Good morning :)
Since today is Friday I guess a random talk on the general market, strategies and individual stocks is warranted.
There are news out on FRPT that is moving the stock higher, but the news isn't really "new", they're just announcing they're meeting the production targets for orders that were previously disclosed.
Those orders are insufficient to justify the $1.1 B market cap, and nobody knows what the net profit margin of those sales is. I guess today's press release is another opportunity for the company to dilute shareholder's value some more.
So I'll continue holding FRPT short, as SIGM short and QID long.
Have a nice day :)
hi
dell short?
amkr short? failure again at the 12dollar resistance
maxi
News on SIGM seems to have given it a slight boost, but like FRPT its not really specicfically new I think:
DOW JONES NEWSWIRES
Sigma Designs Inc. (SIGM) said Thursday that the Nasdaq Listing and Hearing
Review Council decided to review and stay a previous decision to allow the
company continued listing under certain conditions.
According to a filing with the Securities and Exchange Commission, the
listing council has also determined to stay any future decisions by the Nasdaq
Listing Qualifications Panel to suspend the company's shares from trading,
pending further review by the listing council.
Sigma Design's continued listing on the exchange was based on the condition
that it submit additional information regarding its internal stock option
review by Jan. 24, and file delayed quarterly reports by March 14.
The Milpitas, Calif., maker of silicon-based media processors said it has
until May 4, to submit any additional information it wants the listing council
to consider in its review.
-Yogita Patel, Dow Jones Newswires; 202-862-1343;
[email protected] (END) Dow Jones Newswires
03-01-07 0843ET
Copyright (c) 2007 Dow Jones & Company, Inc.
08:43 030107
Quote from: rickjust on March 02, 2007, 09:38:08 AM
hi
dell short?
amkr short? failure again at the 12dollar resistance
maxi
DELL is too big to move a lot and the market will always have some hope/expectation that Michael Dell will be able to turn things around now that he's back. I don't think that is the best idea, but hey, I'm not having good ideas lately.
AMKR is one of the cheapest semiconductor stocks outthere, I wouldn't short that one.
Good luck :)
Yep, that negative news on SIGM was already out yesterday before the market open. Since it isn't new it had no material impact on the stock.
But thanks.
I wonder why INSM has been up lately and today, anybody knows?
Thanks :)
gm David,could you please have a look at MPET for me.It's an oil co. that's been strong through this mayhem
David,I believe there has been another continuance for the up coming court proceedings, leading to speculation that a settlement is near. I guess this is good for insm.
court date posponed on insm
By the way, for people that were not able to read it, I'm no longer a bull on gold or silver, at least not yet, as those metals continue to trade as commodities instead of alternative financial assets.
Since they're perceived as commodities they'll go down with the rest of the market as the global economy slows.
Quote from: soxguy on March 02, 2007, 09:58:01 AM
David,I believe there has been another continuance for the up coming court proceedings, leading to speculation that a settlement is near. I guess this is good for insm.
Hmm, ok, not a good enough reason for me. It may make the stock rise some more on a buy the rumor, sell the news type of trade, but fundamentals are weak and the company has been and will continue to dilute shareholder's value, as one can see here:
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=insm&lstStatement=Income&stmtView=Qtr
(at Diluted Weighted Average Shares)
David, I am interested in your take on Real Estate. Here on West Coast everyone says its a bubble and prices will come down. But then it reminds me when everyone is on one side, markets usually proves them wrong. Quite frustrating if you want to buy your first house :)
Hi david, any thoughts about ANGN.
MPET at 6 month highs,MOVEING NOW @1.53 HOD
Quote from: 2bun on March 02, 2007, 09:57:42 AM
gm David,could you please have a look at MPET for me.It's an oil co. that's been strong through this mayhem
Sure 2 bun :)
You know I'm bearish on oil due to my forecast of a worldwide recession in late 2007 or 2008, but let me take a look at the specific elements of that company.
There's no long term trend as the stock traded sideways since inception in 1988. Over the short term there's some rebound from very oversold levels, I'm not sure if this is a bull trend or just a correction to the steep sell off that occurred in April/May 2006.
I like to buy the winners, and if MPET was a looser even with high oil prices, I'm afraid it will lose even more if $oil goes down to $40 or so. But maybe there's something intrinsically changing at the company, lets see.
- The market cap is just $61 M. The Company is engaged in the sale of oil and gas and the exploration for and development of oil and gas reserves.
- There has been dilution over the latest quarters, as the share count rose from 25.78 million in fiscal Q3 2006 to 41.5 million now (http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=mpet&lstStatement=Income&stmtView=Qtr).
- The balance sheet is strong, with a current ratio of 7.7 and $29.4 M in cash
- Revenue has been rising a bit and the latest quarter was the strongest ever in revenue terms
- But the company lost a bit of money in calendar Q4 2006, more precisely, net income was, well, just ($8 K).
Maybe the explanation for the current rise is on the recent news, let's see:
• Magellan Announces Second Quarter Earnings (http://biz.yahoo.com/prnews/070220/nytu055.html?.v=78)
Yes, good news. I believe the market especially liked this part:
«The Company had $29.4 million of cash and marketable securities at December 31, 2006, compared to $22.4 million at December 31, 2005 and no long-term debt.»
The problem is, where did this money come from? From dilution !
It is a close call, but since the company is engaged in oil exploration and doesn't seem to have a meaningful net profit margin, since I believe oil will go down going forward, I'm afraid I'm bearish on the stock.
But I can be wrong, good luck :)
Quote from: stocky on March 02, 2007, 10:09:04 AM
David, I am interested in your take on Real Estate. Here on West Coast everyone says its a bubble and prices will come down. But then it reminds me when everyone is on one side, markets usually proves them wrong. Quite frustrating if you want to buy your first house :)
Hi stocky, nice to see you :)
You know I don't live in the US, so I have a limited knowledge of the real estate market in your country.
But from what I read and the experience here in Portugal, where there was also a real estate bubble that burst, as the economy entered a deep depression, house prices went down, but not by a lot, say 3% a year since 2004. What happened was that the market dried up, that is, the volume of transactions stalled.
The low quality houses went down the most. Some very high quality places like Cascais for example saw house prices continue to rise. I think the housing market analysis must be very local and case specific. If you buy quality for a reasonable price there will always be demand. You should buy something more unique, and not a "commodity", if you know what I mean.
I guess you should go ahead and buy the house, and not worry too much about macroeconomic developments. A house is not an investment, it is the place you live in, and you need one :)
Thanks David, it helped in giving me some direction.
Hi David,
I meant to ask you about your view on OMNI. It broke above key 9.20 resistance at the beginning of this week, but obviously this week's actions have held it in check. Still, it has been much more resilient than most stocks. Valuation-wise, it appears attractive and is growning fast.
