Hi there, The idea of this thread is to test my options system. In a nutshell: If I like what a stock is doing, I will start looking at the options of that stock. The only positions possible will be long calls & puts. No fancy options strategies and no volatility plays. So basically it's directional long/short stock trading with some extra leverage. Usually positions will be initiated at the start of the session. Positions will be held for a couple of day to a couple of weeks. (no intraday trading) No stop loss will be set. Positions will be a small % of the account and it could mean they expire worthless. Don't expect a trade everyday. JP
To kick off: XOM - long 75 Mar'15 CALL @0.69 (stock price was ~72,28 at when I bought it at the open)
I like it. Simple and straightforward. What is your process for choosing the strike and time to expiration?
That is a .27 delta with 43 days to go. May I ask how many you bought? BTW, earnings are tomorrow in the morning.
I will set a target that I expect price (stock) to reach as a minimum. Then I will pick a strike price between that target and the current price. So in case of a long I will buy a call (slightly) OTM and expect to sell it again ITM. Expiration is 1,5 to 2 months away. If it doesn't move the way I expect it to after a couple of weeks, the trade is probably bogus. So with Exxon I expect 75 to be reachable within a couple of weeks timeframe. The number of calls doesn't really matter as I don't plan to post the whole account only the trades. Allocation per position is about 5% of the account but that is still subject to change. I know tomorrow are the earnings. It's not part of the plan but just a coincidence in this case. It makes it riskier, hope the reward is better too. But thx for the heads up JP
You did OK today because of action near the close but 1. Buying options on the open often encounters a reversal. Also the bid/ask spread does not settle for awhile and is relatively large on the open. 2. You are paying a small volatility premium since tomorrow is earnings. If things go well the above does not matter but nonetheless you need to consider. If I was long I would be expecting Exxon to hit $75 in a matter of days not weeks. There is a remarkable amount of open interest for the March 15 calls. Clueless as to why.
Yes, I agree on the bid/ask spread. I try to wait 5 or 10 min. after the open. But on the other hand ideally I would like to enter as close to previous' day closing price as possible (in the XOM case at least) JP
JPM - long 100 Mar'15 PUT @1.30 (stock price was ~103.11) Expect to hold this for just a couple of days. JP
I sold half of the position @1,16. (stock price was ~74,82) Tomorrow is ex-dividend for XOM. Some extra downforce is to be expected. Although I stay confident on it for the coming weeks. Also, indexes seem vulnerable today with DJ / S&P making a doji after their very strong run up last 1,5 month.