If the stock rose to $615 really quickly, I think this forum would explode. JAN 17s are only available up to $380 right now - it might help to use a more realistic number than the 600s. If the stock price triples, it doesn't matter a whole lot which calls you have, you 're going to make a ton of money.
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Newbie Options Trading
- Thread starter Jonathan Hewitt
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- investing options TSLA tsla stock
That $615 is not my point, as that's clearly unrealistic. It is just what caused me to notice the potential flaws in the calculator which is giving me hope that I am starting to understand all of the variables.
The Blue Owl
Endangerous Herbivore
I understand now, that makes sense.
I wouldn't call it a flaw, but rather an inherent limitation. There is nothing the calculator can do to predict the volatility change associated to such a dramatic rise (or anything else, really). Volatility is a measure of how uncertain market players feel about the stock price over a certain period, so it is what it is; you can't calculate it from other variables (which is why it's an input into the Black-Scholes equation, but also an output from the actual prices option traders are willing to accept after haggling -- a.k.a. the "implied" volatility).
Haha, it's funny that you say that because I was literally in edit mode to change 'flaws' to 'limitations'. I decided against it because I felt that even though it is a limitation, it is also still a flaw. I see your point though.
I'm glad I'm making sense. Explaining it out helped me understand further. Thanks for the assistance, I appreciate it.
As Familial Rhino replied, it's all over the map. I usually submit my offers at a slight premium to the current bid, and they usually get picked up eventually during the day.
When I trade liquidly traded stocks, I usually submit "market" bids. I might lose a few pennies, but I gain transaction certainty. NEVER EVER do this with options. Always place a limit price, or you could find yourself getting a very poor price.
That's helpful, and is aligned with what I've read, thank you. I always do limit with stocks, so I'll be used to it. Do you follow the same pricing strategy when selling (slightly below ask)?
My technique for buying calls has been to put in a limit bid somewhat above bid price, wait a while to see if there are any takers, and then if no takers I change my bid to a higher price, wait to see if there are any takers and repeat this process until I get the calls purchased or decide the price is too high. Obviously, this technique can be problematic while the stock is rising, but otherwise it works for me. If anyone has concerns about using this technique, I'd like to hear them.
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Wshowell
Member
Hello everyone,
not so sure this is one of my better ideas but it's late and I just finished off a great weekend and a tall glass of Cab. I have a long history of trading options, as an executive for Schwab, Thinkorswim/Investools and for the past 6 years being the primary educator on the subject for Etrade's 4 million clients, a writer for the CBOE blog and an instructor for the Options Industry Council. Wiley Trading published a book I co-authored in 2012 on the subject.
Wiley: Trading by Numbers: Scoring Strategies for Every Market - Rick Swope, W. Shawn Howell
our contract with our publisher won't allow us to send out excerpts from our material or discount electronic versions but for those that want to take a more formalized approach to learnings options I've posted a heavily discounted offer below. We did an online options course a few years back for Etrade clients and recorded the sessions. The online sessions are priced at $149. I've created a coupon link below that allows you to purchase it for $20 (I have to charge a nominal amount to keep our online hosts happy). The coupon is good for 50 uses and expires Feb 28, 2015 but you can take the course any time in the future. The online educational portal even has a 30 day money back guarantee.
Stock Market Training - Stock Market for Beginners - Udemy
I was surprised to see how popular this topic is so hopefully some educational opportunities will help others. I know I've garnished so much information from this site already doing research into my future purchase. Based on what I do and who I consult for, I cannot offer specific opinions or advise except to encourage everyone to educate yourself and formulate your own opinions based on your own analysis. I'll go back to lurking again... All the best.
not so sure this is one of my better ideas but it's late and I just finished off a great weekend and a tall glass of Cab. I have a long history of trading options, as an executive for Schwab, Thinkorswim/Investools and for the past 6 years being the primary educator on the subject for Etrade's 4 million clients, a writer for the CBOE blog and an instructor for the Options Industry Council. Wiley Trading published a book I co-authored in 2012 on the subject.
Wiley: Trading by Numbers: Scoring Strategies for Every Market - Rick Swope, W. Shawn Howell
our contract with our publisher won't allow us to send out excerpts from our material or discount electronic versions but for those that want to take a more formalized approach to learnings options I've posted a heavily discounted offer below. We did an online options course a few years back for Etrade clients and recorded the sessions. The online sessions are priced at $149. I've created a coupon link below that allows you to purchase it for $20 (I have to charge a nominal amount to keep our online hosts happy). The coupon is good for 50 uses and expires Feb 28, 2015 but you can take the course any time in the future. The online educational portal even has a 30 day money back guarantee.
