stock options picks

[catrader]

David R. does not like options but I think if you dig deeper, they can be investment alternatives.  Created this thread to analyze and keep statistics of option opportunities.  Guess I can start with one that maybe if you could have gotten before earnings yesterday could have been rewarded greatly, amgn, had you bought yesterday the Aug 75 call,  5.80  +5.15.  let's see if we can see something like this.  After all, 400% + returns is not bad right.  Must caution like they say, play options only with money you can affort to lose.  But then are options that much risker.  I think if you think a stock is going up and it has options and premium is not that great, might be the way to go.  yesterday i was bullish on yhoo and intc.  so if i bought calls, they probably might be worthless or lost a great of the premium. ofr the same reason if you think a stock is going down, puts might be the way to play instead of shorting the stock.

[VikingFan]

I just bought some SHLD calls on its breakout over 162.  Considering how high the stock price is and how far it moves, they're not that pricy.  I got the Auust 165's for 5.3, hoping they become in the money soon.  This is a risky play, as are all options...

[catrader]

after hours today ebay going up 15% and vrsn going down like 10%.  guess those would have been nice plays.  will put some calls and puts on these tomorrow and what could have happened had you taken positions. 

[VikingFan]

Added some more of those shld calls at 4.2.  Apparently, Cramer said on his show last night that he lightened up on his SHLD position, so his followers dumped this am, sending it down about $4.  I'm going to stop on these calls if SHLD doesn't at least consolidate near the 160 level.

[VikingFan]

Another play I'm doing today is writing some puts and far out of the money calls on my GOOG stock.  GOOG options are up significantly today because of earnings tonight.  I sold the August 300 puts for over $10 and plan on selling the August 350 calls against my GOOG stock for $5 or $6.  Selling the puts naked is very risky, but I want to get more goog if it does happen to drop well below goog anyway no matter what this quarter's report says.  Normally, I'd buy further out of the money puts to protect the downside, but I'm going to take the risk this time. 

If GOOG gaps down well below 290, I can lose significantly on the naked puts and will be long more stock at a basis in the lower 280's.  If it shoots over 350 and stays there, I'll be called out of my shares, but with a very nice profit.  If it stays between 300 and 350 through expiration, I'll have made an extra $15+ per share.  I'll probably end up trading out of the options before expiration, but wanted to take advantage of today's high premiums driven up by earnings speculators.

Again, this is a very risky play, but one I like because of my view on GOOG and thoughts about where it will likely trade after earnings.

[catrader]

vikingfan,

nice analysis on goog.  guess i need a lot to learn as sticking with basic buying puts and calls.  Good sites for learning, www.888options.com and www.cboe.com.  well here are some opportunities that happened.  numbers are approximate as the bid/ask there is usually like 0.10 and 0.20 spread.  if you were bullish on ebay and dndn(like some are here on the main thread) and thought it would go up in ths short term and bought lets say yesterday, here is what you could have made in some august calls.  dndn aug 5 call  $2.40  +1.05  so about 77% return.  ebay aug 37.50 call $4.30 +3.60  500% return.  If you were bearish on vrsn and bought a put yesterday and thinking in the short run, vrsn aug 30 put  $5.80 +3.60  163% return.  By the same token if you were wrong, then positions would be worthless or lost a lot of their value.  so learning here, and looking for the next amgn, ebay,vrsn, dndn. 

[catrader]

some goog calls and puts before earnings.  premiums do seem hight because of the volatility  aug 310 call $18.40   aug 350 call $4.40      aug 310 put  $14.90    aug 280 put $4.40.

[VikingFan]

It's pretty funny -- every single call and every put up 350 strike for August is red this morning.  All the option buyers from yesterday lost money. 

Update on my trades -- I covered the short 350 calls at .75 from 4.80 (couldn't get filled above 5) and covered the short 300 puts at 7.30 from 10.3.  Though the shares have taken a hit today, I bought a bunch of GOOG after hours last night on the drop and sold all that in the 308's this morning to net out a profit on the shares as well.  I'll probably hold some core shares longer term unless there's a spike or I get stopped out. 

When it dropped to 280 last night, I was getting a little worried, but that drop didn't make any sense...