Cheers,
ST
Quote from: automountus on March 02, 2007, 10:19:44 AM
Hi david, any thoughts about ANGN.
I think I should have held it longer when I bought it at $4 or so about a year and a half ago :)
Let's see what we have now ... the long term trend is obviously bullish and the 50 days simple moving average has been supporting the stock. The 200 days SMA is still coming up just at $9.24, so there's potential for a sharp correction, as multiples contract, as I believe it will happen over the general market.
- Market cap is $61 M. The Company, through its Medical Graphics Corporation subsidiary, designs non-invasive cardiorespiratory diagnostic systems. Also sells health and fitness products under the New Leaf brand to consumers through health & fitness clubs, weight loss centers.
- No dilution
- Balance sheet is strong
- Revenues are growing nicely and were $33.65 M in 2006
- 2006 was the first profitable year for the company, and diluted EPS was $0.34, so the trailing earnings multiple is 46.
My take is ANGN is a nice company, but the stock is overvalued. If the general market multiple contracts the stock could have a correction to the ascending 200 days SMA, at $9.24, where I would consider it a nice long term buy.
Good luck :)
David,
Glad to see you've joined the Bear Camp - I went cash in Dec and missed the froth at the top, but the market is now at that level.
As for good Short candidates, you may want to look at is TWM which is an Inverse fund of the Russell 2000 and SDD which is an Inverse Fund of Small Cap 600 compaines. These are both similar products to QID ETF
As mentioned previously these ETFs don't require a margin account and with the coming market correction or crash I believe the small cap companies will be the first ones to go in the selling furor.
Best Of Luck - Also Check your PMs - I am sending you links for some like minded boards you can take a look at when you have some spare time.
Best Regards,
KC Scott
Quote from: ScottishTrader on March 02, 2007, 11:00:14 AM
Hi David,
I meant to ask you about your view on OMNI. It broke above key 9.20 resistance at the beginning of this week, but obviously this week's actions have held it in check. Still, it has been much more resilient than most stocks. Valuation-wise, it appears attractive and is growning fast.
Cheers,
ST
Cool ScottishTrader, I'm curious about OMNI too.
Technically the stock is mixed, as the 50 days moving average just crossed below the 200 days, and OMNI is trading within what seems to be a symmetrical triangle.
Fundamentally:
- Market cap is $140 M. An integrated oilfield service company providing a range of onshore seismic drilling, operational support, permitting, and survey services, dock-side and offshore hazardous and non-hazardous oilfield waste management and environmental cleaning services.
- Hmmm, there's convertible stuff there, as the Diluted Weighted Average Shares has been risin (http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=omni&lstStatement=Income&stmtView=Qtr)g.
- Balance sheet looks weak
- Nice revenue growth over the years, but declined sequentially in Q3 2006.
- EPS for the last reported 4 quarters was $0.64, so the trailing earnings multiple is just 14.3
Well, since I'm bearish on oil I couldn't be bullish on this company Scottish Trader. The company needs oil prices to stay high, or revenues will shrink.
I also don't like the increase in the number of shares outstanding or the weak balance sheet. But probably I'm missing something, maybe some news or something, if you want please post more information, thanks :)
Quote from: KCScott on March 02, 2007, 11:03:27 AM
David,
Glad to see you've joined the Bear Camp - I went cash in Dec and missed the froth at the top, but the market is now at that level.
As for good Short candidates, you may want to look at is TWM which is an Inverse fund of the Russell 2000 and SDD which is an Inverse Fund of Small Cap 600 compaines. These are both similar products to QID ETF
As mentioned previously these ETFs don't require a margin account and with the coming market correction or crash I believe the small cap companies will be the first ones to go in the selling furor.
Best Of Luck - Also Check your PMs - I am sending you links for some like minded boards you can take a look at when you have some spare time.
Best Regards,
KC Scott
Thanks KC Scott, nice to see you :)
You're providing very useful information, as I also think small caps in general will go down more than big caps. Small caps have been in a prolonged bull market of their own, and they're more expensive than large caps (although large caps are quite expensive too, if we take out the energy and the financial groups, which will suffer if there's an economic recession).
Hi David,
As per yesterday's request:
Can you have a look at CGR and also NKTR?
Thanks,
Dhiraj
GOOG looks like a good short, check the double top breakdown on the chart. If it breaks that long term ascending support level as I think it will, watch for it going down $50 in a very brief period of time.
Damn, my friend from the semi industry suggested shorting CMOS a few weeks ago, and I lost track of it. Down 23% today!
David, what do you think of ARM as a short here. It is coming off recent highs and is part of the auto industry supplying parts worldwide. I would think that the auto industry would get hit pretty hard in an economic downturn so ARM should follow suit. Thanks!
Hi Dave! Could you check EMKR please? Thanks.
Quote from: tokyopua on March 02, 2007, 11:47:48 AM
Damn, my friend from the semi industry suggested shorting CMOS a few weeks ago, and I lost track of it. Down 23% today!
That's what I call a momentum short :o
There was this news out:
• Credence Issues 2Q Outlook Below Street (http://biz.yahoo.com/ap/070301/credence_systems_outlook.html?.v=1)
AP (Thu 5:58pm)
So you think your friend had inside information? Once a guy in Portugal, who has been an investor for over 30 years (he was a money manager in Australia for about 20 years), called me saying to short Altera. The stock went down more than 20% two days later due to some news out ... he knew, because a friend of a friend warned him.
Quote from: David Randolph on March 02, 2007, 11:56:46 AM
Quote from: tokyopua on March 02, 2007, 11:47:48 AM
Damn, my friend from the semi industry suggested shorting CMOS a few weeks ago, and I lost track of it. Down 23% today!
That's what I call a momentum short :o
There was this news out:
• Credence Issues 2Q Outlook Below Street (http://biz.yahoo.com/ap/070301/credence_systems_outlook.html?.v=1)
AP (Thu 5:58pm)
So you think your friend had inside information? Once a guy in Portugal, who has been an investor for over 30 years (he was a money manager in Australia for about 20 years), called me saying to short Altera. The stock went down more than 20% two days later due to some news out ... he knew, because a friend of a friend warned him.
In this case I just think he knows the industry really really well! He also had a short on AMD that he coved for a nice profit recently. I used to work with him, we were at the same company but he has many more years than me in the semi industry. He was short CMOS for about a month already, but was always nervous about it lol.
I think his nervousness was part of why I didnt take it as seriously. He didnt tell me "short CMOS" in any aggressive way, just told me that he was short himself. Well, hindsight is 20/20, and I am happy for him cause of course he got clocked in many longs Tuesday and is staying long in those, so he needs this nice profit from CMOS...