Stock Market Training - Stock Market for Beginners - Udemy
I was surprised to see how popular this topic is so hopefully some educational opportunities will help others. I know I've garnished so much information from this site already doing research into my future purchase. Based on what I do and who I consult for, I cannot offer specific opinions or advise except to encourage everyone to educate yourself and formulate your own opinions based on your own analysis. I'll go back to lurking again... All the best.
Thanks Shaun - I've watched a couple of short videos on etrade that you and Rick did, I assume the course you offer has substantially more and longer videos. I know you likely can't say, but I'll guess you've ventured onto this thread because you currently see some opportunity in TSLA options - at least those of us who have invested in them hope so (on the call side)! Good luck with the future purchase, all of us here that have one (or more) love them!
Yes, I do. Probably not the most scientific approach, but I trade only occasionally, so spending time/money to master a more complex trading platform and strategy doesn't seem worthwhile to me.
Wshowell
Member
Hello Cattledog,
Funny that you've seen a few of the videos we've done. I didn't realize how many people had watched the videos (165K for just the options one), gulp.... Rick is so much better in the studio so I try to avoid those whenever I can. Still, despite me being uncomfortable, the information is solid for the newbie.
Options Trading for Beginners - YouTube
Come see us in Austin later this year, nothing is locked down yet but they asked us to pencil in Saturday Nov 7. The all day events are always free for both clients and non clients alike, high end hotel, nice lunch and anywhere from 300 - 1200 attendees. They do it up right. I usually do two or three 70 minute session on options throughout the day, one basic intro, an intermediate (spreads, straddles etc) and hopefully something fun for me in the Advanced (Vol Skew, Iron Condors, Index Diagonals etc). As we get the dates we update it on our website and that includes the webinars we do each month. Pro Market Advisors — Educating, Training and Consulting.
Funny that you've seen a few of the videos we've done. I didn't realize how many people had watched the videos (165K for just the options one), gulp.... Rick is so much better in the studio so I try to avoid those whenever I can. Still, despite me being uncomfortable, the information is solid for the newbie.
Options Trading for Beginners - YouTube
Come see us in Austin later this year, nothing is locked down yet but they asked us to pencil in Saturday Nov 7. The all day events are always free for both clients and non clients alike, high end hotel, nice lunch and anywhere from 300 - 1200 attendees. They do it up right. I usually do two or three 70 minute session on options throughout the day, one basic intro, an intermediate (spreads, straddles etc) and hopefully something fun for me in the Advanced (Vol Skew, Iron Condors, Index Diagonals etc). As we get the dates we update it on our website and that includes the webinars we do each month. Pro Market Advisors — Educating, Training and Consulting.
chickensevil
Active Member
So today I experienced the result of something I thought I would try out now that OptionHouse has moved to TradeMonster and I get the new OCO options for orders. (If this was available previously I couldn't say). I had a call that was already well into the green, and decided since I as of late do not have the time to baby my positions every trading hour that I would stick in a bracket order with the OCO (order cancels order) so it had a limit price set on the high end and a stop loss market order set on the low end.
The only negative to this is that the stop loss is forced to be a market order... and generally market orders for options can really screw you over. In this case I paid 7.55 for the call, it was around 10$ when I set up the brackets and put it at 15$ limit and 9$ stop loss market with the thought that hopefully in the worst case I still make *something* should the price suddenly drop. This was done yesterday.
Come today, sure enough it triggered the 9$ at 10:10 AM (note that at that time the price was dropping pretty hard, pretty fast) and I sold it off at 8.88$ netting me more than $1 gain. Now, you might think that oh I lost .22$ on the sale because I put in a market order... and sure that is one way to think about it. But in reality, I was otherwise occupied from 9:30 at the open until 11:30 and totally unable to touch my account or look at the overall market to see that it was going to be a bad day to put in something. By the time I would have seen this to react myself it would have been at around 8$ or lower for the call. So I look at this as gaining *at least* .88$ as opposed to some kind of loss.
Anyway, overall I am pleased with my first attempts to force myself into an actual locked in exit strategy because it actually yielded me something in return. That same call has currently fallen to 7$ so I would be eating red right now if I hadn't done this. Sure, this call had enough time to ride out (they expired in March) that it could very well have recovered before then, but a profit is a profit and I can now pick something new with that money instead of *hoping* that I see the price flip around and become profitable again (something that another one of my calls is currently experiencing that is down over 50% right now... yikes!)
