Naked Index Calls = $$$$

Discussion in 'Professional Trading' started by paysense, Jun 11, 2007.

  1. are those short index option sells doing...may erode fast = money in the bank!

    Remember these late last week trades?

    DJX at 133.45
    STO (455) DJYGG Jul 137's @1.1
    or a $50,000 (theoretical) scoop into the acount.

    SPX at 1500
    STO (90) SXMGI Jul 1545's @ 11
    or a $100,000 (theoretical) scoop into the account.

    I realize it is too late to start a C2 account with these trades, but it's been 5 years since I've deployed this strategy so this may be just a running start. Any help with actual margin requirements/breaches would shed some light.

    In other words could 150k have been brought in a 1M account at these prices? I'm thinking ok. How much am I currently margined with this virtual trade?

    If market further tanks perhaps the (way) OTM QQQ calls can be sold short.

    ...and uh, I remember now - my stop-loss target was about 50% - not 35% as stated previously.'s all coming back to me, lol. Awful quiet on the ET front, - I'm thinking more than a few head-scratching events have transpired.

    03:30 pm EST - OK, now go sell the QQQ (Jul 48's) naked calls - could be practically free money. We can monitor the market erosion and lock in hefty gains when deemed of worth.

    If the market somehow bounces, it has to reach new highs for us get burnt - or it'd have to bounce rather sharply and hit our stop = 50% increase in call price.

    ask prices on the above short plays are today (marginally higher) at:

    DJX at 134.5
    DJX Jul 137's @ 1.20

    SPX at 1510
    SPX Jul 1545's @ 13

    QQQ at 47
    STO (1925) Jul 48's @ 0.52
    or a $100,000 (theoretical) scoop into the account.

    These were posting from another thread of mine. We will monitor this relatively easy 25% gain in a large account. PayS

  2. Here are some pictures (after the texual confrontation)

    (Today's) Volume remained below Friday's light trading levels.
    Volume was running about one-fifth lighter on the main exchanges.
    Index charts don't look to good. DJIA/SPX has broke support. Naz has head-and-shoulders pattern forming. Volume on declines is high, on advances is lighter. Now getting lower highs and lower lows.
    SOTM are still being bought. A bit slimmer Monday.
    Do you believe in miracles?

    I don't do a whole lot of exhaustive charting (T.A.). Although used as a secondary indicator (HandS pattern) of market action. Aside from the other indexes that broke support, let's give the Nasdaq the benefit of the doubt - namely it's quickly emerging head-and-shoulders pattern.
    Few patterns give a clearer sign of a stock's peak than a head-and-shoulders top. Forged at the end of a long run-up, it often signals the end of the glory for a market leader.

    A topping index begins the pattern by hitting a high, marking the left shoulder. It then pulls back, often bouncing off a support level like the 50-day moving average.

    Instead of forming a smooth, rounded base, the index typically shoots straight back up to a new high. That's the head. It then rides a sharp second leg down. Volume in a classic head and shoulders often increases as the pattern moves from left to right, a bearish sign amid continued selling. The price action is usually wide and loose.

    The index makes one last futile attempt at gains, wedging out the right shoulder. In a textbook head and shoulders pattern, that near-term high falls short of the left shoulder. The bottom soon drops out, and it plunges. If you don't sell by then, you could lose all your gains.

    The Nasdaq has made new highs in disturbingly low volume. This could be the last final rally attempt this time around...then a plunge.




    Market Close:

    Another rally attempt fails in light volume. Too bad it started to tank with only 10 minutes left in the session.

    Volume remained about a fifth below Friday's light trading volume. AAPL was down 4.3%.
  3. The idea is that IF you can discern the markets behavior at tops and bottoms with a fairly good degree of accuracy, a Hedge Fund Manager can simply phase into these types of positions (short index calls at tops/short index puts at bottoms) and make a fairly low-risk ~15% gains 2-4 times a year.

    The manager in effect is compounding about 75% returns on average each year. What does that do?

    Say you open an account with a limited partnership agreement for a few select individuals of say 3M.

    In 1-2 years you'd have a nice track record and close to 7M.

    This ongoing track record could attract an easy 10-20M of frenzied clients that could reap another 25M on this - IN JUST 2 YEARS!!

    What would your cut be? Whatever you want! In fact in this short timeframe, it's conceivable that your own worth may exceed 3M, to soon leave the rest in the dust.

    Of course all this is predicated on how these results actually pan out. It would be nice at this juncture to only be concerned with perhaps mitigating tax consequences using off-shore accounts...but we all know that indeed these trades need to prove successful.

    One feather in the cap is that all things being the same time premium is eroding to make you $$$ with each passing minute!PxS
  4. (valuable) drivel posted 03:30 pm EST

    Although stubborn, market leading stocks (finally) beginning to falter.
    Leading stocks, which had deflected the bulk of recent losses, were mixed among big-volume moves.
    Vix/vxn which jumped last week are again jumping - even higher (fear-factor).
    Adavancing stocks dimishing.
    Volume remained on track to finish above Monday's level - volume was tracking about 13% higher on the NYSE, up 25% on the Nasdaq.