DAVID:
I see Forestry Index $DJUSFS almost invulnerable these days and
two of the components like CSAR and WY showing no impact on the
latest correction. could you take a look at them please.
You are doing a fine job keep cool.
By the way applaud for Scott.
Quote from: dhiraj19 on March 02, 2007, 11:35:17 AM
Hi David,
As per yesterday's request:
Can you have a look at CGR and also NKTR?
Thanks,
Dhiraj
Ok Dhiraj, let me have a look at CGR. Technically the stock looks like is having a pullback in an overall bullish trend, but I have to tell you, the more charts of below $5 stocks I see, the more I believe they're kind of a one time wonder, you see, they spike up and then go down to previous levels until the next spike up.
Trends usually aren't sustainable, stocks ramp up all at once and then just die.
But let's see the fundamentals, as I know nothing about the stock.
- Market cap is $120 M. The Company is engaged in the acquisition, exploration and development of precious metal properties, the acquisition and development of oil and gas properties, the production and marketing of minerals and the production of oil, NGLs and natural gas.
- No dilution
- Balance sheet is weak
- I don't see any revenue growth
- EPS for the previous 4 quarters was 10 cents, so the trailing earnings multiple is 16.
Analysts are expecting just 7 cents EPS for 2007 (http://finance.yahoo.com/q/ae?s=CGR), so the forward multiple is 23.
I don't know what moved the stock up (maybe the recent rise in oil?), if it was that, since I'm a bear in oil, I'm a bear on this stock.
It will be hard to find a stock that I like in the current bear market, it would need to be quite unique, I guess, but I'm sure they're outthere.
Thanks, I hope I'm wrong, good luck :)
How about SFLY for a short? Looks like it IPOd recently as there isnt much chart history, and I think it is up because it has seasonally strong Q4 (at least that is what it looks like from this chart on MSN):
http://moneycentral.msn.com/investor/invsub/results/hilite.asp?Symbol=sfly
Shutterfly, Inc., formerly Shutterfly.com, Inc., is an Internet-based social expression and personal publishing service that enables consumers to share, print and preserve their memories by leveraging its technology-based platform and manufacturing processes. The Company offers a range of products to customers, including prints, photo-based products and merchandise and an assortment of ancillary products, such as frames, photo albums and scrapbooking accessories. In addition, it provides a number of valuable tools and services, such as the ability to upload and edit photos online, share photos with friends and family and permanently store an unlimited number of photos on the Company's system.
Doesnt sound like a great business model to me lol...
47.2 PE vs industry 20.4,... but a decent current ratio of 4.9
Thanks for your thoughts david. What happens with the "convertible stuff" to affect the diluted weighted shares - is this effectively outstanding warrants/options etc that can be excercised and certain price points over time? I had seen a relatively stable share count over the last several Q's, at least for the total outstanding.
Or could it be due to this from their last 10Q?
Quote
On November 11, 2005, we entered into a Common Stock Purchase Agreement (the "Stock Purchase Agreement") with Fusion Capital Fund II, LLC ("Fusion Capital"). Under terms of the Stock Purchase Agreement, Fusion Capital has committed to purchase up to $25.0 million of our common stock, at intervals determined by us, at prices determined by a formula set forth in the Stock Purchase Agreement. As of September 30, 2006, no shares have been purchased under this agreement.
Also, the trailing P/E may be a bit misleading, given the have already earned .60 this year, and we could expect them to at meet the last 2 quarters eps. This would give .85 for 2006 (conservative imo) a P/E of 10.6. I think the main story for OMNI is the fact that they have been rapidly acquiring new operations on a non-dilutative basis, and that these companies are going to begin to add substantial revenues through 2007.
QuoteOMNI recently announced that its full year pro forma revenues for 2006, including full year revenues for the acquisition of Preheat, Inc., Rig Tools, Inc. and Charles Holston, Inc., would top $140 million
to date they have generated $73M in revenues in 2006, so this suggests that they expect to make something like $67M plus this Quarter, which seems high, but may well be the result of these additional acquisitions. If they can maintain an operating income margin of around 20% (as they have done in the last few Quarters) that would translate into Q4 EPS of about .50 cents per share, and full year eps of 1.10+. then we would be looking at a rapidly growing oil services company with a P/E of just 8.2. This is speculative, but is only my analysis coming from their numbers.
Also, another one to have a look at on the bull side (which you have probably already covered is NM, formerly BULK (they recently moved to the NYSE). Acting well today (and always nice to see a stock bucking the market trend), and looking to break new highs once again. It has run a lot this month, but may have more room to go.
Sorry these are both long suggestions, I know you are mostly focused on the short side right now, but whatever makes us money, right?
I've been thinking about the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php) and its objectives. It will be hard (I would say impossible) to go from the current $24,000 to $150,000 just shorting stocks, it doesn't matter how hard they fall.
I believe I'll need options, specifically put options, to achieve the objective during this bear market. You know options are a risky game, but one can choose the level of risk he wants to take.
A high reward/high risk proposition is what the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php) is all about.
Options will kick in this board in a few minutes!
Quote from: David Randolph on March 02, 2007, 12:31:53 PM
I've been thinking about the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php) and its objectives. It will be hard (I would say impossible) to go from the current $24,000 to $150,000 just shorting stocks, it doesn't matter how hard they fall.
I believe I'll need options, specifically put options, to achieve the objective during this bear market. You know options are a risky game, but one can choose the level of risk he wants to take.
A high reward/high risk proposition is what the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php) is all about.
Options will kick in this board in a few minutes!
I'll learn about options from you!!!!!!!!!!!! that sounds wonderful....!!!! Thanks a lot David ;D ;D ;D
Ramsburg told me he bought some GOOG put options for the 3 Stocks on Fire Portfolio as I told him to do but after all he couldn't buy because for that strike there wasn't enough liquidity. I just asked him to get some "good" puts, but apparently it's not that easy.
We'll need to study this better before jumping to conclusions, I never traded options before, he used to do that a lot but it was years ago, so ... we need to take our time to accurately choose the puts we want to buy.
David I saw that you bought GOOG Option $520 PUT Jun 07 @ $80 (yahoo ticker: GOPRV.X) but when I go to my broker's site and search for GOOG in options, I only get this, I don't see the $520 ... ???
http://img109.imageshack.us/img109/8158/googtj4.png (http://img109.imageshack.us/img109/8158/googtj4.png)
Quote from: Se7en on March 02, 2007, 01:03:00 PM
David I saw that you bought GOOG Option $520 PUT Jun 07 @ $80 (yahoo ticker: GOPRV.X) but when I go to my broker's site and search for GOOG in options, I only get this, I don't see the $520 ... ???
http://img109.imageshack.us/img109/8158/googtj4.png (http://img109.imageshack.us/img109/8158/googtj4.png)
Yep, I told Ramsburg to make the transaction for me, he told me he bought those puts, but after all he couldn't do it ... we're looking for other more liquid puts.