So I think I am going to try to train myself more toward locking in on strategies that I force myself to take cold, calculated, non-emotional decisions. Since that seems to be where I am getting messed up in options.
The only negative to this is that the stop loss is forced to be a market order... and generally market orders for options can really screw you over. In this case I paid 7.55 for the call, it was around 10$ when I set up the brackets and put it at 15$ limit and 9$ stop loss market with the thought that hopefully in the worst case I still make *something* should the price suddenly drop. This was done yesterday.
Come today, sure enough it triggered the 9$ at 10:10 AM (note that at that time the price was dropping pretty hard, pretty fast) and I sold it off at 8.88$ netting me more than $1 gain. Now, you might think that oh I lost .22$ on the sale because I put in a market order... and sure that is one way to think about it. But in reality, I was otherwise occupied from 9:30 at the open until 11:30 and totally unable to touch my account or look at the overall market to see that it was going to be a bad day to put in something. By the time I would have seen this to react myself it would have been at around 8$ or lower for the call. So I look at this as gaining *at least* .88$ as opposed to some kind of loss.
Anyway, overall I am pleased with my first attempts to force myself into an actual locked in exit strategy because it actually yielded me something in return. That same call has currently fallen to 7$ so I would be eating red right now if I hadn't done this. Sure, this call had enough time to ride out (they expired in March) that it could very well have recovered before then, but a profit is a profit and I can now pick something new with that money instead of *hoping* that I see the price flip around and become profitable again (something that another one of my calls is currently experiencing that is down over 50% right now... yikes!)
So I think I am going to try to train myself more toward locking in on strategies that I force myself to take cold, calculated, non-emotional decisions. Since that seems to be where I am getting messed up in options.
chickensevil
Active Member
You are welcome. I don't contest to be good at options trading (yet) but I figure hopefully my experience can help someone else!
Along those lines, I have basically re-initiated that same trade (with the same exits) again today, since I was able to get the same calls for 7.50$ after the drop this morning (not the best price for the day, but good enough). When it had sufficiently risen above 9.50$ in the afternoon, I put in the exit plan again. So worst case I lock in a similar profit all over again, if tomorrow we see another dip (and note that tomorrow we have some fed information coming out, so the macro event could take TSLA for a ride in either direction). Being setup for this, it won't matter how busy my Friday is, I will be happy having made something... as opposed to eating a loss.
I think the important thing, is once you make a decision, and start to see that you were right about that decision and the stock starts to take off in the direction you wanted, you should plan for some kind of cap to force you to sell, and some kind of bottom to let you keep something. This way you aren't trying to really time things perfectly, because, at least in my experience, when you do that... it never works out in your favor.
Of course at any point I could decide to cut in the middle and sell as well, but in this way, I feel like I at least have a range in place of where I expect things to stay.
ev-enthusiast
Active Member
As I have seen during last months information provided by RSI can help with a buying/selling decision.
A very low RSI, like under 30, is a hint that a stock is oversold (hence think about buying here), a very high RSI, more than 70, is a hint that a stock is overbought (hence think about selling here).
chickensevil
Active Member
Well after much up and down today it finally kicked my stop loss again... Hrmmm I am not going to complain simply because I made some money and we closed down at 203 instead of up near the high of 207. I would have swollowed the 207 pill if I had to, but I think today's rollercoaster was confirmation to stick to my plans because there was a couple times today I was on the fence about canceling the OCO so it wouldn't trigger. If I had let emotion get the better of me I would have to be reporting a totally different story.
I bought Feb13 222.50 calls on 1/14 for 1.19 and just sold half my position for $6.19 this morning. First options trade ever, 400%+ gain. Thanks everyone for the good thoughts and links to help me get comfortable trying it. Definitely making any money on strategy, more like trying to find new ways to put knowledge of Tesla to work besides my long position. Good luck to others.
This is the good side of options trading, congratulations. But don't get cocky, kid... sometimes it goes the other way just as quickly.
chickensevil
Active Member
Yeah, extremely good call on the bottom and with an options trade that gave you about a month to play with. I don't think you could have done that one any better.
But as ggr said, be careful not to let your first win go to your head. Treat each trade as if it is your first trade and put the same diligence (or possibly more) into it. Good luck!
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