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 Put_Master   Registered: May 2009 Posts: 1029 09-21-12 05:55 AM I'm not the expert here, so I'll let others address your issues. I'll simply say do NOT take his course, which i assume will cost you hundreds of dollars. And do NOT start off doing straddles, strangles, IC's or other type spreads, that potentially put all your cash at risk of a total loss, if the stock moves too little or too much in the wrong direction. It's too early for you to consider trades, that rely of a stock either staying inside or outside a specific trading range, during a specific unit of time. That stuff comes later. Start with selling OTM cash secured puts and covered call type trades. However, if you are going to disregard my suggestion and do spread type trades, do them on low priced stocks while you are learning. Not stocks with high strikes like AAPL, GOOG, ect. Strikes under \$20. Edit/Delete • Quote • Complain
 oldnemesis   Registered: Sep 2012 Posts: 214 09-21-12 10:38 AM Instead of GOOG let me try Waste Management: which is more reasonably priced. Let me start out with the most simplistic issues: Lets say you think WM will go back up to at least 35 by Jan and want to use options to play that. Lets also say that you don't want to spend money on the possibility that WM will go above 36. You think that possibility is nil. Also lets assume the probability of WM going below 31 is also nil. (that's a lot of assumes) Lets look at two trades: WM Jan Long 32 call vs WM Jan 32/36 spread (i.e. form a spread by buying the 32 call and selling the 36 call) .....................Call.............................Spread........... Cost..............160..............................145 Price.............P/L..................................P/L 25................(160)....(100%)..............(145)....(100%) 30................(160)....(100%)..............(145)....(100%) 33.60..............0...........0%..................15.........10% 35.................152..... 95%..................158.......108% 40.................641......400%................255.......175% The straight call will cost you \$160 while the spread will cost \$145 because you made \$15 back by selling the 36 call. In the stated range of 31 to 35 the spread does better than the straight call. Also if WM drops below 31 you will lose less money on the spread than the call. That's the basics and that's probably 75% of what the course will cover. The additional things will probably encompass short puts and short put spreads plus a few ideas like buying a long term (like a year or more) option and then selling multiple short term options, and 'rolling' the trade up or down. (something we hate) The ideas of market neutral or delta neutral strategies like the Straddle: http://www.investopedia.com/article...p#axzz275sBOyBx The Iron Condor: http://www.investopedia.com/terms/i...p#axzz275sBOyBx The Butterfly spread: http://www.investopedia.com/terms/b...p#axzz275sBOyBx http://www.investopedia.com/terms/i...p#axzz275sBOyBx The Strangle: http://www.investopedia.com/terms/s...p#axzz275sBOyBx May or may not be covered in enough depth to be worth while. The only way to know ahead of time if the course is worthwhile is to get a more detailed description of what is covered and to what depth... preferably from someone who has taken the course. Whether or not taking a course in these things is 'worth it' to you depends on your circumstances: How much money and time do you have?? How good are you in doing your own research and testing things out on paper?? It's just my opinion but I don't think you can learn to trade from a course. Edit/Delete • Quote • Complain
 aijourneyman   Registered: Sep 2012 Posts: 15 09-21-12 12:14 PM Put_Master, Thanks for the response. I understand what you are saying and appreciate your time tellig me to be careful. Doing cash secured puts and covered calls sounds like a good place to start - what would you say if I ask, after spendingtime with these simpler trades, what should I *really* walk away with, knowledge and experience-wise? I assume there is some deeper knowledge that will come from spending time with these types of options, and curious for some guidance. For example I could just chart play and then have a guess withcash secured puts. Or I assume I could look more at the greeks, the prices around different strike levels and expirations, and get a feel for just how the greeks work (I read somewhere that greeks arent necessary to be successful with options trading). I am a sponge right now, and I am open to any help suggestions. I have a detail-oriented mind, and learning more about options and greeks is not something that I am afraid of. Thanks for the advice on spending money on a course - I wont be doing that (it was thousands too). Thanks, AIJ. Edit/Delete • Quote • Complain
 aijourneyman   Registered: Sep 2012 Posts: 15 09-21-12 12:30 PM Hi oldnemesis, Thank you for your response, and sharing details on that spread trade example; very helpful. May I ask, after pondering your example, when would not buying a spread be the better trade - such as just going long? Do people just go long or short, or does one always look to offset downside risk through some sor tof spread? Another thing that was mentioned, but sparingly, was looking at IV and standard deviation, using this to work out where to formulate ideas on price movement probability moving forward, and which strikes to look to buying. Looking at this type of information is something I havent done at all, coming from an equity swing trading style of part time trading. I am a little OCD when learning new things, andI normally do very well when doing my own research on a topic (I am self taught in equities and forex andI am sure I can pick up options). Having a mentor is not something I would shy away from,but for thousands of dollars, it may be better to use that to cut my teeth in the markets. Thank you for the response, Aij Edit/Delete • Quote • Complain
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