Hi David, What do you think about svvs as a short?
Thanks, Dave
David, do you think it is still a good time to buy SIGM?
I just sold my last stock PFSW at 1.07 and I am holding about 5K cash. I invested 3K on Jan to see how the stock is, and luckily I had big profit and thank you for your suggestions which helped me a lot, especially CPNE.
But currently I have a question. For someone like me holding only 5K cash, I assume it is not good to short?? optional sounds good, but to risky. As I just graduate and just started to work, I could only put additional 20K or 30K. SO you think I should just hold the cash and wait?
Also, what do you think of LFL, TBV, UNAM and CALD, you can just pick one or two, or simply tell me if you like them. Thx
David, my brother keeps trying to get me to buy puts on GT. Your opinion? He's already called 3 times today on it.
Hi David,
I opted to buy the GOOG June 2007 $400 strike puts, since they are liquid, as you mentioned. The Ticker is GOPRT. They are a lot more risky, but I anticipate selling them soon after the stock breaks the trend line.
Good Luck!
Bourbon
Hi David,
As far as the GOOG puts go, a couple things - first of all, I know this is your fast portfolio, and as such you will put 1/3 of your money into each trade. the problem with the $80 GOOG Jun 510 puts is that they cost $8000 per contract!! (i.e. $80*100) for some, certainly for me that is way too much to put into a single highly volatile instrument. GOOG is fairly unique in that it is such a high priced strock that any options will tend to be expensive, even "at the money" options. Maybe something a little closer in timeframe, i.e. April puts, and closer in strike, e.g. the April 450 puts are currently $23 per contract. still expensive, but presumably you only want to hold these for a short period of time, so the time premium will not decay too significantly.
Finally, GOOG is currently struggling with 440, which was right on yesterday's (and the recent move) low. I also see a potential intraday falling wedge with its base at 440 as well. I would be concerned about a short term rally here, and would only look to buy those puts on a clear break of 440 (i.e. 1-3 5 min bars). Just my thoughts....
QuoteDavid, do you think it is still a good time to buy SIGM?
What do you mean? I was short the stock, but bought to cover at $26.63 (as you can see on the Trades (http://www.3stocksonfire.org/trading/index.php?topic=8769.msg90513#new) thread). I don't think it is the best short outthere. Look for stocks with bearish trends, those will go down the most and more easily.
How about AMD? I know not small cap, but it just broke below recent lows and is in a clear downtrend. It rallied at the beginning of the week, but has been tanking since
QuoteAs far as the GOOG puts go, a couple things - first of all, I know this is your fast portfolio, and as such you will put 1/3 of your money into each trade. the problem with the $80 GOOG Jun 510 puts is that they cost $8000 per contract!! (i.e. $80*100) for some, certainly for me that is way too much to put into a single highly volatile instrument. GOOG is fairly unique in that it is such a high priced strock that any options will tend to be expensive, even "at the money" options. Maybe something a little closer in timeframe, i.e. April puts, and closer in strike, e.g. the April 450 puts are currently $23 per contract. still expensive, but presumably you only want to hold these for a short period of time, so the time premium will not decay too significantly.
Yep, We didn't buy those puts for the 3 Stocks on Fire Portfolio. Since I don't know much about options, I asked Ramsburg for him to choose the right puts, he told me just bought those on the MSN, but he was wrong, there wasn't any liquidity.
He's looking for other puts now, and he told me he's not going to buy 33%, just 10% or so, because he thinks the risk is too high (me too).
He'll post which puts he bought here soon, I delegated the process to him ...
QuoteFinally, GOOG is currently struggling with 440, which was right on yesterday's (and the recent move) low. I also see a potential intraday falling wedge with its base at 440 as well. I would be concerned about a short term rally here, and would only look to buy those puts on a clear break of 440 (i.e. 1-3 5 min bars). Just my thoughts....
Yep, I see that support too but I believe it will break it by the end of the session and a big sell off will occur.
Thanks :)
that was a typo, I meant if it is still a good time to short SIGM?
Quote from: gix330 on March 02, 2007, 01:27:36 PM
that was a typo, I meant if it is still a good time to short SIGM?
Yes, but probably not the best thing outthere ... look for bearish momentum. I already covered that trade.
To me shorting Google (buy puts) is the right thing to do today (but pay attention to risk).
So how to buy those puts? I never have, and on my options chain on Etrade, I see something called GOP OL that looks like there is a bid at 22.2 and ask 22.6... man, I am a newbie for options, how to even buy this, the order types are:
buy to open, sell to open, buy to close, sell to close
so I assume its sell to open since this is a put? ???
Quote from: tokyopua on March 02, 2007, 01:33:15 PM
So how to buy those puts? I never have, and on my options chain on Etrade, I see something called GOP OL that looks like there is a bid at 22.2 and ask 22.6... man, I am a newbie for options, how to even buy this, the order types are:
buy to open, sell to open, buy to close, sell to close
so I assume its sell to open since this is a put? ???
²
I absolutely know nothing about options ... :-[
Can someone briefly explain how it works? Gains, losses?
Hi Tokyo -
You want to Buy to Open GOPOL.
You are buying the right to the put - or the option of selling the stock at a fixed price. Here we want the stock to go down, so that the put will go up (it will cost more for the right to sell it at that fixed price).
Quote from: BigSully1 on March 02, 2007, 01:13:48 PM
David, my brother keeps trying to get me to buy puts on GT. Your opinion? He's already called 3 times today on it.
I'm sorry BigSully1, but my opinion is you shouldn't short that stock, that is like buying a falling knife in a Bull Market. You need to sell weakness, not strength.
Good luck.
Quote from: dnickers on March 02, 2007, 01:35:34 PM
Hi Tokyo -
You want to Buy to Open GOPOL.
Thanks! Now that I know how to buy, I need to figure out how much to buy!
I dont know what a good amount to buy is given also that David is putting in less than normal here... maybe will sit it out for awhile...
Quote from: David Randolph on March 02, 2007, 01:04:40 PM
Yep, I told Ramsburg to make the transaction for me, he told me he bought those puts, but after all he couldn't do it ... we're looking for other more liquid puts.
Sorry for the mistake :-\
We bought
GOOG Mar 460 Put (http://finance.yahoo.com/q?s=GOPOL.X) @ $22, but only 10% instead of the regular 33% per trade due to these options being more near the money (bigger leverage and risk).
