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| four 5,087 posts msg #136293 - Ignore four |
6/10/2017 3:39:28 PM https://explosiveoptions.net/options-trading-strategies/option-premium/ Explosive Options Trading Service How To Capture Option Premium, By Suzie Smith, May 17, 2016 Interested in trading for income? In this three-part series for advanced traders, I will share with you the top methods I use to generate monthly returns for my clients. In my first post, I talked about directional and non directional trades. In my second, I discussed covered calls. In this third one, I’m looking at how to capture option premium. The two ideas we’ll focus on are the use of credit spreads on equities and the proper use of cash-backed short puts. While reading this article, please keep in mind the objective: to capture premium that is way out of the money. Think of it as picking up dollars that someone left lying on the ground while the rest of the gang ran off to Vegas to play high stakes poker. Key elements to make this strategy work are to stay way out of the money on your options selections and properly size each trade to fit within your portfolio and risk parameters. Let’s take a look at the two core strategies I use to capture premium and produce income in my clients’ portfolios. Cash-Backed Puts There are two reasons to sell cash backed puts or “naked short puts.” One is to try to gain entry into a stock at a certain price level. In this instance you sell the put at the strike of your choice, take in a credit for the premium and wait to see if you are assigned the stock. Once you are assigned the stock, you can begin writing calls against it (as described in my last article). The second reason is to sell a way out of the money put with the intent of capturing the premium and never (hopefully) taking assignment of the stock. When selecting your option, look at the chart and determine the last low. CMG Chart : May 17, 2016 Let’s use the Chipotle (CMG) chart above as an example. (Full disclosure: I am long CMG via calls and various bull put spreads.) The stable base appears to be $400, so I would look at the options chains to determine what premium I can get for selling a front month. I’d then work my way up the options chain month by month to see how much premium I can get while staying as close to the $400 area as possible. In this instance, I have to go out to September 410’s. Doing the math, I am tying up $40,000 in margin while taking in a $1,490 credit, which gives me a 4% return on my money. This rate of return tells me two things: 1) find a lower priced stock, and 2) look to trade CMG using a different strategy (keep reading). I ask myself, “Am I OK with holding 100 shares of CMG stock at $410?” If not, this strategy is not for me. The ideal setup is to find a stock that has made a recent relative low and proven that the low is going to hold. I’d then sell the put while the volatility is still high. Remember – we like to sell high volatility and buy low volatility. It is very important to adhere to position sizing when selling naked short puts. Never sell more than you would mind taking assignment on at the strike you sell. Remember that you can be “put” the stock at any time, not just at the monthly expiry. Always assume you could be put the stock at any time. Bull Put Spreads A bull put spread is a bullish strategy that provides profits when the underlying stock stays stagnant or rises. When written as a spread, it has a clearly defined potential gain and loss. The gain is the premium collected on the trade, and the total risk is the spread less the credit collected. To further ratchet down risk, I suggest the use of stops (100% of the premium collected). So for our CMG play, if I take in a credit of $3 I will stop out at $6. Staying with CMG: We have already sold short one put. To create a spread, we simply buy one long put, which creates a vertical bull put spread. This will alleviate the huge margin requirement to trade this stock via the short put method, and it will still allow us to stay within our trading parameters. When writing bull put spreads, you sell the higher strike put and buy the lower strike put, all with the intent of staying out of the money and as close to front month as you can get (time decay is your friend on this strategy). For CMG, I can sell the May monthly 440/420 (sell the 440 put and buy the 420 put) for a credit of $1.32. Doing the math, we take the premium 132/2000 (margin used) = 7% return on your money in 5 trading days. All we are concerned about is that CMG stays above $440 by the close next Friday. Now I’ll look at the next expiry of May 27. I can sell the same bull put spread for $2.42, which gives me a 12% return on my money. 242/2000 = 12% (assuming I hold the spread down to zero through expiration). Selling a 10 lot of these would bring in an income of $1,320 for the first trade and $2,420 for the second trade – not too shabby for such a short timeframe. In either trade we use to capture option premium (the naked short put or the bull put spread), I would look to exit at an 80% profit target. As always, respect position sizes and don’t overload your portfolio with one name. The market is a very fickle environment. Even trades that seem super easy can turn on a dime, so trade nimbly and carefully. If you would like more information on my portfolio management services please contact me at suz at investsps dot com. Copyright: mblach / 123RF Stock Photo © Aztec Capital LLC |
| four 5,087 posts msg #136294 - Ignore four |
