Thanks Cache Landing, I think I mentioned in a previous post that I would indeed do more of what you do, given enough acc't size to do it. How much on average does one need to start playing spreads? I've been with IB and have very much enjoyed their low commissions, although they don't have any charts or analyses to speak of. I've never been with anything else, and imagine as you and others have said, there's more comprehensive service out there. I paper traded for about 3 mos. before joining, and wasn't making money there either! I was so eager to get in the game that I paid little heed to the warnings I heard as to how fast I could lose lots of money. It's amazing how much it takes to burn the gambling instinct out of oneself. And how resilient it is! As I have said before, I know how to make money, but not how to keep it! From someone who's never kept any money from this game...
I only asked because the stock trades on pretty low volume. Low volume companies are alot of times much less predictable in regards to price movement. This would result in a whipsaw pattern. Just wanted to make sure that you recignize this. But your last post makes it apparent that you not only recognize it, but that is what draws you to it. Happy trading.
Closed my long call in ZIGO today for a 40% profit. Deciding when to take profits is a new experience. Too soon?
Well, if you know how to make money then the minimum I would recommend shouldn't be a problem. Back when I first started trading, I actually started with $500. Everyone laughs when I tell them that. I turned it into $4000 within a year and used most of it to buy furniture. But then I was hooked. I scraped together about a thousand the next time. Turned it into $20,000 within a short amount of time playing earnings reports. Then I got over confident and lost pretty much all of it over the course of a year or so. What had been working before was no longer working (straddles/strangles and other delta neutral strategies). I spent the next few years developing different strategies and teaching myself what not to do. During those years my account zero'd out twice. I learned a valuable lesson. MOST books on options are full of crap. They aren't worthless, but they teach a lot of half truths. I then settled into the methodology that I use now and it has treated me well for quite some time. Let's just say I don't have to worry about my account reaching zero any time soon. When I was a bit younger I enjoyed playing (limit) poker because I'm not too far from Vegas. They say you should sit down at the table with at least 20X the big blind. This is because in limit poker, patience is key. Only play the high probability hands. In the mean time, you want to be able to handle getting unlucky a few times. Trading options is similar. You can't do that with a $500 account value in options. With proper money managment you can succeed starting with about $3,500 (the initial account minimum at TOS). Your chances are much better starting with $5,000. You have to be able to come back from bad luck. Now, can I take $500 bucks from someone, lump it together with mine, and make them money? Absolutely, because I can diversify. With my methods, on $3,500 bucks, you could reasonably be in 5-7 positions at one time and still have room for misfortune. I would recommend being in around 10 at once (hence the $5000). Anyway, not that you needed a life story, but I just got typing and hear's where I ended up. And by the way, I never paper traded before risking real money.:eek:
In my experience, the only time that it is too soon to take profits, is when you haven't yet covered commissions. Glancing at the chart, it was a good time to take stuff off the table. You might've eeked out a bit more with a well placed trailstop. But chances are high that it will retreat just enough to hit your stop before another move higher. I probs would've taken the profit too. If it breaks that resistence at $16.5 and holds then you might have a pretty good bullish play on your hands. 40% is plenty for a short term play. In fact, for those who aren't greedy, even 10%/month will make someone considerably wealthy in a relatively short period of time.
It's gone straight from the Portfolio watchlist to Buy Watch Speaking of taking profits, another dilemma: Been long AEIS since 27th December. The stock has moved up 25% and I'm currently up 115%. Noticed the first signs of weakness today. Admittedly, I got in as a channelling play, and it's brushed the top of the channel but it seems like there's still a lot of upside momentum, and no resistance until 16. Should I have sold out, or was I right to stay in the game?
You got in a couple days before I would've. I would've waited until the price was sitting on top of the 20- & 50-day MA on 1/4/06. Good entry though as a channelling play. Touched the top of your channel today. That is where I would've taken profits, then wait for it to retreat a bit and get back in toward the bottom of the channel. 115% is a good play. Make sure you keep it. If you are still in right now. Put in a trailstop tomorrow just in case, but be careful of stops on low volume.
Yeah, unfortunately persuaded myself that with all the upside momentum, it could reasonably go up to 16. Still in. How close would you run the trail-stop, and what do you mean when you say be careful of stops on low volume?
I wouldn't be disappointed about staying in. I'm just saying that I would've used that as a sell point given that you were already up over 100% on the trade. It still looks strong, and you have to consider that all ten economic sectors were in the red today. If nothing else, you will probably get another good chance to lock in profits. As far as a trailstop. I don't know which ones you are in. You mentioned that you like to buy ITM. If I were you, I would only be willing to give up about 10% of my profits so I would set the trailstop accordingly. What I meant by the caution was that you need to be careful when relying on a stop if there is not a steady volume of options being traded. If you set a conditional trailstop on the price of the underlying then IV might not work out to your advantage. Also, if you are close to expiration then theta will kill you if the underlying holds still. If you set the stop on the option price, many times it will blow through your stop because your broker had the stop set to trigger when the last fill price hits that level or lower. Well, on low volume the b/a will go lower without anyone actually executing a trade that would trigger your stop order. Subsequently, once someone finally makes a trade you might have lost all your profits as it triggers a market order far below your stop point. If you put in a limit order, you won't get filled because the current bid is now far below your limit. That sort of came out jumbled but I hope you get the idea. Personally I only trade options on high volume stocks. There must be a good amount of open interest at each strike. On these forums you see a lot of people trading companies that only trade around 100,000shares/day. On these companies, options have such low volume that any given strike might go a couple days without a single contract bought/sold. That equals bad news for most stops.
Nicely explained, Cache Landing, and thanks for your personal reply! It sounds like you are available to be a good coach. Too bad it comes just at the time I can't trade! As you explained, your last workings with straddles/strangles wasn't working - what is the name of the strategy you use now? And, I noted you made good money on ER's. Is it not still a good strategy for you? How does that work? Do you buy a level call and put on the same stock and one increases more than the other diminishes after the gap up/down? I've asked on this site a number of times how to read and access IV on options but, no replies. You say one needs only $500 to trade your style, but doesn't that style require you to have an acc't size that is big enough to handle exercises of the options you write/sell to open? I may not be able to reply to anything you send up soon, I'm away on a trip for a week starting tomorrow. Chao. Happy Trades to you...