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Newbie Options Trading
- Thread starter Jonathan Hewitt
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- investing options TSLA tsla stock
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Yes, a bit. Low open interest will usually mean a bigger bid-ask spread which in practice means that when you decide to sell you might have to go lower to find a buyer. Less liquidity in that option is another way to look at it.
InTheShadows
Active Member
I have a question for day traders in the know. The following questions are in regard to margin enabled accounts with less than $25k
If I buy 10 calls today, then a few hours later sell 3 of them then a couple hours later sell the rest of them, is this considered one day trade or is it considered two?
Second related question. If I buy 10 puts, then 30 minutes later sell 5, ten minutes later buy 10 more of them, then a few hours later sell them all. How many trades is this counted as?
And my final question.
I buy 10 straddles, sell the calls 1 hour later and then sell the puts 3 hours later. Is this one day trade or two?
If I buy 10 calls today, then a few hours later sell 3 of them then a couple hours later sell the rest of them, is this considered one day trade or is it considered two?
Second related question. If I buy 10 puts, then 30 minutes later sell 5, ten minutes later buy 10 more of them, then a few hours later sell them all. How many trades is this counted as?
And my final question.
I buy 10 straddles, sell the calls 1 hour later and then sell the puts 3 hours later. Is this one day trade or two?
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Do you want to buy it as stock replacement? As something more speculative? Planning on rolling it to 18's in a year?
Basically the higher the strike the higher the leverage. For me, my situation, I'd probably look at the $350-450 range, maybe some $550's for high delta.
Thanks a lot for the quick reply Johan, I am planning to roll over to 18 and further but not stock replacement. Right now I hold few of 2016 $300 calls, so as 2017 is opened want to buy some of those.
mershaw2001
I'm short the short sellers
pz1975
Active Member
Yes individually but per dollar invested buying a bunch of 550s vs a smaller number of ATM calls you will get a higher net delta.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Thanks, that's how I was thinking. More leverage per dollar. Funny thing, in Norway the Englified term "gearing" is often used about this concept, but I've never heard it used here. (Gear as in shifting to a higher gear or changing the gear ratio).
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
No, it's two separate transactions. To me it means selling a call you bought earlier and at the same time buy a new one with a further out expiration. By doing the transactions closely together you don't risk the stock "getting away from you" between the trades. This is "rolling out". This usually keeps tou from going in to a higher leverage situation as your calls comes closer to expiry, but depending on the strike prices for the old and new call you can choose your new leverage.
"Rolling up" would be the same concept only keeping the same expiry but buying a call with a higher strike (more out-the-money). This always increased leverage and risk.
Please correct me if I got the lingo wrong.
mejojo
Active Member
pz1975
Active Member
The bid-ask spreads will be much higher at first compared to later and thus you will likely pay a higher price now compared to later (taking other variables like stock price out he comparison). I'm not going to buy any 2017 LEAPS until the bid-ask spreads is reasonable. This will likely happen first on round numbers since they will likely sell more at the beginning (250, 300, etc).
As an example of rolling up: back when the stock tanked, I bought some slightly OTM Jan'16 calls. Now with the stock near $260, I'll shortly sell one and move up to, say, $280. Yes, these are conservative plays, being so close to being ITM, but that's where I'm comfortable for now. Doing this roll up lets me double my holding with no extra money on the table, or to pull some profit out. I'll probably leave all the money on the table particularly with the rest of the equities market so overheated.
Rolling out avoids theta decay. It comes at a cost, though, as the longer-dated call will cost more than the shorter-dated call you are selling.
Rolling out avoids theta decay. It comes at a cost, though, as the longer-dated call will cost more than the shorter-dated call you are selling.
pz1975
Active Member
Wouldn't you lose out doing this because of the loss of each transaction? ie. having to sell the lower strike options at a lower cost relative to the bid-ask and buying the higher strike at a relatively higher price? There is also the transaction fees.
For very long term options you should always be able to buy for less than the ask and sell for more than the bid. Unless you expect the stock to move very quickly it is usually worth spending a little time setting your bid or ask as high or low as you can and then slowly moving it up/down. At least that is normally my strategy with LEAPS
As for transaction fee it varies a lot but at my broker it really is not enough to matter when talking about LEAPS that are worth thousands.
mershaw2001
I'm short the short sellers
Lower liquidity, if fewer people are aware that these are trading, prob means a wide bid/ask spread.
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