Rolling down sold puts????

Oct is a bad month. I would look to buy puts not sell them since trend has changed to negative. I am not guessing that we are now in a bear market, price HAS made lower lows.


We could fall another 200 points or more on the S & P.

Remember smart money is aware of the seasons.

There is a time to buy, a time to sell, and a time to do nothing. What you need to answer is what if the stock falls to $ 1/sh are you going to get a margin call.

 

i mean call not put :

 

Hi spindr0 you mentioned earlier it was a good idea to look into a covered call spread is that the same as a bull call spread?

Thanks,

droid

 

A covered call spread is the combination of a covered call and a bullish call spread. IOW, for every 100 shares you own you buy a lower strike call and sell 2 higher strike calls. It should be done when mildly bullish and for even money or better.

To the upside you make 2 pts for evey pt the stock rises, b/t the 2 strikes. If it goes nowhere or drops, it's as if you did nothing.

 

Ah nice! Thanks spindr0. That is what I am at the time mildly bullish.

 

You mean AAPL 210 calls. AAPL 210 puts are DITM and 25.00

 

In hindsight, it looks like you sold the puts at teh top of the range.

IMO Drys is trading at the bottom of the range but has not broken support. I see some supprt at a bit under $6.00

What T/A did you use? Using the range is extremely important, expecially in such volatile stocks.

Are you sure you want to make a move that may involve buying back puts on a stock that is trading at the bottom of the range, but not broken support? You may do better waiting for a couple of up days.

Of course, if it breaks support, all bets are off.

 

Hi Tom1am,

Thanks for the reply! Sorry for my ignorance in advance, but what is T/A? So it looked like today I could of bought back the Oct 7s for .85 and then sold the Nov 6s for about .55. If I am forced to buy back the stock at 6 in Nov I don't feel I would be in horrible shape.

Thanks,

droid

 

If you want to do that roll, use a spread order. You might be able to get a better fill.

 

TA is technical analysis. It is the use of graphs and charts by traders to give a visual of where the stock is trading relative to its past. TA is used by options traders to try to pick the best entry points for a trade. This is important because stock direction greatly affects option prices (among many factors).
Simply put, stocks trade in a range up down up down and this movement is normal movement. Support is the bottom of a range and resistance is the top of the range.

Think of it like this..just before Christmas when the stores are full the prices are higher. After New Years when the buyers leave the stores, the stores put on sales. Oversimplication, it helps understand the picture. If demand picks up again, the prices rise.

Understanding TA can help keep you from overpaying for stocks (and get better prices/premium for options), although there is many more factors for options.

If a stock trades in a range it is said to be healthy, if it breaks down below support for more than a couple of days, then it could be a bad sign. Same for resistance, if it breaks out is is a good sign. Google Victor Sperandio or Trader Vic for a good discussion of these concepts.

With respect to DRYS, there is a dime spread (slippage) in the options you mentioned, as well as commissions, per trade, round trip, whatever you do, so please look at the total cost of trading positions.

Finally, (IMHO) TA should never be a sole method of stock selection. Fundamental analysis, PE, growth, cash flow, etc. should be used, with TA being more for entry/exit points, or trading.

Good luck
Tom