible day there was a takeover announcement and EVERYBODY exercised their calls, even thought they were out of the money. He lost over 700,000 or something.


----------



## warezwana (3 July 2009)

emilov said:


> And whoever sells naked options without UNDERSTANDING 100% the risks, well, they deserve to be creamed.




To sell a 'naked call'.. that means instead of buying a call option you '*sell to open*' right?


----------



## wayneL (3 July 2009)

warezwana said:


> To sell a 'naked call'.. that means instead of buying a call option you '*sell to open*' right?




Yes



emilov said:


> . And whoever sells naked options without UNDERSTANDING 100% the risks, well, they deserve to be creamed.
> 
> Like that one guy in "Market Wizards" who was making heaps of cash selling naked calls and then, in one terrible day there was a takeover announcement and EVERYBODY exercised their calls, even thought they were out of the money. He lost over 700,000 or something.




Amen.

Naked puts has been a point I covered at some length on my blog last week.

There is unnecessary fear and loathing of naked puts. So many buy/write traders regard them as the spawn of Satan. Go figure.

The main risk is not being naked a call or naked a put at all. There is in fact less risk than being short or long stock in equal numbers because of the premium collected. (We're talk pure risk here, nor risk reward).

The risk is LEVERAGE.

Sell one put contract of BHP and you are effectively long 1000 of that stock at the strike price. The question one should ask oneself - "Would I be comfortable buying 1000 BHP?".

Now some will go ahead and sell many OTM puts to collect premium, exposing them to being long many thousands of stock... LEVERAGE.

Same with naked calls. You're effectively shorting the stock.

Look. Every stock trader has been caught up in a nasty gap. It happens, It sucks. But it's not generally account ruining unless they're leveraged up via CFDs or whatever. Most stock traders understand their risk.

Most option traders don't understand their risk. Most "educators" don't even cover money management and position sizing. I imagine the lesson Emil might have learned was that he was trading too much size. To me that's obvious.

Of course there are better strategies if you're just trading vega/theta. With naked calls and naked puts, you have to be prepared or even perhaps desire to be short or long the stock.

I used naked puts during that remarkable volatility to get me into some banking stocks, then sold calls to keep lowering the cost base. As a result I now have some stocks with a cost base of less than zero. But the important thing to note is that I wanted the stock, if I didn't get it because I wasn't assigned, I made very nice profit. The perfect strategy for that situation.

But do I trawl around looking for high vols to sell puts on (like the CC traders do)? No #~~#ing way, Jose!

Commodities are a different deal, I sell naked puts and calls all the time, just to collect the premium... but under very tight statistical criteria. (As described by Stuie Johnson in his book "Trading Options To Win") This is the so-called "non-seasonal" trade. But I also have a defence regime in place - "Apocalypse Never" as Stuie so amusingly puts it. You have to know when and how to start adjusting or morphing, and when to just get the hell out of Dodge City (to use another of his phrases).

I posted a trade a few months ago selling naked calls on the SP 500 using this method.

The secret is not only knowing the risks and rewards, it is knowing probabilities as well.

Blog articles> Naked Puts - Myths and Truths = Naked Puts - An Addendum = Naked Puts - A Horror Story = And a little bit about blowing yourself up  =


----------



## mkelpie (26 October 2009)

Some good, and very pertinent info to what I'm doing at the moment, which is writing puts, specifically on BHP at a price I'd be happy to buy at. The one thing I'm doing that keeps me edgy is that I've got more contracts open than I could buy in one time if exercised, but obviously I don’t open them all at same price so if I had to buy a few of them back, one or two of them would be significantly cheaper price than I sold for.


----------



## cutz (26 October 2009)

mkelpie said:


> The one thing I'm doing that keeps me edgy is that I've got more contracts open than I could buy in one time if exercised,




Ouch,

That could hurt big time if the market cops a pounding, be careful out there.


----------



## mkelpie (26 October 2009)

cutz said:


> Ouch,
> 
> That could hurt big time if the market cops a pounding, be careful out there.





I'm happy to accept a lower premium while writing puts with lower strike prices, so I've got a bit more time to be reactive. Must admit tho I was happier doing this while BHP was mid 30s than kissing 40.


----------



## cutz (26 October 2009)

mkelpie said:


> I'm happy to accept a lower premium while writing puts with lower strike prices, so I've got a bit more time to be reactive. Must admit tho I was happier doing this while BHP was mid 30s than kissing 40.




What strikes are you looking at ?

The problem with this concept is you're taking on to much risk for what you stand to gain.

Nov 36 puts last traded at 26 cents, take on too many and your position potentially can blow out before you have any chance of making good, especially if IV explodes.


----------



## cutz (26 October 2009)

Actually just realized wayneL  has gone through this already (post #42).

So I guess who am I to tell you how to trade mkelpie but IMO naked puts more than you can handle if assigned just aren't worth it, especially now.


----------



## condog (2 November 2009)

Hi Great thread - luving it...

Wayne , can you give examples of the strategies you used to g lower your cost base.....to below zero


I understand how to write a call option and lower the cost base of a stock...

