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Old Feb 16th, 2012, 03:13 PM   #445
ryanpatrick
 
 
Join Date: Nov 2011
Location: US
Posts: 360
Also added ARUN feb 24 calls...at 1.50. Straight calls here...all ARUN needs to do is match report like last time around. Last time, ARUN matched EPS and slightly beat revenue with no outlook, and I saw it jumped 11%. That's what I would call crappy report and a nice rally. I checked and short interest is still right at the same level of 20M covering 20%, that's fuel for another rally IF the numbers are at least on par with estimates. I think there's room for another upside surprise here again as estimates are still at $0.15 on recent quarter and that number has not changed in past 90 days. Small trade of 3 contracts under $500 total risk.
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Old Feb 16th, 2012, 03:15 PM   #446
jeffalvinson
 
 
Join Date: Nov 2006
Posts: 453
Quote:
Quote from falconview:

Anyway, onward and forward. I´ve upped my bet size today.
In for 10 contracts QQQ 61. Probably going to close before the end here? Take whatever I get. [/B]

falcon,

Calls or Puts and at what price?


Jeff
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Old Feb 16th, 2012, 03:23 PM   #447
falconview
 
 
Join Date: Jun 2010
Posts: 1,465
OOhhhh! Okay Atticus my friend. At my age I forget a lot of things. Sorry about that misunderstanding on my part.

Thankyou traderlux for understanding my point I was trying to get across. Glad somebody did.

In the meantime, a day trade today is now closed. Upped my contract size from 5 to 10 this time, due the success of my new buy entry indicator. The net take was +$300. Which puts my total account since Jan. 1st up 10% and I would normally think that was great, but RYAN has changed all that with an account over 400 %. I can only weep and cry into my pillow at nights. I´ve used up one of my two allowable day trades today. But a profit in the hand is better than wishful thinking and the volatility seemed to be going out of it.

Somebody on here, had mentioned back in the 1990,s trading earnings strangles using one as a hedge. I got my notes on the comment but forget the name of the party who contributed that. It was a monthly bar trading system. I find that this system I am using now is a weekly bar trading system. Or it works over the weekend usually. I guess because I´m only trading UP because we are trending. Anyway, I´ve been making a variation on my current indicator, to trade the monthly. Will see how it goes next week, when I will start the first half of a strangle going for the month. Using April month contracts. Back in the 90´s was when I traded stocks and used SUPERCHARTS. Later TRADE STATION came out. The cost of data and everything, and earnings were so slow in stocks, I eventually quit and put my cash into real estate. In the boom this allowed me to retire when I sold out, using trading curves and volatility by the Sunday paper in Miami in real estate. I caught the top of the bubble. It was beautiful. Two weeks later my wife and I had retired and with two pickup trucks heading for Belize to start a new life around the Gulf and down through Mexico. We only got fast enough internet to do this last year and started last June again trading, for something to do.
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Old Feb 16th, 2012, 03:27 PM   #448
Nine_Ender
 
 
Join Date: May 2010
Posts: 1,232
Quote:
Quote from ryanpatrick:

Well that's 420%, but I'm cautious because strting amount was only $1700-$1800.....Can it be done with something in the range of $20000 account? $50000 account? Maybe I could still get the wins in play, but I don't know how risking $5000 per trade will affect options. If you think about $5000/$200 per contract gives me 25 contracts and it works if I'm in those higher volume options, but I've also been in some where after earnings those market makers will make you work for your selling price especially when volume is 0 and spread is $0.30-$0.40 for ex. $3.00/$3.40 as the spread. You can't just put a limit in $3.10-$3.15 and expect to get all 25 contracts out, I'm going to have to tweak things a little and maybe stick to high volume options where the spread is under $0.10.
I can tell you a few drawbacks :

1. Putting a substantial amount into near month options
on directional plays is susceptable to "black swan" type
events, and they don't have to be huge to wipe you out.
One of my worst trading days was when a new
virus scare came out on a Sunday.

2. If you unconsciously increase your risk ( via more size or
more volatile plays ), you can lose track of the fact the risk
on these trades is already huge. Your musings about AAPL
puts are a good example.

3. You've touched on marketmaker issues, yes they are real
sometimes you may want to exit a position and they'll
arbitrarily drop the prices knowing you want out.

4. The current market is IDEAL for your strategy. At other times,
there are NO good plays for months at a time, and boredom
could make you lose money. I'm not talking about steady
market drops. Much more dangerous to your strategy are
flat, choppy markets without clear direction.

5. Something I observed but I'm not sure about. Buying Puts
in anticipation of market drops seems to be extremely
difficult to time. I was almost always a month early on
these plays when I tried them.

6. Hedging strategies often don't work.

You seem to have some interest and ability in this area, but sometimes this isn't enough to be successful. One of the most important aspects is cash reserves.
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Old Feb 16th, 2012, 03:28 PM   #449
ryanpatrick
 
 
Join Date: Nov 2011
Location: US
Posts: 360
Quote:
Quote from atticus:

I don't trade diagonals. My avg holding period is 8-days. I make vol and price bets and trade down and out dispersion.
And after all was said, I wasn't laughing at your statement that options are correctly priced. It was clearly funny to me because that same statement can into my mind for 2 weeks last year think no way are these market makers mispricing these options. I felt that these type of strangle/straddle trades should be delta neutral and with the exception of a few outliers, most of the trades should end up with $0 profit/loss. I tested it out for about a week in May 2011 (paper trade only) as I was not in real time option trading just yet. I took just about every earning trades there was and the result were 70/30 winners/losers. I'm not sure how this would have turned out with real money at the time, but when I decided to put it to test this week, I came with it knowing that there is a good chance that the options are not priced according to the potential move. What I see most of the time is that options are priced right at or slightly under the average move a stock would make post earnings. What I think they are missing is that the unexpected news happen more often than not on these earning trades by which we get these very huge swings.

Just my opinion, but it seems these market makers could be the same old analysts trying to call a price of the stock and we should all know by now that analysts usually lead pigs to the slaughterhouse.
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Old Feb 16th, 2012, 04:30 PM   #450
atticus
 
 
Join Date: Mar 2007
Location: USA
Posts: 12,879
Quote:
Quote from ryanpatrick:

Just my opinion, but it seems these market makers could be the same old analysts trying to call a price of the stock and we should all know by now that analysts usually lead pigs to the slaughterhouse.
Analyst projections are not dictated by supply and demand. Simply, if the MMer prices an option too cheap (offers below fairval) then market participants will lift those offers.

Upstairs participation is what sets the vol-line. MMers react. IOW, "the street" is mis-pricing those options via the auction process.
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