6/10/2017 3:43:50 PM https://explosiveoptions.net/options-trading-strategies/covered-calls/ Covered Call Interested in trading for income? In this three-part series for advanced traders, I will share with you the top methods I use to generate monthly returns for my clients. In this post, we’ll discuss covered calls. (Check out my first post on how to use directional and non directional trades). Covered calls are often the first foray into an investor’s option trading experience. For our example, the structure of a covered call is to buy 100 shares of stock and sell one call against the stock, taking in a credit or “premium” for the option sold. Trading covered calls requires a margin account due to the option component involved. Remember, we don’t trade stocks on margin as that is akin to gambling using credit cards as your backing. The purpose of the covered call can be twofold. You can sell the call to create an additional income stream on a long term position that you don’t want called away, or you can create a covered call position that is designed to call away at a certain time and date. (To demystify some terminology: Selling a call against stock is also called a buy-write. Selling an option can also be called “writing” an option against stock.) In the first instance, option selection is pretty easy. You would select a call that is out of the money and that you can still get decent premium for. Look at the chart of your stock and determine the maximum high you think it will achieve and sell a call above that. This is one way I create extra income for my clients. Exxon Mobile (XOM) is one of my favorite long term holdings. I currently have the October 95 calls sold against my common position. I have been selling calls against this for years. Each time it technically “lowers” my cost basis even though it does not show an adjusted lower basis on the screen. You may not get much as far as percentage gains when you are trying to cover a stock that you don’t want called away, but each transaction creates a little more profit that adds up quickly over the months. If you do not have a core stock holding, you may consider buying your favorite dividend paying ETF, like the XLE, and selling upside calls against your holding. In this case, you are getting possible capital appreciation, a dividend, and options premium. This approach has two benefits: You are able to target specific sectors, and it is unlikely that you will wake up with an entire index down 50% overnight. A disadvantage is that ETF’s offer lower premium as compared to individual stocks. I would highly discourage using the covered call strategy on double and triple or inverse ETF’s. Some would consider writing calls against stock as a defensive measure, and they would be correct. A prudent investor is always seeking ways to protect against adverse price moves, and this is one way to do it. My favorite way of trading covered calls is to produce a fixed income by a certain date and time. I have a “stable” of stocks that I am very familiar with, and I use them over and over to sell calls against. I use a covered call worksheet that enables me to predetermine my downside risk, targeted gains if called, and annualized return. My goal in the trade setup is to find a stock that will give me at least a 7% return if called with at least 10% downside protection, and its chart must have numbers close to a major moving average (which would act as a support in case of adverse market conditions). The sweet spot in premium for covered calls are generally those trading between $15-$60, as they give a mid-size portfolio the ability to hold enough shares to make a difference in the profit and loss column without taking on too much risk. As always we start with the chart. For this exercise I chose FitBit (FIT) to structure my covered call. Let’s put the math on the chart: FIT: Price per share @ entry: $ 18.03 Option Expiration Date: August 19, 2016 Option Strike: $19.00 Premium (price rec’d for covered call): $2.25 Targeted Gain Per Share: $2.25- (18.03-19.00) = $3.22 Breakeven: (18.03-2.25) = $15.78 Now look at the chart: FitBit chart: May 2, 2016 Entering this trade puts you in close proximity of support, which is the 50 day moving average and the bottom Bollinger band. Remember, the bands contain 95% of all price action so it is unlikely that this stock would deviate out of the bands and stay there. So, we have our targeted gain per share of $3.22 per call or $322.00 per contract. Your downside protection at entry is price per share/premium rec’d for call ($2.25/$18.03) = 12.5%, which fits within our criteria. The maximum gain ($19.00-$18.03)+$2.25/$18.03 = 17.9% also fits within our criteria, so it is a good candidate for our covered call portfolio. The final step in the covered call purchase after entry is patience. You sit with the trade and do not tinker with it, only monitoring the chart to ensure it does not go below the breakeven stock price. Patience is key here. Let the stock do its work ,and if it calls away, be happy with your gains and look to write it again. If it does not call away, you simply sell another call against it and repeat the process. I’ve given the example here of entering the trade as a complete covered call. You may alternately enter a stock at a support level, wait for a rise in the stock, and then sell calls against your stock, as you may be able to get a higher premium for your calls that way. If you would like more information on my portfolio management services please contact me at suz at investsps dot com. |
