All right, the teacher is here! .0001 is my favorite number to buy at.Quote:
Originally Posted by Dr. Dave
Dave, I am ready to get somewhat of a handle on options.
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All right, the teacher is here! .0001 is my favorite number to buy at.Quote:
Originally Posted by Dr. Dave
Dave, I am ready to get somewhat of a handle on options.
First -
I need to see if I have a customer. So, before we even get into it, I'm going to write out a few questions, if I get an "aye"- then we can go forward. I figure I could spend weeks explaining stuff, so if there aren't any quailifiers, it will be slow going.
First - an options call contract is basically a contract between 1 person that holds 100 shares of a company, and is willing to sell ("sell to open") a contract - for a slight premium to someone who wants to buy a contract for the right (not obligation), to buy 100 shares of the company from him/her (the seller) at a certain price (strike price) by a certain date (options expiration which is the third friday of each month - but you can select contracts - provided they exist for forward months).
Why would you want to be a buyer?
1) you'd rather wait to see if the stock develops in price and then you get your shares at a lower price - maybe you are waiting on news, etc. If the news isn't what you expect, you would just lose the premium you paid, and that's that.
2) hedge your current stock - the opposite of a call contract is a put contract, here the buyer expects the price to go down, and that person gets to buy shares at the strike price to later sell at the open market price.
3) Just buy contracts and sell them later, pocketing the difference in price.
That's what I'm doing.
One last thing, there aren't a lot of these contracts floating around, most companies (stocks) that do have contracts are your big board established companies - even many stocks tooted by cramer or the fool or whatever don't have option contracts available. So, we are talking tickers like GS, AAPL, AMZN, MSFT, and the likes. You won't find them for say BEHL, or even companies that are mainstream.
So - before I go much further, lets see if I can get an "aye" -
If you can say yes to the following questions - I'll ramble as much crap as I can as fast as I can go. If there is just general interest, then it'll be slow going.
1) Are you interested in option 3 above - just buying and selling contracts
2) Do you qualify by your broker to do trade - if you don't know, I'll tell you some guidelines, so if you think you fit, then add this to your yes list... note, every broker will screen you, its subjective and usually taken on an individual basis. This is what they will be looking at:
a) how long you have been trading (ie. you can wipe out your account pretty fast, so unless you are funded like $50K, I don't see how they would clear someone with under a year of experience.
b) you're net worth, who knows, they may run another credit check, but they likely did that when you set up a margin account
c) if you already have a margin account
d) your balance (you can likely get away with $2k, but I'm no expert on how your brokerage operates)
If I reviewed your account, I'd likely give a thumbs up to someone with 5 years of experience and 2K in a margin account, but not someone with less years, likewise, if you had 20K in your account, then I'd say 2 years of experience is ok. Like I said, every brokerage is different
These are just questions from me - I'll put more energy into it if we are on the same page.
3) Do you and are you comfortable day/swing trade(s)?
4) Have you traded the big boards (and by this I mean, bought and sold a bunch - not say bought SIRI 5 years ago and averaged down, never sold, still hoping)
Some general links to look at:
http://en.wikipedia.org/wiki/Option_(finance)
http://en.wikipedia.org/wiki/Call_option
http://en.wikipedia.org/wiki/Put_option
http://www.cboe.com/
hahaha, you posted as I was writing. you also qualify, so I'll get onto it in a bit, have some other work to do.Quote:
Originally Posted by billhart22
but, as you can see- I;m good at procrastinating.
Aye, go for it. I will print these out as you go.
Oh yeah - the other questions -
I forgot what number I was on...
5) Do you have access to real-time quotes and charts (I guess charts is optional)
6) Do you have the ability to watch the trade all day - or put in a conditional order while you step away
I've lost a lot of money because I was either asleep, driving to work, etc. But, from here on out, I have come to the conclusion that for me, these are 1-3 day trades only, and the picks aren't there everyday... so I can plan accordingly.
You're a go on these too - scottrade has conditional orders - have you used one yet?Quote:
Originally Posted by Dr. Dave
Yes, I use them for when I am not going to be home....over...Quote:
Originally Posted by Dr. Dave
Hey Tony!
How are you doing bud?
I see you lurking....heheh...did you get any EVFL? It did about 2.5 billion today.
Hey Bill, Im always around....How you doing....no I didnt get any but I have a order in for mglg if it drops back to .0005 and behl if it get to .02...Quote:
Originally Posted by billhart22
Im basically focusing on siri for the next opportunity to sell premarket on the
6th I'll sell half of my shares if it get between .60 and .70 x 75k shares...and Im waiting for the prices to come to me...Ive been reading about evfl and from what i can gather they have about 100billion shares to put out there so im gonna watch for a while.....Im trying to learn options with you...but it seem to much for me....
Info on contracts -
To get a gander on what the pricing is - I usually just go to yahoo finance - we'll use AAPL for the examples:
http://finance.yahoo.com/q?s=AAPL
Then click options on the left
That will bring you to here -
http://finance.yahoo.com/q/op?s=AAPL
Note, from here, they have a "get quotes" button on the left, but a "get options pricing" button on the right - just found that thing the other day.
There are tabs you can click for the options expiration.
They don't use the actual date - they just go by month.
*Tip - before you go in, always look on the calendar - the third friday is always options expiration, unless its a holiday - then i think its thursday (in reality its saturday, but you can't trade that day).
