Sticking with Calls and Puts

[warezwana]

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]

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]

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]

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]

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]

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]

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.

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]

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]

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]

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]

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]

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

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]

$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]

Sorry warezwana,

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

Are you only going long on calls and puts?
.

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


Newbies.. pffffft

 

[warezwana]

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]

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]

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]

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

 

[warezwana]

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..

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]

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]

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.