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Thread: Options and bulletproofing investments

  1. #1
    Siriusowner is offline
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    Joined: Nov 2008 Location: The Oil Patch, Texas Posts: 922

    Options and bulletproofing investments

    I have received many private messages about one of my previous posts about bulletproofing an investment. Some saying that I was BS. Here's a sample what you guys can do:

    "You have my utmost attention.
    I want to learn how to trade like this. Please teach me. I'll do whatever it takes.

    I started investing 6 months ago with $6500 and have turned that into just under $20,000. But I know that was mostly luck, because I still know very little compared to what I need to know. I want to turn my 20K into much much more.

    I live in NYC. If you do also, perhaps we could meet. Else whatever mode of communication you prefer is ok with me."

    1st. you have to apply for options trading with your brokerage. Read and learn as much as you can about options. Good sites are: www.CBOE.com and www.ISE.com

    Now, this is what you need to do:

    It is April 2009,

    1.- Say you buy 100 shares of XYZ at $60.95 (ps: I can show you all how to buy stock at a discount, sometimes as much as 20% discount).

    2.- Buy to open 1 Sep 09 $70 put option at $13.00

    3.- So now your total amount of investment is: $73.95

    4.- But the level at which the investment is insured is $70.00...

    5.- So, the total amount at risk is: $3.95 or 5.34%

    Enter the covered call.

    You now own an income producing asset, protected by "stock insurance".

    6.- Sell to open June $70.00 call at $3.90

    7.- New at risk picture: $3.95-$3.90=$0.05 or 0.07%

    A situation like this I call it "bulletproof".

    Say it is June, 19th 2009, expiration day and XYZ is trading at $80.84

    8.-Let the call be assigned and sell the put: $70.00+$5.50=$75.50.

    9.- And selling the call produced $3.90 so, $75.50+$3.90=$79.40

    10.- So, total in $79.40 - Total out $73.95 = $5.45 or 7.36%

    So, 7.36% in 3 months with virtually NO RISK. And you could have sold the calls 2 or 3 times generating more income, but in the end this example was about bulletproofing your investment.

    Let me know if you have more questions.


    ps: This is how I made $10,000 in April (today is expiration so today is when I close the month) with NO RISK !

    ps: Nice run by SIRI so far, y'all should consider selling its leaps.

    ps: This strategy is part of the SKETCH. You can download it for free @ www.poweropt.com. Y'all just need to sign up for the 14 day trial. Please keep in mind that I am not affiliated with them in any form and this is not a solicitation. I just liked their strategies.
    Last edited by Siriusowner; 04-17-2009 at 03:37 PM.

  2. #2
    winagain35 is offline
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    Joined: Jun 2008 Location: Denver, CO Posts: 190
    By the way... If any of you use TD Ameritrade, they have some GREAT tools for options trading. Download Options360 and then listen to as many of the free webinars on options trading as you can.
    For a brief time today the SIRI Sept 1.00 Call was fetching .20 I sold a bunch at .15 And to think, it wasn't that long ago that the stock itself was trading for less.
    Pretty amazing!

  3. #3
    Siriusowner is offline
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    Quote Originally Posted by winagain35 View Post
    By the way... If any of you use TD Ameritrade, they have some GREAT tools for options trading. Download Options360 and then listen to as many of the free webinars on options trading as you can.
    For a brief time today the SIRI Sept 1.00 Call was fetching .20 I sold a bunch at .15 And to think, it wasn't that long ago that the stock itself was trading for less.
    Pretty amazing!
    Trademonster.com, Thinkorswim.com and optionsxpress.com are tailored almost exclusively for options trading (You can trade stocks and futures but their bread and butter are options).

    Yes, I am beginning to trade SIRI's options again also. I like to trade more options than stocks because of the leverage. I get more bang for my bucks !!! And in the case of SIRI I sell the $2.50 Leaps. I sold 90 contracts (9000 shares), got $2.35 per share (meaning if I get assigned the shares will cost me 15 cents each)...What's more ? I got the money today ! Not in January....
    Last edited by Siriusowner; 04-17-2009 at 05:22 PM.

  4. #4
    m4svt is offline
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    Joined: Sep 2007 Posts: 151
    Lol my mistake...

    So we bought 100 shares of xyz at 60.95. So we spent 6095.00
    We bought a 70 put for 1300
    We sold a covered call for 390
    The call was executed and gave us 7000
    We sold the put and that gave us 550
    So we spent 7395 and got 7940 back.. Infact givin a profit...
    Last edited by m4svt; 04-18-2009 at 04:21 PM.

  5. #5
    trippingthespeculatingpos is offline
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    Joined: Dec 2008 Location: San Antonio Posts: 2,884
    rofl none of this makes any freaking sense to me, i do love m4st though haha great that he understood it cause i didnt.

  6. #6
    doobz26 is offline
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    m4svt,
    Have you traded options before?? doesn't sound like it...

  7. #7
    m4svt is offline
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    Joined: Sep 2007 Posts: 151
    For years my friend. I did get confused up there tho lol

  8. #8
    cos1000 is offline
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    Quote Originally Posted by m4svt View Post
    For years my friend. I did get confused up there tho lol
    So that clears that up .... and...... is why options require time and work to understand.... and time to execute a well thought out strategy.... Look at how complicated this "slice in time" example was.... Imagine with all the parts of the trade constantly moving....

  9. #9
    SiriMonkey is offline
    You lost me.
    Julie

  10. #10
    trippingthespeculatingpos is offline
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    Joined: Dec 2008 Location: San Antonio Posts: 2,884
    dont worry your not alone lol

  11. Ad Fairy Senior Member

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