Options Mentoring

[cutz]

Tysonboss,

Assuming you're not using iress go to trading>>advanced options>>select options from dropdown box (near where you enter stock code) >> enter stock code/expiry/call >> select at the money or out of the money >> hit get quote >> select the option >> hit sell under the option quote panel >> order pads comes up, make sure your selling to open then enter your details >> hit proceed.

Hope that helps, just be careful, check and double check everything.

BTW, premiums are pretty lean at the moment.

 

[Tysonboss1]

Tysonboss,

Assuming you're not using iress go to trading>>advanced options>>select options from dropdown box (near where you enter stock code) >> enter stock code/expiry/call >> select at the money or out of the money >> hit get quote >> select the option >> hit sell under the option quote panel >> order pads comes up, make sure your selling to open then enter your details >> hit proceed.

Hope that helps, just be careful, check and double check everything.

BTW, premiums are pretty lean at the moment.

Thanks for that,

So I am guessing that you can only trade options on a limited number of companies, I own heaps of MCW that I was hoping to write some covered calls on but it looks like this isn't possible.

 

[wayneL]

Thanks for that,

So I am guessing that you can only trade options on a limited number of companies, I own heaps of MCW that I was hoping to write some covered calls on but it looks like this isn't possible.

ASX options market can become frustrating very quickly indeed.

 

[cutz]

Thanks for that,

So I am guessing that you can only trade options on a limited number of companies, I own heaps of MCW that I was hoping to write some covered calls on but it looks like this isn't possible.

Yeah no worries,

Checked it out on iress, no options listed for Mac. Countrywide.

 

[wayneL]

FYI

The ASX list of optionable stocks http://www.asx.com.au/data/option_securities.pdf

Also a list of optionable stocks on CBOE (about 70% of all optionable stocks in the US). http://www.cboe.com/TradTool/Symbols/SymbolEquity.aspx

 

[Tysonboss1]

FYI

The ASX list of optionable stocks http://www.asx.com.au/data/option_securities.pdf

Also a list of optionable stocks on CBOE (about 70% of all optionable stocks in the US). http://www.cboe.com/TradTool/Symbols/SymbolEquity.aspx

Cheers wayne, I was actually trying to find that list today.

Thanks for your help Cutz, I sold my first covered calls today.

Big clap for TysonBoss, WOO HOO.

 

[cutz]

Congratulations Tysonboss1,

I remember the day i sold my first covered call, on BHP at the tail end of the last bull market, the subsequent period was option trading heaven.

Things have changed a little now, gotta get used to reduced IVs.

BTW, these days i don't like covered calls, if i have one on i manage it as if i don't own the underlying.

 

[jayinoz]

What is the best value option trading sites for asx + more liquid markets on the one site? I use Etrade for asx trades and $45 per contract seems steep + asx costs.

Interactive brokers seems to have very poor service. i have been trying to get an account created with them for 2 months. They never offer any support via email or phone. Their Sydney number just rings out all the time.

What brokers\platforms do others recommend?

Finally I cannot understand why Etrade will not allow me to write Short Put's against shares I own. As I understand that I must pay say $38 for BHP shares @ XXX date. Being bullish I thought it would be a good way to make income without missing out on a bull run, as late. So naturally i write covered calls and they have all been exercised. Missing out on the last months Bull market, approx 7% portfolio gain.

Why do the brokers not allow selling of option puts, if you have a bullish frame of mind?

Thanks for ur help.




Cheers

Jay

 

[cutz]

Hi Jay,

The best option brokers here are IB, account opening is no problem provided you take the time to study and correctly fill out the forms.

Commsec are OK, they allow any strategy providing you have the margin and don't do anything silly.

I don't understand how you short puts against shares you own, also you've highlighted why the covered call strategy can be flawed.

 

[jayinoz]

BTW, these days i don't like covered calls, if i have one on i manage it as if i don't own the underlying.

So you are trying not to be exercised and get say a 10% gain (On option trade amount) for example then cashing in on your option trades?

After having such a high number of shares exercised lately. It a good\bad senario--good you sell for price to make profit + 2-5% income. Bad that you missed out on a possible bull run. To get back some losses from last year.

But isn't it a bitch when you do this then find you could have made 200%. The 'what if's' in option trades are vast and numerous.

 

[cutz]

So you are trying not to be exercised and get say a 10% gain (On option trade amount) for example then cashing in on your option trades?

Hi Jay,

Haven't really got any targets on, any profit is good but i'm particularly cautious with a few things, say i sell some calls against a stock i own i may buy some calls at a slightly higher ratio further out, with BHP i generally go $5-$4 strike value out. If the price explodes i haven't capped the upside. This can also be done with puts.

Anyway generalized only but that's the idea.

 

[jackson8]

What brokers\platforms do others recommend?
Why do the brokers not allow selling of option puts, if you have a bullish frame of mind?
Thanks for ur help.
Cheers
Jay

hi jay
personally i prefer commsec for trading options have always received good service from them and i like using a national broker

to sell puts you may need to apply for a higher level of trading with your broker . you may currently only have a level which allows covered selling such as your calls over stock you already own
to sell puts you would be going naked unless you have the stock short
just be prepared to have to put up the margin requirements
with commsec that is double the asx calculated margin

gary

 

[cutz]

Morning all,

What are peoples thoughts on buying/holding stock as a long term strategy coupled with trading options in the short term, reflecting back on the last couple of financial years the option trading environment was pretty good but it was no fun watching my favorite blue chips copping a beating.