Yahoo ticker: GOPOL.X
Ameritrade Ticker: +GOPOLregards ;)
Quote from: tokyopua on March 02, 2007, 01:39:12 PM
Quote from: dnickers on March 02, 2007, 01:35:34 PM
Hi Tokyo -
You want to Buy to Open GOPOL.
Thanks! Now that I know how to buy, I need to figure out how much to buy!
I dont know what a good amount to buy is given also that David is putting in less than normal here... maybe will sit it out for awhile...
One contract will cost you 21.XX or whatever X 100 = $21XX.00. Just buy one or two ;)
$VIX is really getting in gear here... fear is in the air again, nobody wants to be long into the weekend...
Options can be a little tricky - you will almost always be in the red at first due to the bid/ask spread. However, they can be very rewarding. With options I believe it's best to set some stops (sell to close) at your pain threshold because they can move very fast.
Quote from: gix330 on March 02, 2007, 01:44:16 PM
Quote from: tokyopua on March 02, 2007, 01:33:15 PM
So how to buy those puts? I never have, and on my options chain on Etrade, I see something called GOP OL that looks like there is a bid at 22.2 and ask 22.6... man, I am a newbie for options, how to even buy this, the order types are:
buy to open, sell to open, buy to close, sell to close
so I assume its sell to open since this is a put? ???
well...i only know how short selling works, and I think you have Sell Short option to Short the stock David picked, then BUY COVER it!?
am i right? I use scottrade, and i did not see the Buy to Open option at the trade section!
You usually have to be in a special option trading dialog box...at least that's how it is on ameritrade...but definitely "buy to open" purchases the option...a put is an insurance policy if you're holding the stock...or in effect a short if you are not long the underlying position.
Quote from: tokyopua on March 02, 2007, 01:33:15 PM
So how to buy those puts? I never have, and on my options chain on Etrade, I see something called GOP OL that looks like there is a bid at 22.2 and ask 22.6... man, I am a newbie for options, how to even buy this, the order types are:
buy to open, sell to open, buy to close, sell to close
so I assume its sell to open since this is a put? ???
If you think the stock will go down, you buy to open the puts. You could also sell to open the calls (less risky - you just get the premium). Buy to close is the same as "buy to cover" when you sold to open ;D
I also don't know much about the practice, but know the theory. My game has always been the futures ... much more simple.
I just hope GOOG breaks that ascending trendline today, I draw it precisely since the IPO.
Quote from: dnickers on March 02, 2007, 01:41:16 PM
Quote from: tokyopua on March 02, 2007, 01:39:12 PM
Quote from: dnickers on March 02, 2007, 01:35:34 PM
Hi Tokyo -
You want to Buy to Open GOPOL.
Thanks! Now that I know how to buy, I need to figure out how much to buy!
I dont know what a good amount to buy is given also that David is putting in less than normal here... maybe will sit it out for awhile...
One contract will cost you 21.XX or whatever X 100 = $21XX.00. Just buy one or two ;)
Exact, the cost is X 100 shares (standard options are always related to a block of 100 shares).
regards ;)
Quote from: David Randolph on March 02, 2007, 01:48:44 PM
Quote from: tokyopua on March 02, 2007, 01:33:15 PM
So how to buy those puts? I never have, and on my options chain on Etrade, I see something called GOP OL that looks like there is a bid at 22.2 and ask 22.6... man, I am a newbie for options, how to even buy this, the order types are:
buy to open, sell to open, buy to close, sell to close
so I assume its sell to open since this is a put? ???
If you think the stock will go down, you buy to open the puts. You could also sell to open the calls (less risky - you just get the premium). Buy to close is the same as "buy to cover" when you sold to open ;D
I also don't know much about the practice, but know the theory. My game has always been the futures ... much more simple.
I just hope GOOG breaks that ascending trendline today, I draw it precisely since the IPO.
Carefull though - because selling calls if you're not long the position exposes you to more risk. If the stock doesn't go down, but goes up, and the stock is called from you, you are expected to come up with those shares. Sure you get to keep the premium, but if it goes to infinity - you're broke. ;D
First time do Option trade, Scottrade can not find both GOPOL.X nor GOPOL under Options order Entry? Also, I should use Limit for order type to put @22 or whatever price i will short, right? or i use stop limit?
sorry...but i am new! :(
Hey David - I think we're going to need an options learning discussion thread. I TOTALLY recommend that if you are at all unfamiliar with options, to NOT play them until you learn them. The tuition expense is even greater with these. Good luck!
So now to quantify the risk: absolute worst case is holding until expiration date and they expire worthless. So say I buy one contract for say $2100, the most I can lose is $2100, is that correct?
thank you dnickers and yes, I agree with you, I hope David can open an options learning thread if it is possible. ;D
Quote from: tokyopua on March 02, 2007, 01:58:16 PM
So now to quantify the risk: absolute worst case is holding until expiration date and they expire worthless. So say I buy one contract for say $2100, the most I can lose is $2100, is that correct?
Exactly.
Here are some subprime loan holders that are PUT candidates:
NEW YORK (Fortune) -- When a certain $126,000 subprime loan on a $696,000 house on the West Coast failed to produce a single mortgage payment, alarm bells went off at Clayton Holdings, a company that monitors credit risk.
Closer scrutiny revealed other red flags. The borrower's previous rent payment had been $1,000, compared to the $4,482 she was supposed to be shelling out for both the primary loan and the $126,000 piggyback. And her stated income was $84,000 even though she was an hourly worker at Target.
"We do an autopsy to find out what caused the loss of blood," says Keith Johnson, Clayton's COO. "It's a CSI subprime."
In the past few weeks, the bodies have been piling up fast and furiously. Fallout from subprime mortgages - that is, home loans to borrowers with a blemished credit history - gone bad has wreaked havoc on the industry.
Big names Washington Mutual (Charts) and HSBC have reported hits tied to their subprime business and there has been a nonstop barrage of bad news for major subprime lenders, including New Century Financial (Charts) and NovaStar Financial (Charts).
The complete story is below:
http://money.cnn.com/2007/02/28/magazines/fortune/subprime.fortune/index.htm
AMD will lose to Intel over the next two years. Goldman Sachs rates AMD a sell and recommends AMD as a short. I would buy the PUT.
Quote from: gix330 on March 02, 2007, 01:54:47 PM
First time do Option trade, Scottrade can not find both GOPOL.X nor GOPOL under Options order Entry? Also, I should use Limit for order type to put @22 or whatever price i will short, right? or i use stop limit?
sorry...but i am new! :(
Right click on the symbol and select show options chain. Puts are on your right. Scroll down the window and you'll find GOPOL
Quote from: dnickers on March 02, 2007, 02:00:33 PM
Quote from: tokyopua on March 02, 2007, 01:58:16 PM
So now to quantify the risk: absolute worst case is holding until expiration date and they expire worthless. So say I buy one contract for say $2100, the most I can lose is $2100, is that correct?
