Discussion in 'Options' started by Churchill, Nov 20, 2012.

  1. I'm considering buying the May 2013 12$ strike calls. Maybe put in an order at $0.20

    Decent risk reward I think.

  2. Bry


    Looking at the charts I think there is a reasonable chance of run up for BAC from here. But because of possible cycle top in Jan, I would personally rather buy the Jan 10 strikes for 34 cents, looking for profits in January.

    If BAC can show strength and follow thru past $10 and then $10.25, you might be in the clear.

    Good luck.

    (PS, thanks, I might buy a few myself)
  3. Placed an order today for 200 contracts 11$ strike Jan 2013 expiry, $0.11 bid. Meh, we'll see.
  4. Bry


    Good luck getting your bargain fill--the bid size is "only" 10,662. I own 3 of the Jan 10 calls from 36 cents. I bought them at the ask on Fri or Thurs.

    I would like to buy a few more calls averaging down if price drops and I am still bullish, and hopefully I won't panic and liquidate the position I already own. I wrote it out as a plan but that doesn't mean I will do it!
  5. Bry


    Looking at the charts I am kinda spooked that it is topping somewhat here. We need a real impetus to push stocks directly higher now, like fiscal cliff solution news. Maybe you can pick up Jan 10 calls at 11 cents if you wait long enough. The 10 strikes (vs. the 11) give you a much, much better probability of getting profitable later on.

    IF in maybe two weeks, BAC has made a nice correction, I will be more bullish again, but am feeling very cautious right now.

    The way I trade, I am so skittish that if BAC opens lower tomorrow, and it probably will, I will be hitting the sell button. I have trouble even letting small positions go slightly in the red. Just they way I am. Holding calls til Jan is like forever for me.

    I hope you are only risking 10% or less of your account on the BAC calls.
    Good luck, Churchill, and be careful.
  6. As with all trades, the issue is not only one of R/R, but of "probability".
    What is the "probability" of your trade being successful..... regardless of the risk/reward.
  7. i'd be short BAC (and the mkt in general now). just my 0.02. as another poster said i'd wait for a pullback before buying calls (although the vol will be pumped up after this).
  8. I didn't get filled but it was not out of the question. Even though there was a large bid amount at $0.11, a large portion of those would get out of the way as BAC declines. Only a minority are firm buyers. Plus the volume for BAC is often huge. I have seen massive support/resistance get taken out in seconds.

    Looks like market will be up today. I will try to be patient getting filled.
  9. In the very short term who knows. But I am personally Bullish for the next 5 months, at least.

    As for position size, yes, I am very carefull. For straight up equities, 10% is my max, but for options, I rarely go higher than 2% of my total, usually less.

    I usually buy calls further out. Under 2 months until expiry is unusual for me.
  10. Hello there. True R/R is not the only factor, but it is the most important factor IMO.

    The absolute probability of my trade paying off is less than 50%, likely a lot less, but if I perceive the R/R is improperly priced, then it is worthy of buying.

    For example if the chances of BAC going to $12 by Jan 19 is 25%, but priced like the chances are 10%, then the call would be a bargain, even though the actual occurrence only has 1/4 chance of happening.

    Likewise, if BAC has an 80% chance of going to 10, but paying off like 75%, then I don't like the trade, even though this second event is much more likely to happen than the first example. One has to carefully evaluate betting size and when to get out and a list of other things that are easier said than done, but you get the idea.
    #10     Nov 27, 2012