I have been thinking about your post for sometime and I actually think your strategy has merit. The only problem for me is finding the right opportunities to enter into such a trade and finding the right underlying (how to predict trend and high/low?). Also I find it difficult to just sit on my money either in cash wait for a "fat pitch" or tie up in long term options waiting for events to unfold slowly. Regards,
I like what Von Texas is doing but I have concerns. Problem with Options is that you lose theta everyday. So even if you buy options on oil and it takes a few weeks, or months, to produce a decent profit on the premium, you've lost quite a bit on time decay and need a big enough move to turn a profit. As I've said before if I had major capital for trading I would stick to vanilla equities. No need to worry about the Greeks especially theta. I don't like the unlimited risk potential on Futures so Options is where I am for leverage.
I am mostly in cash except for 2018 long calls, hoping for a pullback soon as I would like to buy a large block of BP or RDS/A, before X-day , sell August 19 covered call at about $2.00 OTM, if I don't get called away I will hold thru X-day and collect the dividend, if my stock gets called away after X-day then I will collect 3 times. Premium , Dividend, & about $2.00 x shares held. These 2 stocks are already pulling back , but not enough yet. I pretty much do the same thing over & over with about 6 or so stocks. A good site for keeping up with oil & gas is ( OILPRICE.COM) their info is updated hourly. Good Luck, Stadtmuller Von Texas
I now prefer the longer DITM LEAPS with a Delta above 90 that way Theta is not much of a factor. OTM leaps have worked well for me also but I bought most of them in Jan, Feb. March of this year and that was a unique time period that does not come around to often. COBE will be posting 2019 leaps starting Sept. 12, 2016, I am not buying any more 2017 oil leaps as I think the oil stocks will be mostly flat for a few months & then increase sharply. Good Luck Stadtmuller Von Texas
Hi Ironchef, you are absoulately right about trend/direction,I think oil will go up more, but not right away, that is why I don't want any long call options less than Jan 2018. That gives me 18 months to be right about direction. I will also buy DITM with mim. delta of 95, this is almost like buying the stock except I can control 3 times as much . If BP pulls back to approximately $35.00 next week I am planning on buying BP 2018 $30 call for around $5.50 prem, delta is currently 95, I am paying very little for Theta, but I understand the clock does tick, however since I will have so much intrinsic value I can get out any time. I am also looking at just buying the stock out right, selling a covered call Aug 19 2016 $37.50, collecting about $ .42 in prem, holding thru Aug. 3rd X-day ( get $.58 dividend) or get called away with about $2.00 share profit. It is possible to get paid 3 times within 30 days, I would be guaranteed to get paid 2 times. I invite everyone to tell me where I could improve. Thanks Stadtmuller Von Texas