    "This should just all but wipe out the rally."

    Ten-year bond yields hit 5.248%, up from 5.17% late Monday.
    Nasdaq head-and-shoulders pattern not looking good.
    Do we have time for further support levels to be broken?
    This is ugly. Maybe 1 more bounce but with 1 hour left DJIA, Nasdaq, S&P 500, Small-cap 600, Russell 2000, Mid cap 400, Philly Semi Index - mostly at lower support level.

    $$$- call options now profitable: 20-30% of sold premium gone.
  5. Let the market be your guide:


    shows some of the tell-tale signs...

    First we had another rally attempt fail in light volume. Too bad we only have 10 minutes left in the (yesterday's) session when things began to tank.

    ...for those that have to-date vaulted their accounts, take advantage of ET thread "Naked Index Calls $$$$" on Career Trader for some ideas what to do now.

    So what do u think's in store for tomorrow? Blasted (dead) cat!

    ...and we (today's market) were doing so good there with the midday rally

    ps when markets do go down...they over-exag just like on the way up. On margin? Holding losers? Doubling down? Using futures/options?..........

    Not to mention that this mornings market gapped lower at the open.GA

    Right now indexess are characteristilcally squirrely at the low support with 20 minutes left?????? They are acting PSYCHOTIC;)



    ROTFLMAO, jus' kiddin'
  6. Anyways...more of the same. A schizophenic market that now (today) gaps up, program trades, adv/dec numbers heavily favoring the advancers -- all on volume that is tracking sharply lower than Tuesday's heavy trading.

    If institutions aren't supporting this rally, it doesn't have much to stand on = $$$

  7. At best volume was average with HUGE up day.

    Calls are back about even. I see this as the right shoulder (head-and-shoulders pattern).

    Not an uncomfortable hold. Spread about across the major out past old highs. May lose 50% or 10% of Fund but 3 or 4 times right out of 5 may impress.

    Don't quit your day job.

    Elevator goooiiiiinnnnggggg.....:p
  8. BJL


    Up over 30% is back about even?
  9. Hello,

    With the market seemingly working against us, it doesn't bode well to ignore possible failures. Thus my posting...

    Wake up to find - The markets resilience is unrelenting!!

    ...these are basically just musings or my personal take on things as they affect my "proven" abilities in this strategy. Mind you this self-training with naked options has always been on paper:

    Gotta love this market.
    Volatility plunges. (see VIX/VXN)
    Still (buying) volume seen on highly-rated stocks list.
    AAHHH YEESSSSS!!!! But I SEE (major averages) volume plunge! (he-he) - does provide joy if my call is "right".
    Volume was down about 7% on the Nasdaq and 5% on the NYSE.

    That being said...what is/should be affecting the market -

    "NEW YORK (MarketWatch) -- Treasury prices reversed course to close slightly lower Wednesday, keeping the yield on the 10-year note near its highest level in five years, after a government report showed wholesale inflation rose more than forecast last month. The fixed-income market also reacted to earnings reports from financial services companies showing continued deterioration in the subprime mortgage market. The benchmark 10-year Treasury note ended down 4/32 at 94 16/32, yielding (TNX : CBOE 10-Year Treasury Yield Index
    News , chart , profile , more
    Last: 52.17+0.17+0.33%"

    Closing comments: (again these bulletted items are what stand out as moving/shaking items that make things work for me.)

    Higher crude - higher bond yields - higher stocks - higher volume???
    Economy is on track, does something HAVE to give? Well I say let the market be your guide and you can't go too wrong.


    ps why do i do this - i don't know - nothing else to do - live track record - humanness - who knows.
  10. Ahh, a reply by BJL...I didn't notice.

    Well that day it seemed about even - but I wasn't being exactly exact.

    But I did round up the numbers for today's vault into the air!

    SPX Jul 1545 at 16 (11)
    DJX Jul 137 at 1.6 (1.1)
    QQQ Jul 48 at .66 (.52)

    () is sell price. You can calculate (current loss). Remember our stops are set at 50% of 11, 1.1, and .52.

    Depending on margin requirements (which I need to still work out) in a 1M account these position sells at say 1/3 each (I'm told) would be limited to a (I'm guessing) 10% max return not the 25% I hoped for.

    Apparently by using a spread (?) we would use about 1/3 the buying power so may get closer to the gain I originally hoped for.

    In other words if we bought the SPX Jul 1550's when we sold the 1545 (not sure if 1550's is optimal either),

    just like bought the DJX 139's (?) with the 137 sells,

    just like bought the QQQ 50's (again not exactly sure what's works best) when selling the 48's ------

    that perhaps the 100k, 100k and 50k could be brought into the account.

    Now I know that is not 1/3 into each so let's stick to the orig formula [100/100/50] and see how this works out.

    Point being the loss at 50% (having to cover short at a 50% increase to the option premium) would acceptably (I'm saying)affect (DD) to the fund at say 7-10% (?) [again guessing]

    I'm gonna nail down the details, though. Paycents
    #10     Jun 14, 2007