Now that it seems like a good time to cash in a little i was curious to know how you hardcore guys and girls play it, cash only ?, 50/50 ?, stock only ?, what do ya reckon

 

[wayneL]

Morning all,

What are peoples thoughts on buying/holding stock as a long term strategy coupled with trading options in the short term, reflecting back on the last couple of financial years the option trading environment was pretty good but it was no fun watching my favorite blue chips copping a beating.

Now that it seems like a good time to cash in a little i was curious to know how you hardcore guys and girls play it, cash only ?, 50/50 ?, stock only ?, what do ya reckon

Think of Cottle's option metamorphosis diagram on page 45 of The Hidden Reality. The premise of that particular diagram is that each position pictured can be created from long stock, the position in the centre of the diagram. It's certainly one way of going about it.

On the other hand, each position can be created without the stock at all.

I suppose owning the stock "keeps" you in the market, whether that is desirable or not depends on what you're trying to do. If the stock is an "investment", keep it and if capable, (which I'm certain you are) trade options around it IMO.

Disclaimer - Just my opinion; for amusement value only.

 

[mazzatelli]

cutz, this long term stock isn't MQG is it? :

 

[cutz]

cutz, this long term stock isn't MQG is it? :

LOL, nah don't own MQG stock, although i used to.

The only MQG interest i have now is a conservative Oct put backspread combined with a call credit spread.

Oh, nearly forget to mention, still got some Sep puts i accidently bought last month, meant to short, didn't want to pay up to reverse and the rest is history.

 

[cutz]

I suppose owning the stock "keeps" you in the market, whether that is desirable or not depends on what you're trying to do. If the stock is an "investment", keep it and if capable, (which I'm certain you are) trade options around it IMO.

Thanks for your thoughts WayneL, these days i'm starting to wonder if owning 100% stock and no cash is a rational choice especially after witnessing first hand how irrational the markets can be.

Dunno if it's the wine but i'm even considering cashing in more stock and just focussing on options ( actually this started with the unloading of BXB last week ).

I guess what I'm getting at is am i kidding myself by putting on a decent backspead on the index, shorting the futures and cheering the market down and at the same time my "long term stocks" are taking a beating (hypothetical situation)?

 

[Tysonboss1]

Hi Guys,

Can anyone give me a brief explanation about how your shares are called away should some one exercise a call option I have sold. I am just after some info on the actual mechanics of the transaction.

For example, when do the socks disappear from my portfolio, when can I expect payment, does it only happen at the expiration date or can it happen sooner, will they be called away even if the stock only hits the strike price for a few minutes and ten drops again.

 

[wayneL]

Hi Guys,

Can anyone give me a brief explanation about how your shares are called away should some one exercise a call option I have sold. I am just after some info on the actual mechanics of the transaction.

For example, when do the socks disappear from my portfolio, when can I expect payment, does it only happen at the expiration date or can it happen sooner, will they be called away even if the stock only hits the strike price for a few minutes and ten drops again.

Technically, your shares can be called away at any time (if the options are American style which all stock options are).

In reality, nobody with their head screwed on is going to do so unless there is a benefit in doing so.

Exercising a call option before expiry is never optimal unless thunder certain circumstances where is a dividend involved.

Think of the other side of the trade, someone has bought the call option you sold them. If there is no ex-dividend event in the life of the options, why would he exercise early when you are carrying the stock for him, and he will forfeit any time value in the option by doing so? It ain't going to happen... unless the call owner doesn't know what they're doing. But it would be remiss of me to say that it is not possible, it is, just not very likely

Dividends however may cause early exercise. If the dividend is greater than the forfeited time value left on the option PLUS the cost of buying the corresponding put (thereby having the equivalent synthetic call option. i.e long stock, long put).

The chance of having your stock assigned early are therefore very slim, even if substantially in the money... but you will know the circumstances where it is likely as per above.

N.B. This applies to short calls only, short puts have a different dynamic.

If you assigned you will receive an exercise notice from your broker after the close of trading and your shares are gone the next day. Normal settlement rules apply.

If you want to keep your stock, and you think early exercise in optimum for the buyer, you can always buy back the call (and sell another strike/expiry if you want).

 

[mazzatelli]

Thanks for your thoughts WayneL, these days i'm starting to wonder if owning 100% stock and no cash is a rational choice especially after witnessing first hand how irrational the markets can be.

Dunno if it's the wine but i'm even considering cashing in more stock and just focussing on options ( actually this started with the unloading of BXB last week ).

I guess what I'm getting at is am i kidding myself by putting on a decent backspead on the index, shorting the futures and cheering the market down and at the same time my "long term stocks" are taking a beating (hypothetical situation)?

Having 100% of your liquid assets in the market is a bit dangerous
Sounds like your conflicted with timeframes. I guess you should assess whether your happy with your long term methodology? [Don't detail anything, just sth to think about]