[catrader]

vikingfan,

can you buy/sell  all stocks after hours or just some?  do you get it there and then or put order and wait to be filled the next day?  Like the bid/ask that you see is it valid?  I don't think you can do after hour trades on options.  I might be wrong.

[VikingFan]

I can buy/sell all Nasdaq stocks after hours.  You get it there live with live bids/asks.  Options stop trading at about 4:05 and open with stocks at 9:30.  You can buy/sell stocks after hours to hedge option positions.

[catrader]

some goog calls and puts before earnings.  premiums do seem hight because of the volatility  aug 310 call $18.40   aug 350 call $4.40      aug 310 put  $14.90    aug 280 put $4.40.

ok lets see how these options are doing today for goog,  aug 310 call $7.10  -11.30   aug 350 call  $0.80  -3.60   aug 280 put 2.75  -1.55   aug 310 put  15.40  +0.50.  as vikingfan pointed out, most options listed yesterday went down in value because after earning, goog did not move way up or way down.  this kind of points out the volatility in options.  in the case of these goog options, might have lost money because goog is a volatile stock which leads to the high premium and since earnings where within analyst estimates, it moved, but not that much. 

[VikingFan]

As an options alternative to buying GOOG stock, I just bought some GOOG Sept 290 calls at 21.90 on the pullback under 300.  If goog sells hard, the most I can lose is 21.9 points, which is about half the after hours range goog had last night.  Hoever, even if goog drops to 270 or so, these calls will still have some value.  On the other hand, if goog breaks out to a new high by September expiration, I'll be participating in a leveraged way.  This options play, as all, is risky, but it allows me to sell the common shares at some point and still participate in the upside for the next couple of months without as much at risk.

One reason I got these calls is all the brokerage support of goog, with so many upped earings estimates and upped targets to the 340-400 range.  Another reason is the depressed premiums, caused by all the people who bought yesterday and are selling today.  Finally, the potential that GOOG will finally be added to the S&P 500 in the next couple of months makes this risk attractive.

[catrader]

gw just made it to the 3 stocks on fire portfolio, looking at the calls, the jan 5 06 call looks interesting, right now can be bought for $3.40/call which makes time value for 6 months at $0.27 which seems cheap. lastly, might want to wait for earnings on gw which is this wed., 7/27, or if you think it will beat then maybe get before earnings.

[catrader]

imagine if you had bought insp puts today!  well here were the puts as they closed today.  After hours it is down like $10+.  insp aug $40 put $6    insp aug $35 put $2.6   insp  aug 30 put  0.75   insp jan 07 $40 put $.8.7   insp jan 07 $35 put $4.5   insp jan 07 $30  put $2.50.  tonight might post some companies that are announcing earnings soon to see if there is any input from others on what they see from graphs or news or were they expect it to go.  This morning, could have made nice profits on lxk puts.  Tonight after hours, amzn did well and up 10%.

[RJ]

Cat,

All of these scenarios sound very promising and the results are fascinating.  In reality, you would have had to make this determination on each in depth prior to taking a position, underestanding the premium being paid, risk-return, in the money - out of the money.... It is not just about  how little one can lose playing an option, it is also about greed and emotions. Most call and put option players jump in front of the train in motion, not plan the course to be taken. I know, I have been run over by that train too many times. Viking Fan hedges. Most true knowledgeable option players hedge. This is not about owning a piece of something. You own the possibility, not necessarily the probability of winning. There is no Company news that will bring it back when expiration comes and it has not moved. With most brokers there are no stops available (Options Express being the exception that I am aware of). In theory, all of these possible plays you quote are exciting.  The sad part is that 90+% are losers as most will jump in too late. You do not become an "investor", you become a true gambler, and in most instances a true "loser".. I play them only when the risk - reward is greatly in my favor, and that is extremely rare. Selling calls and puts as well as hedging is a much more conservative way to play this game .... in my humble opinion. So, I hope you do not take offense at this. I have exerted much energy in this area and lost much as well. It is amazing what is transpiring in this community...I have a great respect for many on this site, you included as I am very low on the totem pole....may all your trades go well   
RJ