The symbol is the options contract symbol. In scottrade, they use a dot before the symbol. You also use just the 5 letters usually, so some brokerages (I have more than one - so I know they don't use dots) will use
QAAHO for the top contract on that list
.QAAHO will be what scottrade uses
options are leveraged, and the tickers represnt 100 of something, so going across the top... for QAAHO
75.00 means the strike price is 75.00 - that means if you had bought the contract, you have the right to buy 100 shares of AAPL from the seller of the contract (who has 100 shares) at $75.00 a share. You can then hold them forever, or sell them on the market - which they are trading near $159 today... or, you could sell the contract likely at the ask - but the market is closed, so the numbers will change on monday (we'll the numbers except the strike)
Symbol is the symbol of he contract
Last is just like stocks - that was the last price - but it's leveraged so in reality 76.80 means $7680 per contract. Bill, for you, if you put .QAAHO into your scottrader elite, the price would show 76.80, but if you made the trade, it would be $76.80. Note, here the seller is hurting!
Bid, ask and vol are the same.
*Tip: Usually you only get the ask or just shy of the ask when buying, so plan on that accordingly if shit starts hitting the fan.
Volume as you can see is pretty low.
*Tip: Therefore when scouting out trades, you want to see a decent amount of volume and open interest - like in the upper hundreds/thousands. If you are going to flip a contract, you don't want to see numbers like vol = 1, open interest = 30.
Open interest, this is how many contracts are open - note, it's tough to guage how many are newly formed contracts and how many have been traded multiple times. There is a discussion about it in John Murphy's book http://stockcharts.stores.yahoo.net/teanoffimajo.html
You can get this at the library, and decide if you want to buy it - I think its one of the best. Note though, its great for discussion, but after trying my hand at mechanical trading systems, I say don't try to buy and sell macd crossovers etc.
For the trades, we are (rather I am) doing, you don't have to look up that open interest thing, just be aware of the numbers.
The yellow background are those contracts that are in the money - ie. where the strike for a call is below the current market price...
ie I can tell by looking at this chart that the shares of AAPL are between $155 and $160. In the money means if you had the $155 contract, you could "exercise" (meaning buy the 100 shares) and you'd be ahead if you turned around and sold them that instant - ie. if AAPL was $159, you'd make $4 a share instantly if you dumped them, for a profit of $400. Well, once you have the shares, you could sell how many you wanted, so say you sold half, you'd have $200.
My mistake, they do have the expiration date up at the top of the table.
APVHL is "out of the money" meaning, if you exercised that, it would be pretty dumb, as you could have bought AAPL in our example on the open market for $159, so why pay the $160 strike price?????
"At the money" is when you are right on the line - some will have a small buffer. They don't show that here.. but you can figure it out.
Things to note - many brokerages will automatically exercise the option contract at the close on the expiration date if you are in the money - so if you don't want 100 shares of something - you need to tell them not too - but on the other hand, you'll also lose the entire thing - ie. the $7680 for QAAHQ if you don't sell the contract by the close.
Also, take a note at the liquidity - if you were the QAAHQ guy, hopefully there is a rich buyer on the other line - I'm sure there will be, but if you are doing this for some other less thinly traded stock (thinly traded in the option sense) maybe you could miss out -
you can also call your broker ahead of time and say don't exercise these for me - in most cases (we'll at least for the two brokerages I've used for these).
Puts - that's everything in reverse... we'll talk about those later though, I need to work!
I am fine, thank you, sir. Those are good prices to get into the game on both stocks. I have been looking for a behl .02 also, but it keeps getting away from me. I don't own any behl, but would like to have some...for sure.Quote:
Originally Posted by Sworntwofun
Yep, the stocks with the billions in outstanding shares make runs and you have to capitalize on them when they run. I picked up 5 million today as a sampler. Actually that is plenty for now. Options are a bitch to learn, but Dave is kind enough to explain and I want to get a "feel" for them.
He has been trading these a long time and it still is challenging to him, so it is best for me to kick back and listen.
I hope that you are having a great weekend. Are you back to doing any projects now?
Ok - I'm gonna work for a bit - some notes for me, as I'm pretty ADD
go over:
1) pros and cons - use GS as an example
2) differences in expirations dates
3) bill - put in .HJQHP (FSLR) into your scottrader - and look at the FSLR chart - look at the price swings today of FSLR and that contract (remember to multiply by 100 for the price) - you can see why it cost me $50 to read and laugh at your post! But seriously, this is a good example of the volatility we are talking about.
4) going in and out of the money
5) post my experience
No not yet... the Union hall is full of carpenters....I might use the re-education grant and take a course in movie and film direction and production...its something I always wanted to do and I actually have been in 3 movies and on a few sets...other than that taking it day by day.....I gonna make some big moves hopefully with siri real soon...im vested about 65k right now.... thats about it but I read all the post here everyday.....
Or better yet - why taking risks is bad -
look at AMZN, then put in the tickers for
.QZNHR (that's the first one I had, luckily I scaled down, you'll see why)
.QZNHS
set it up so you can see previous day prices, I paid 3.42 for .QZNHS - ouch
Im gonna hit the sack guys.....Have a nice weekend and I will talk at you all later....Tony:cool:
Peace - have a good one!Quote:
Originally Posted by Sworntwofun
Have a good night Tony! Take care.
Bass - I hardly read any other threads on the buzz - I just found your question on SIRI calls. Answered in the other thread. I usually just hit the "last" button next to Bill's name on this weekly thread - which is why I didn't see it.
Good evening guys.
It's 3:46am on Sat morning and I"m still kicking (barely) after around 20 hrs of work.
Dave, thx for doing all that options education. I know it must be alot of work and time put into. So know that I recognize your efforts.
With that in mind...
It it possible to make a new Sticky Forum for Dave's options education info? It just seems a shame to have all this great knowledge get lost next week because we started a new weekly forum. But if we create a seperate sticky just for him it would stay for much much longer.
Just an idea. Have a great weekend guys. I know I will bc I have a date set up for tomorrow day. (Hope Im not too tired):cool: