3SOF

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

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.   

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. 

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. 

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.

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    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. 

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. 

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.