Exactly.
Also, keep in mind that this in an "in-the-money" put...meaning that the strike price is (only for the put case) above the current price. So if today were expiration day, and the stock was at $440, the option would still be worth $20 X $100 = $2000 because this GOPOL put has a stike price of $460 (meaning we could sell 100 of our GOOG shares for each contract held, if we had them, for $460...If we don't own the shares we simply sell to close the option.
Playing in the money options is usually less risky, as they are tied more to the stock price. Out of the money options are HIGHLY speculative and can evaporate very quickly. This put would have to go to $460 to become worthless on expiration day.
QuoteCarefull though - because selling calls if you're not long the position exposes you to more risk. If the stock doesn't go down, but goes up, and the stock is called from you, you are expected to come up with those shares. Sure you get to keep the premium, but if it goes to infinity - you're broke. ;D
Jesus, thank you for remind me of that !
Selling calls to be short isn't less risky at all, because if the stock shoots up to the moon ... one has to pay the money to the holder of the calls. The risk is infinite, the gain is limited.
However, when we buy a put, the risk is just the money we buy (but that is really the risk, if I'm wrong I can lose it all). So, be carefull, don't buy much, Ramsburg bought just 1 contract of GOPOL.X for the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php).
Quote from: dnickers on March 02, 2007, 02:08:28 PM
Quote from: dnickers on March 02, 2007, 02:00:33 PM
Quote from: tokyopua on March 02, 2007, 01:58:16 PM
So now to quantify the risk: absolute worst case is holding until expiration date and they expire worthless. So say I buy one contract for say $2100, the most I can lose is $2100, is that correct?
Exactly.
Also, keep in mind that this in an "in-the-money" put...meaning that the strike price is (only for the put case) above the current price. So if today were expiration day, and the stock was at $440, the option would still be worth $20 X $100 = $2000 because this GOPOL put has a stike price of $460 (meaning we could sell 100 of our GOOG shares for each contract held, if we had them, for $460...or simply sell to close the option.
Applauded you for all the explanations :) I went to buy one put but since I only put in my options trading application today, I have only Level 1 options trading and was rejected :P Probably for the best since I clearly need to study options more than I have.
Quote from: nica33 on March 02, 2007, 02:04:02 PM
Quote from: gix330 on March 02, 2007, 01:54:47 PM
First time do Option trade, Scottrade can not find both GOPOL.X nor GOPOL under Options order Entry? Also, I should use Limit for order type to put @22 or whatever price i will short, right? or i use stop limit?
sorry...but i am new! :(
Right click on the symbol and select show options chain. Puts are on your right. Scroll down the window and you'll find GOPOL
thank you and i found it. But i will not buy option until David opens a learning thread. :P
Thanks Tokyopua :)
Quote from: gix330 on March 02, 2007, 01:59:09 PM
thank you dnickers and yes, I agree with you, I hope David can open an options learning thread if it is possible. ;D
Dnickers rules on options!
Where should I open the thread? On the Members corner? Or we'll just talk about it here, on "random trader talk"? There's more audience here, so probably we'll learn faster.
David, have you stopped completely with trading futures or isn't it a good idea to do it while the markets are bearish?
Quote from: David Randolph on March 02, 2007, 02:17:08 PM
Quote from: gix330 on March 02, 2007, 01:59:09 PM
thank you dnickers and yes, I agree with you, I hope David can open an options learning thread if it is possible. ;D
Dnickers rules on options!
Where should I open the thread? On the Members corner? Or we'll just talk about it here, on "random trader talk"? There's more audience here, so probably we'll learn faster.
I know Samantha has a thread open somewhere, so there are some open already in the members section. She is really passionate about talking about them, lol.
QuoteDnickers rules on options!
Well, I wish I ruled on options, but I am familiar with the basics. :D
Option trading is a very risky investment tool, it's not suitable for everyone.
If you want to learn more about options, go to the following site and take the online tutorial.
http://www.cboe.com/LearnCenter/default.aspx
Hope it helps. Have a good weekend everyone.
Quote from: David Randolph on March 02, 2007, 02:17:08 PM
Quote from: gix330 on March 02, 2007, 01:59:09 PM
thank you dnickers and yes, I agree with you, I hope David can open an options learning thread if it is possible. ;D
Dnickers rules on options!
Where should I open the thread? On the Members corner? Or we'll just talk about it here, on "random trader talk"? There's more audience here, so probably we'll learn faster.
you both rules!!!
it is really a good idea to open a learning thread, time to learn something important since i can not do anything with only 5K. lol...
BTW...how do you think of copper, David?
The basic principles are:
- Puts go up when the stock goes down, so those are the ones you want to buy to bet on the bear case.
- Calls go up when the stock rises, calls are a leveraged way to be long stocks.
But, it is possible that if one chooses the wrong option, for example a very out of the money option that will only have value if the stock moves 80% in 5 days, you can buy them, the stock goes in your direction, yet you lose the money, even if you're right on the direction.
There's a lot more to it, but I'm just a theorist.
Generally I used them just to get some leverage on the bear run, because if that isn't the case, I'll be out of this bear market with just 20 or 30% profit. That is ok for the Main (http://www.3stocksonfire.org/3stocksonfire.php), but the Fire (http://www.3stocksonfire.org/3stocksonfire_3sof.php) needs more than that.
All - Regarding options. You really should spend some time understanding what you're getting into BEFORE you play with options. With options you can put $5,000 in and your money can drop to $2,500 before you know it. They can have a huge reward, but there is also a huge risk involved. This is the one area of trading that is not best to learn while you are doing it... trust me.
Quote from: Se7en on March 02, 2007, 02:21:09 PM
David, have you stopped completely with trading futures or isn't it a good idea to do it while the markets are bearish?
I've traded futures for 7 long years, but I'm not doing it now. It could be a good idea, but as a medium term speculation tool, never for day trading as I did.
Futures are very liquid, have very narrow spreads, and allow leverage (that can be a problem if one can't control risk).
I made a lot of money trading futures and also lost all my account some times, in my early days. All in all I don't recommend anybody entering that game, it can eat your life.
I need to enable options for my account, I wanted to get into options a while back. Because I hear puts are much better then shorting most of the time.
David,
You'll notice there is a whole messge board in the public section on options - SamanthaStephens has been one of the few strong proponents of options there - my god she would be so happy to see 3SOF moving into options.
