_________________________________________ Quote From uninvited Guest What part of "account blow up" don't you understand? __________________________________________ The learning process is not dependant on success or failure of a trade or trader. One also needs to learn that there is a way not to do things too. Even though most of your posts are negative does not mean you have nothing to contribute, though it may seem so But this post was directed to Multioption, something irritated you that you had to butt in.
u-guest, would you care to share what's your trading based on? I'm not asking for your trading secrets. Also, what kind of TA did you try and failed so badly?
:: ALERT :: SBUX Starbucks, earnings Thursday after market closes. $30.83 Buy Nov30 Put @ $0.45 Buy Nov32.50 Call @ $0.10 Total debt $0.55 If SBUX hits <$28.90 or >$33.60 on Friday more than double cost of straddle/strangle. Or just buy the puts. You tried hard and came up with the above trade and SBUX just closed in the middle of 30 and 32.50 (AH at 31.24) causing you to blow out all your money if you ever traded. That is worse than a monkey pick.Please enlighten us how you did that?
Thanks - CNMS2 and Smallfil, to both of you for the rec's - I will be studying. By the way, does anyone know how one can keep momentary track of crude and nat. gas prices? I will stay close by to watch for Pinabetal's picks.
Okay, let me use an example most of us on this thread are familiar with and that is APA. Trader A buys 1000 shares of APA at a price of 66 and Trader B buys 10 contracts of Jan 2007 strike 70 at 9.00. Trader A cost is $66,000 cash not using margin and Trader B cost is $9,000 cash, non-margin. Looking at the last daily swing hi and low range is about 20 points. Market trend is up so we can forecast a reasonable up move of 61.8 % using fibonacci to the 71 area. Current delta with APA at 66 and using a ATM 65 strike the delta is about .60 so we will use .60 based on if APA reaches 71 the 70 strike for Jan 06 would be approx. .60 delta. Trader A places a GTC limit order to sell to open 10 contracts of the Jan 06 70 strike Both traders sell the Jan 06 70 strike when APA hits 71 area for approx 4.00. Lets also assume for our example that APA closes at Jan 06 expiration below 70 so both trader A and B get to keep the 4.00 premium. What's our return? Trader A 4/66 = 6% Trader B 4/9 = 44% Both traders have reduced their cost basis by $4.00. Trader A adjusted cost basis is $62.00 Trader B adjusted cost basis is $ 5.00 Now, lets do it again and assume both traders earn another $4.00 premium. What's our return? Trader A 4/62 = 6.45% Trader B 4/5 = 80% Both traders have reduced their cost basis by $4.00. Trader A adjusted cost basis is $58.00 Trader B adjusted cost basis is $ 1.00 One more time, assume both traders earn another $4.00 premium. What's our return? Trader A 4/58 = 6.9% Trader B 4/1 = 400% Trader B has zero cost plus 3.00 net gain and can keep doing this until option expiration if he chooses. Risk vs reward. Who has more risk? Take a worse case scenario and terrorists bomb APA immediately forcing a loss of 50% of the stock value. Using a price of 70 and a loss of 35 who lost more trader A or Trader B. Trader A current cost basis at 58 , 1000 shares = $23,000 loss Trader B, current cost basis zero, 10 contracts = no loss plus 300% gain. Now take the other scenario that APA goes to 75 and both traders must cover their shorts and both traders decide to exit. Trader A exercises to cash at $70 + 4.00 premium = $74.00 74/66= 12.12% return. Not bad. Trader B Leaps are worth at least $14.50 using a .60 delta and probably more adding time value so lets say $15.00. Trader B has a short cover loss of -5.00 and a 4.00 premium so a net loss of -1.00 What's Trader B actual return? 15.00 - 1.00 = 14.00 less 9.00 cost or 5.00 gain. 5/9 = 55.5% For a few good traders like some here, short term directional trading works. For the 99% of the other traders its a recipe for disaster. I have done both, short and long term and in my opinion getting the return >of< your principal is more important than getting a return >on< your principal. In summary, this board is made up of all kinds of traders, the best and the rest. lol I put myself into the rest category. For the rest, longer term cost more to play but your chances of winning are far greater than the short term. You have only to go back and read the great posts to see what I mean. I enjoy the healthy and polite debate. hank
Congratulations!:eek: What are you basing your trading picks on? Do you care to start a trading journal posting your trades in real time? I'm giving you the benefit of the doubt.