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6/12/2017 1:20:34 AM http://wolfstreet.com/2017/06/09/big-tech-stocks-come-unglued/ What to make of it? This move shows just how nervous the market has gotten at these nosebleed valuations. This morning, perennially money-losing and cash-bleeding Tesla had a valuation of $60 billion, a company that sells so few cars that it disappears as a rounding error in the 1.52 million new vehicles sold in the US in May. It’s not even on the scale. Yet folks, now waffling about solar panels too and still waiting for the miracle that has been promised for a decade, think it’s worth nearly $60 billion? The market is currently full of these kinds of crazy valuations. And everyone wants to pick up the last nickel in front of that steamroller they already see coming. So their hands get a little twitchy. |
| four 5,087 posts msg #136426 - Ignore four |
6/17/2017 10:33:52 PM http://www.kiplinger.com/slideshow/investing/T018-S001-25-big-stocks-raising-dividends-for-25-years/index.html Identify reliable dividend stocks by concentrating on the Dividend Aristocrats, 50 companies in Standard & Poor's 500-stock index that have hiked their dividends every year for at least 25 consecutive years. Since size, longevity and familiarity can provide comfort amid market uncertainty, here are the 25 biggest Dividend Aristocrats by market capitalization. Dominated by household names, the list is a good starting point to find high-quality companies for your long-term portfolio. |
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6/18/2017 12:43:04 AM Option Alpha https://www.youtube.com/watch?v=cgGGCNeGtHg Warren Buffett Naked Put Option Coca Cola Insurance -- Warren Buffett's $5 Billion Dollar Options Trading Strategy That Everyone Ignores - Show #60 Sell Premium (Sell Put Option) when IV is high = Options Expensive = Collect Premium 2016 quarterly filing , page 21 -- Published on Sep 6, 2016 https://optionalpha.com/show60 - What if I told you that Warren Buffett, yes that one, is actually just an options trader in disguise? Actually, he’s not disguising anything since his entire strategy and philosophy is all publicly available and linked below. But, that the $5 billion dollar options trading strategy he is using right now has the exact same core methodologies that we use here at Option Alpha, i.e. option selling. Unfortunately, this strategy and business setup is not commonly talked about in the media. Everyone ignores the 50,000 short put options he sold on KO or the 3-month short puts he sold before acquiring Burlington Northern Santa Fe. They are big trades that tell us a lot about the way he uses options but the media won’t cover those because it’s not “mainstream” enough to reach the masses. Lucky for you, we’re covering it today for you. In today’s show, I’ll help you understand why his most profitable business, which grew from $41 billion to $88 billion, is the insurance business and how you can apply the same principles to your own investment portfolio. Plus, I’ll walk through his biggest options trade that occurred during the height of the 2008 market collapse in which he sold short put options on 4 major market indexes around the world. If this show is even remotely helpful today, please consider sharing or sending it to just one friend or colleague you think might benefit from listening. ================== Listen to our #1 rated investing podcast on iTunes: http://optionalpha.com/podcast ================== Download your free copy of the "The Ultimate Options Strategy Guide" including the top 18 strategies we use each month to generate consistent income: http://optionalpha.com/ebook ================== Grab your free "7-Step Entry Checklist" PDF download today. Our step-by-step guide of the top things you need to check before making your next option trade: http://optionalpha.com/7steps ================== Have more questions? We've put together more than 114+ Questions and detailed Answers taken from our community over the last 8 years into 1 huge "Answer Vault". Download your copy here: http://optionalpha.com/answers ================== Just getting started or new to options trading? You'll love our free membership with hours of video training and courses. Grab your spot here: http://optionalpha.com/free-membership ================== Register for one of our 5-star reviewed webinars where we take you through actionable trading strategies and real-time examples: http://optionalpha.com/webinars ================== - Kirk & The Option Alpha Team |
| four 5,087 posts msg #136484 - Ignore four |
6/23/2017 1:56:51 PM http://www.thetradingreport.com/2017/06/23/mcdonalds-is-replacing-2500-human-cashiers-with-digital-kiosks-heres-the-math/ The future is now |
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6/26/2017 7:07:06 PM http://oyc.yale.edu/economics/econ-252-11/lecture-17 "After introducing the core terms and main ideas of options in the beginning of the lecture, Professor Shiller emphasizes two purposes of options, a theoretical and a behavioral purpose. Subsequently, he provides a graphical representation for the value of a call and a put option, and, in this context, addresses the put-call parity for European options. Within the framework of the Binomial Asset Pricing model, he derives the value of a call-option from the no-arbitrage-principle, and, as a continuous-time analogue to this formula, he presents the Black-Scholes Option Pricing formula. He contrasts implied volatility, as represented by the VIX index of the Chicago Board Options Exchange, which uses a different formula in the spirit of Black-Scholes, with the actual S&P Composite volatility from 1986 until 2010. Professor Shiller concludes the lecture with some thoughts about options on single-family homes that he launched with his colleagues of the Chicago Mercantile Exchange in 2006." |