Tokyopua, I have been playing with options since the beginning of the year, and believe me they are VERY volatile, and hard to hold on to for any length of time - most of my options trades have resulted in gains of between 50 and 100% and often losses in excess of 100% in a matter of a couple of days. To be honest, I had a look at all my options plays and I am about breakeven, maybe slightly down on them to date. If you do decide to play them, I would look to lock in gains if you make a double - you can often make that and more in a single day. And don't play with any more money than you are willing to lose ENTIRELY. With David's GOOG puts because they are quite expensive, they would need to move about 20-30 points to make a 100% gain as they don't trade exactly according to the underlying price. I have been playing AAPL option lately to some success, which are highly volatile and the option prices are much lower (around $2-3 for at the money near month options).
It is also important to understand that options are time dependent, and their value decreases as they get closer to expiration, so they are good to capture short term moves, but only if you are very confident in that short term move. Hanging on to them tends to lead to their value diminishing.
I'm not playing this GOOG trade, but i hope it goes well for those who do. A break of David's long term trendline would surely be significant.
In the money options, as I said earlier, are less speculative. Let's look at GOPOL real quick. The stock is at (let me see right now...) $440.08. Our put gives us the right to sell at $460 anytime between now and March 17th. The inherent worth of each put (right now) is $460-440.08 = 19.92 per share X 100 shares/contract = $1992 per contract. If we bought the GOPOL put today for $21.10, that means we paid a premium of $118 per contract, or about 5.5%. $118 gives you essentially the right to control 100 shares of GOOG, or about $44,000 worth of stock.
Let's hope GOOG tanks ;)
QuoteWith David's GOOG puts because they are quite expensive, they would need to move about 20-30 points to make a 100% gain
And that would be a mere 4.5% drop in the price of GOOG...not unreasonable.
QuoteI have been playing AAPL option lately to some success, which are highly volatile and the option prices are much lower (around $2-3 for at the money near month options).
And again here, it's not about the price per contract, it about the %gain or lost on the money invested! The reason these GOOG puts that David bought are so expensive is because they are in the money. At the money puts are more speculative and their value will erode much more quickly. Compare premiums you are paying, not the price of the contract.
Quote from: floorsmall on March 02, 2007, 02:26:23 PM
All - Regarding options. You really should spend some time understanding what you're getting into BEFORE you play with options. With options you can put $5,000 in and your money can drop to $2,500 before you know it. They can have a huge reward, but there is also a huge risk involved. This is the one area of trading that is not best to learn while you are doing it... trust me.
I agree. That is why I bought just 1 contract, putting 8.7% of the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php) capital at risk.
I don't want to "play options", just to get exposure to the bear case in a stock which I believe is about to tank hard, due to technical and fundamental reasons.
But maybe it won't be today and the stock rebounds and I'll lose ... we'll see, anyway, risk is just 8.7% of capital.
Thanks for the good advice :)
And just like that, I got stopped out of my puts.
:'(
8)
QuoteAnd again here, it's not about the price per contract, it about the %gain or lost on the money invested! The reason these GOOG puts that David bought are so expensive is because they are in the money. At the money puts are more speculative and their value will erode much more quickly. Compare premiums you are paying, not the price of the contract.
Yes, they move more or less $1 for each $1 Google moves, but since I bought the put at $22, each $1 change at GOOG represents about 5% for my puts.
Quote from: dnickers on March 02, 2007, 02:43:09 PM
And just like that, I got stopped out of my puts.
:'(
8)
Why the stop? That way any bit of intraday volatility wipes you out. Better to buy just a little and let the thing run its course. That's what I'll do.
Dave would buying BIDU puts be a better idea than GOOG puts? Thats just going off the theory that our markets affect China more than Chinas markets affect ours. The DOW is down again so that should put more fear in the Chinese sending there markets down. Maybe I'm wrong but I think BIDU has more downside in it than GOOG even though I agree they are both good shorts.
QuoteWhy the stop? That way any bit of intraday volatility wipes you out. Better to buy just a little and let the thing run its course. That's what I'll do.
I just like to have the option go my way immediately, leaving little room the other way. Probably not the best strategy, but limits losses. I like the play though David, and I think I'll watch it for a little bit and maybe try again. :)
Quote from: prodigykid6 on March 02, 2007, 02:48:24 PM
Dave would buying BIDU puts be a better idea than GOOG puts? Thats just going off the theory that our markets affect China more than Chinas markets affect ours. The DOW is down again so that should put more fear in the Chinese sending there markets down. Maybe I'm wrong but I think BIDU has more downside in it than GOOG even though I agree they are both good shorts.
Yes, more downside potential at BIDU than at GOOG. But beware with the puts you buy and absolutely don't invest a significant part of your capital in that. Buy money you can afford to lose, as you would lose if you buy a penny stock that tanks 50% in one day.
GOOG Weekly Chart suggests a double top with a target of $397 (i.e. high of 513 - middle W-leg of $455 = 57. 455 - 57 = $397). If GOOG keeps going down from here, it may see some support at 427-430, but it does look like a significant breakdown is looming unless it bounces immediately.
By the way, its really nice to have such a discussion about all this - very educational :) :)
Quote from: dnickers on March 02, 2007, 02:50:22 PM
QuoteWhy the stop? That way any bit of intraday volatility wipes you out. Better to buy just a little and let the thing run its course. That's what I'll do.
I just like to have the option go my way immediately, leaving little room the other way. Probably not the best strategy, but limits losses. I like the play though David, and I think I'll watch it for a little bit and maybe try again. :)
Ok, I know your game. My game needs to be: see a trade, place my position and then let the market run its course, without any regard for the intraday or even the short term.
But, in this case, if the stock just goes up to close that gap on the chart, my puts will be worthless. I guess there's too much leverage in them, that's why I wanted Ramsburg to buy something more in the money, but the bid/ask spread was huge there.
One thing is sure: I can only speculate, not gamble, and I believe trading with extremely tight stops is gambling, because the intraday is unpredictable, and not just that ... it makes you pay attention to the intraday, and that kills a trader.
I wish I knew how to explain what my experience about that is ... the basic principle is: if you buy or hold based on the intraday or very short term, you will be presented with endless hold/sell decisions as you hold the position, and invariably you get out too soon, not really making any money over the long term.
Let me just applaud you one more time dnickers :)
QuoteOne thing is sure: I can only speculate, not gamble, and I believe trading with extremely tight stops is gambling, because the intraday is unpredictable, and not just that ... it makes you pay attention to the intraday, and that kills a trader.
I wish I knew how to explain what my experience about that is ... the basic principle is: if you buy or hold based on the intraday or very short term, you will be presented with endless hold/sell decisions as you hold the position, and invariably you get out too soon, not really making any money over the long term.