But how did you manage to lower the cost base to below zero... where you in and out of the stock multiple times....

or Did you just write call options for lower and lower prices and where lucky enough to stay out of the money all the way down , making enough premiums for writing that it offset the eventual buy price.

Also who you trading through and whats the cost...  I'm using comsec, but its a bit expensive for my liking...


----------



## wayneL (2 November 2009)

condog said:


> Hi Great thread - luving it...
> 
> Wayne , can you give examples of the strategies you used to g lower your cost base.....to below zero
> 
> ...




Naked puts and CCs when IVs when outrageous. Then collaring and synthetic backspreading.

Believe me, it was more @rse than class. The stock I have below cost is C. This is fortuitous because it's crap. But I also have some HBC, BAC and STD at low cost bases, which I'm more happy with....

...at the moment.


----------



## cutz (4 November 2009)

condog said:


> Also who you trading through and whats the cost...  I'm using comsec, but its a bit expensive for my liking...




Be careful with comsec, especially with assignments and adjustments.

Received a surprise today when i discovered one of my nice little backspreads copped an early on the short side, 0.35% brokerage is a bit of a party pooper.


----------



## sails (5 November 2009)

cutz said:


> Be careful with comsec, especially with assignments and adjustments.
> 
> Received a surprise today when i discovered one of my nice little backspreads copped an early on the short side, 0.35% brokerage is a bit of a party pooper.




Sorry to hear that, Cutz.  It's highway robbery, IMO. 

I find the worst thing with outrageous brokerage like that is that you have to try to avoid assignment as much as possible.  It's complex enough just trading options without having the distraction of trying to avoid assignment.

And one of the worst things is you can be assigned as the market is just about to turn.  I have sometimes seen excessive option exercises occour prior to market turns.  Eg - large no. of put exercises can be bullish - but definitely not guaranteed - lol!


----------



## cutz (5 November 2009)

Hi Sails,

Yeah, 

I avoid assignment in my comsec account like the plague, i've managed to keep it down to 1 per year for the last couple of years, better off taking a loss sometimes.


----------



## freebird54 (9 November 2009)

I have been with interactive brokers a couple of months - great for share trading and just started with options with them -fast fills and at $3/a time compare with Commsec [who, BTW, are already  2 days late settling on a trade and blaming the melbourne cup as they say no settlements happened country wide because there was a public holiday in Melbourne and all their systems are linked!!!]


----------



## condog (12 November 2009)

cutz said:


> I avoid assignment in my comsec account like the plague, i've managed to keep it down to 1 per year for the last couple of years, better off taking a loss sometimes.





Thanks all

Whats your strategy to such low assignment??

And what sorts of positions are you taking to achieve this...


----------



## cutz (12 November 2009)

condog said:


> Thanks all
> 
> Whats your strategy to such low assignment??
> 
> And what sorts of positions are you taking to achieve this...




Hi condog,

I keep comsec assignments down by doing most of my serious trading through IB. 

Comsec is pretty much my covered shallow call backspread account.


----------



## freebird54 (28 April 2010)

I have done some nice trades lately - covered calls and the occasional put on stock I am happy to buy.

But I am trading a lot more frequently o up days calls and down days puts.

More than $1000 profit on BHP calls and STO puts this week

Is there a site that gives % return over the number of weeks to expiry?


I know the AFR publishes them for % return/annum but too late and not always accurate?

On the enclosed watchlist I need to setup an extra column with a formula that automatically calculates the % return on an option 

This I have to change many times a day of course

So any excel experts?

The calculation will be h2 etc. [Last trade in red ] divided by strike/exercise price e2 x 100 to give a percentage then  divided by 52 to give a weekly figure then x  number of weeks to expiry date d2 from this week so = 8 weeks to 24/6 expiry info below from westpac watchlist today


Name Code Call/Put Expiry Date Exercise Price Bid Offer Last Change ($) Change (%) Last Trade Time High Low Volume Open Interest Contract Size % return per week 
options BHPGS8 Call 24/06/2010 43 0.92 0.98 0.95 -0.42 0 2:10 PM 0.97 0.94 39 1023 1000


----------



## freebird54 (25 November 2013)

If you search for my other posts you will see In started with just calls/puts and did wel - exercised a few times of course
Am now doing mainly covered calls with only 3 losses out of 26 this fy

for last few weeks have been doing vmore complicated spreads/condors etc. with reasonable success 



warezwana said:


> *I am just wondering for the Option junkies here, if it is possible to make it in the world of Options sticking to Calls and Puts?*
> Nothing more, no spreads just basic Calls/Puts....
> 
> *No myths, just facts... if anyone has done it, does it*
> ...


----------



## freebird54 (10 December 2018)

freebird54 said:


> If you search for my other posts you will see In started with just calls/puts and did wel - exercised a few times of course
> Am now doing mainly covered calls with only 3 losses out of 26 this fy
> 
> for last few weeks have been doing vmore complicated spreads/condors etc. with reasonable success



just an update - just stick to the basic selling cash covered puts and stock covered calls


----------



## cutz (26 April 2019)

Anyone still trading ASX calls and puts ?

Seems like retail trading volumes have backed right off. especially on the equity series.

What's going on ??


----------