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6/30/2017 7:15:01 PM http://www.optionstrading.org/strategies/a-z-list/ Albatross Spread: An advanced neutral trading strategy. Bear Butterfly Spread: A complex bearish trading strategy. Bear Call Spread: A bearish trading strategy that requires a high trading level. Bear Put Ladder Spread: A complex bearish trading strategy. Bear Put Spread: A bearish trading strategy that is suitable for beginners. Bear Ratio Spread: A complex bearish trading strategy. Box Spread, Conversion & Reversal Arbitrage and Strike Arbitrage: See Options Arbitrage Strategies. Bull Butterfly Spread: A complex bullish trading strategy. Bull Call Ladder Spread: A complex bullish trading strategy. Bull Call Spread: A bullish trading strategy that is suitable for beginners. Bull Condor Spread: A complex bullish trading strategy. Bull Put Spread: A bullish trading strategy that requires a high trading level. Bull Ratio Spread: A complex bullish trading strategy. Butterfly Spread: An advanced neutral trading strategy. Buy Call Options: See Long Call. Buy Put Options: See Long Put. Calendar Call Spread: A simple neutral trading strategy. Calendar Put Spread: A simple neutral trading strategy. Calendar Straddle: An advanced neutral trading strategy. Calendar Strangle: An advanced neutral trading strategy. Call Ratio Backspread: A fairly complicated volatile trading strategy that leans towards bullish. Call Ratio Spread: An advanced neutral trading strategy. Condor Spread: An advanced neutral trading strategy. Covered Call Collar: A fairly simple neutral trading strategy that is suitable for beginners. Covered Call: A relatively simple neutral trading strategy that is suitable for beginners. Covered Put: A fairly complex neutral trading strategy. Iron Albatross Spread: An advanced neutral trading strategy. Iron Butterfly Spread: An advanced neutral trading strategy. Iron Condor Spread: An advanced neutral trading strategy. Long Call: A single transaction bullish trading strategy. Suitable for beginners. Long Gut: A simple volatile trading strategy suitable beginners. Long Put: A single transaction bearish trading strategy that is suitable for beginners. Long Straddle: A simple volatile trading strategy suitable for beginners. Long Strangle: A simple volatile trading strategy suitable for beginners. Naked Call Write: See Short Call. Naked Put Write: See Short Put. Put Ratio Backspread: A reasonably complex volatile trading strategy that leans towards bearish. Put Ratio Spread: An advanced neutral trading strategy. Reverse Iron Albatross Spread: A complex volatile trading strategy. Reverse Iron Butterfly Spread: A complicated volatile trading strategy. Reverse Iron Condor Spread: An advanced volatile trading strategy. Short Albatross Spread: A complex volatile trading strategy. Short Bear Ratio Spread: A fairly complicated bearish trading strategy. Short Bull Ratio Spread: A fairly complicated bullish trading strategy. Short Butterfly Spread: A complicated volatile trading strategy. Short Calendar Call Spread: An advanced volatile trading strategy. Short Calendar Put Spread: A complex volatile trading strategy. Short Call: A single transaction bearish trading strategy. Short Condor Spread: An advanced volatile trading strategy. Short Gut: A simple neutral trading strategy. Short Put: A single transaction bullish trading strategy. Short Straddle: A relatively simple neutral trading strategy. Short Strangle: A quite straightforward neutral trading strategy. Strap Straddle: A simple volatile trading strategy suitable for beginners. Strap Strangle: A simple volatile trading strategy suitable for beginners. Strip Straddle: A simple volatile trading strategy suitable for beginners. Strip Strangle: A simple volatile trading strategy suitable for beginners. Synthetic Covered Call, Short Straddle, and Straddle: See Synthetic Options Strategies. |
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7/4/2017 12:15:12 PM https://www.youtube.com/watch?v=g2ZQxJvKFAM --- --- Published on Mar 11, 2011 Description: Wall Street is a very dangerous place. And in many ways, it is simply a glorified casino that is designed to enrich investment bankers while stripping you of your hard-earned wealth. In this special 90 minute online and interactive presentation, economist and best-selling author Jerry Robinson is joined by Barry James Dyke. Barry is a seasoned financial advisor and has authored an important book entitled: The Pirates of Manhattan. In this free and eye-opening online presentation, you will learn: The truth about how Wall Street really operates (and how it is impacting your investment plan) How the Wall Street "gangsters" hypocritically promote financial products that they never buy themselves You will learn which financial product the bankers invest massive amounts of money into (Meanwhile, they do everything to discourage you from buying it for yourself!) The truth about the popular "Target Date" mutual funds being pushed by Wall Street (And why you should avoid them at all costs!) |
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7/4/2017 1:35:57 PM Covered Call https://youtu.be/ScPLX2ysE0c?t=881 |
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