And this is why I pay money to be a member here. I am learning from the best. The lessons/philosophy learned here is outstanding. What better way to learn than from people who are sincere, genuine, experienced, and talented.
Quote from: David Randolph on March 02, 2007, 03:02:34 PM
Quote from: dnickers on March 02, 2007, 02:50:22 PM
QuoteWhy the stop? That way any bit of intraday volatility wipes you out. Better to buy just a little and let the thing run its course. That's what I'll do.
I just like to have the option go my way immediately, leaving little room the other way. Probably not the best strategy, but limits losses. I like the play though David, and I think I'll watch it for a little bit and maybe try again. :)
Ok, I know your game. My game needs to be: see a trade, place my position and then let the market run its course, without any regard for the intraday or even the short term.
But, in this case, if the stock just goes up to close that gap on the chart, my puts will be worthless. I guess there's too much leverage in them, that's why I wanted Ramsburg to buy something more in the money, but the bid/ask spread was huge there.
One thing is sure: I can only speculate, not gamble, and I believe trading with extremely tight stops is gambling, because the intraday is unpredictable, and not just that ... it makes you pay attention to the intraday, and that kills a trader.
I wish I knew how to explain what my experience about that is ... the basic principle is: if you buy or hold based on the intraday or very short term, you will be presented with endless hold/sell decisions as you hold the position, and invariably you get out too soon, not really making any money over the long term.
Let me just applaud you one more time dnickers :)
Thank you for talking about gambling David. I believe you are right on the money when you say that intraday speculation and basing trades on intraday information is indeed gambling. I believe that all of us will make much more money over a longer time period by sticking to this wise advice.
Making too many short term trades ends up losing more than buying and holding a long or short position. Clearly defining your buy and sell points before making the trade is something that I am becoming comfortable with, but have not always done - and it usually ends up with me losing money on a winning strategy.
Thanks again for your wonderful insight, and sharing your philosophy and thoughts with us. Your experiences can be used by the members here to develop a sound trading technique and philosophy of our own, and you are having a positive impact on us.
Thanks
Bourbon
QuoteAnd this is why I pay money to be a member here. I am learning from the best. The lessons/philosophy learned here is outstanding. What better way to learn than from people who are sincere, genuine, experienced, and talented.
Gee, what a nice way to end a very tough week dnickers, thank you :)
I feel I paid a very high tuition fee, so I'm not willing to let go of what I've learned. The money can only be made in the main moves, not in short term fluctuations. To concentrate on the main move, there must be sound reasons to take the trade and those sound reasons can't change due to a 5% move, or else they were not sound enough. I get out when the market proves me wrong or right, not when it didn't talk yet.
Anyway, I'm still learning, and I often make mistakes, as being a successful trader/investor is probably one of the most difficult endeavors a man can take.
David Options are not so simple as you are writing. The price change with the time and special with the volatility.
If you are not looking for the volatility you are playing a losing game. Try to buy puts with a low volatility (in historic terms).
QuoteDavid Options are not so simple as you are writing. The price change with the time and special with the volatility.
If you are not looking for the volatility you are playing a losing game. Try to buy puts with a low volatility (in historic terms).
However, with in the money options, I'm not too concerned with historic volatilities. Here, the option price is pretty tightly coupled to the stock price...
And options are, in essence, simple. As traders, we do a bunch of calculations and then pick some greek letters to call those calculations...but what really matters is what the underlying stock is doing...JMO
One of my favorite strategies for Bear times is sell put options out of the money, where I consider the strike price cheaper in terms of Company fundamental value. I don't mind if I will have to buy the shares on the maturity date. But this is for the long term.
Quote from: dnickers on March 02, 2007, 03:37:36 PM
QuoteDavid Options are not so simple as you are writing. The price change with the time and special with the volatility.
If you are not looking for the volatility you are playing a losing game. Try to buy puts with a low volatility (in historic terms).
However, with in the money options, I'm not too concerned with historic volatilities. Here the option price is pretty tightly coupled to the stock price...JMO
I agree with dnickers, that is why I prefer in the money options. Anyway, this trade on the options isn't sound, because it has a time limit of just two weeks, so I'm somewhat playing the short term here and I dislike that.
However, if GOOG breaks down to $435 or so I see it plunging $50 or so in a couple of days, so I guess it is worth the risk.
But I understand what you mean by taking volatility into account. Thanks.
Quote from: Guloso on March 02, 2007, 03:39:13 PM
One of my favorite strategies for Bear times is sell put options out of the money, where I consider the strike price cheaper in terms of Company fundamental value. I don't mind if I will have to buy the shares on the maturity date. But this is for the long term.
I like this strategy too, but in bear times, that company may trade well below the fundamental value, and you may see losses for quite some time...in addition, you need to have the cash to buy the stock if the put you sold gets put to you...so it really isn't that powerful of a leveraging tool...but, if the stock doesn't go down, you get to keep the premiums >:D
Quote from: Guloso on March 02, 2007, 03:39:13 PM
One of my favorite strategies for Bear times is sell put options out of the money, where I consider the strike price cheaper in terms of Company fundamental value. I don't mind if I will have to buy the shares on the maturity date. But this is for the long term.
If I understood correctly Guloso, if you sell put options, you're making a bullish trade in a bear market, am I right? Betting stocks won't go down all that much, because they have fundamental value?
That can work if it is just a correction in a bull market, but if it is a bear market, most stocks will go down more than anyone could imagine when the bear market started.
There it goes. GOOG taking a dip ;D
Excellent call on GOOG David. It closed on the LOD, looks like we are ready for a nice super-drop on Monday! This should be terrific as the stock failed to stay above the Long Term trend line. GOOG has many gaps to be filled, I am thinking that the gap near $320-$340 might be a good landing spot in the intermediate term.
Have a terrific weekend - and let's all be happy about a great Monday morning!
Bourbon ;D
David- I bought QID at mid-day on Tuesday, a little before you even. Then on Wednesday I sold it for a small profit and honestly I was a little confused about my next move... After reading your approach to buying QID and just holding I was able to start another position and hold it for the remainder of the week. I just want to say that it was quite impressive how you were able to turn on a dime from a bull to a bear, make an excellent decision and most importantly stick with your decision... more than one person on this board thought you were crazy at the time. Nice job.
PS. I guess I need to become a member if I'm going to profit off your thoughts!
Thanks for your final comments. I'm glad the weekend is here, so I can take a rest from this emotional week (it shouldn't be, but we're all humans).
The 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php) was up 1.07% today, to an overall gain of 62% since January 19, 2007.
This options theme reopens the chance of turning $15,000 into the desired $150,000, but I must play carefully and study the issue a lot. I want to thank your precious help on that.
Have a great weekend ;)