Page 2 of 3 FirstFirst 123 LastLast
Results 14 to 26 of 30

Thread: Wolverine: Another options question (no BJ)

  1. #14
    Don Schlesinger
    Guest

    Don Schlesinger: Re: blind luck

    > After Don told me to sh*t or get off the pot,

    Well, if that's the way you put it! :-)

    > I bought
    > some $200 POT puts for June at $18.80. Today's close:
    > $27 and change.

    Sell half of them!! (See above about bulls, bears, and hogs!)

    > Nearly 50% made, 48 hours later.

    It's an aberration! :-)

    > If I
    > had done this on Friday, I could have gotten that put
    > at under $16 easily. Thanks for the push Don, I needed
    > it to wade into the water.

    Now, get out ... at least partially. Don't hold too long and watch all the profits evaporate.

    > I had built an average short position day trading on
    > Friday in POT at $202.25, but cashed out at $205.75
    > for a $3k loss. If I had stayed in, I would be up $20k
    > today and taking some profits!!!!

    Not my responsibility! :-)

    > Blind luck, or insight?

    No comment.

    > I'm not sure yet, but I've
    > seen too many of these situations develop to NOT enjoy
    > playing with them. And with a resource like Don on the
    > gratis payroll, why not?!? Thanks Don. :-)

    Damn, I do come cheap! :-) (But, I get paid a little more for my options seminars. :-))

    Don

  2. #15
    anon
    Guest

    anon: Re: blind luck

    don u have long provided highly valuable consulting via this and other venues as part of your work for world peace (read gratis)

    wolf great trade, i agree w the donald take some $ off the table

    all i can say is come on lucky yo leven

  3. #16
    Wolverine
    Guest

    Wolverine: Re: blind luck

    > Sell half of them!! (See above about bulls, bears, and
    > hogs!)

    That is EXACTLY what I was thinking, but when trading opened this morning, the profit evaporated to 25%, so I didn't sell half. I haven't looked yet tonight as to how they closed. As I get more info, I'll discuss it here. (if you want me to). I promise, to not be a hog and get slaughtered, but the chart is looking very much like a nice momentum stock crater in the making. I believe it has had 3 distribution days (last Friday being the only up day) in the prior 4 (not counting today, don't know how it finished). WHEN it gets back to 50% profit, half will be sold.

    That's all for now...but I do appreciate your "motivation" to pull the trigger and follow my gut.

    And don't worry Don, I won't blame you at all. I just appreciate your honest and wise opinions. I'm a big boy, I put money on the felt, I win or lose, all I can say is that I tried my best to count the cards and play my hands. Same in the stock market. But I like my odds on the felt better--I KNOW I have an advantage there! :-) I'm just trying to learn some new tricks in the market.

  4. #17
    Don Schlesinger
    Guest

    Don Schlesinger: Re: blind luck

    > That is EXACTLY what I was thinking, but when trading
    > opened this morning, the profit evaporated to 25%,

    He who hesitates is lost. You waited too long. You had your chance.

    > so I didn't sell half. I haven't looked yet tonight as to
    > how they closed. As I get more info, I'll discuss it
    > here. (if you want me to). I promise, to not be a hog
    > and get slaughtered, but the chart is looking very
    > much like a nice momentum stock crater in the making.

    Take your goddamn profit, before there isn't any! The single overriding reason why the vast majority of options buyers lose money is that they are greedy -- pure and simple.

    > I believe it has had 3 distribution days (last Friday
    > being the only up day) in the prior 4 (not counting
    > today, don't know how it finished). WHEN it gets back
    > to 50% profit, half will be sold.

    Change your "when" to "if," and you might have a plan. Do you think that all the people who are going to start selling those puts tomorrow plan on having the position go 100% against them?

    > And don't worry Don, I won't blame you at all. I just
    > appreciate your honest and wise opinions. I'm a big
    > boy, I put money on the felt, I win or lose, all I can
    > say is that I tried my best to count the cards and
    > play my hands. Same in the stock market. But I like my
    > odds on the felt better--I KNOW I have an advantage
    > there! :-) I'm just trying to learn some new tricks in
    > the market.

    Options buyers rarely have an advantage. The "card counters" of options trading are the sellers. Options habitually trade at implied volatilities that are higher than what the underlying realized volatility turns out to be. Take a look here:

    www.cboe.com/micro/vty/cboevarbxbenchmark.pdf

    Don

  5. #18
    Wolverine
    Guest

    Wolverine: Bigger problem

    > He who hesitates is lost. You waited too long. You had
    > your chance.

    > Take your goddamn profit, before there isn't any! The
    > single overriding reason why the vast majority of
    > options buyers lose money is that they are greedy --
    > pure and simple.

    While I agree you are the master and I am but a lowly student, I will respectfully agree with your thoughts but allow more of the time premium of 56 days work. 4 of the last 6 days have been heavy distribution days, and that usually signals a top. Panicing and selling when I could have at a 20% profit (down from the 48%) would have cost me the opportunity to make the 15% it came back later in the day.

    Thanks for your thoughts.

  6. #19
    Don Schlesinger
    Guest

    Don Schlesinger: Re: Bigger problem

    > While I agree you are the master and I am but a lowly
    > student, I will respectfully agree with your thoughts
    > but allow more of the time premium of 56 days [to?] work.

    Let me understand something: the time premium is "working" exactly for whom, here, the buyer or the seller? As time goes by, if the underlying does nothing, what happens to the time premium? It grows larger or gets smaller??

    Don

  7. #20
    Wolverine
    Guest

    Wolverine: Time

    The premium decays away, so the price of the option dwindles. That works against me. Perhaps my choice of words wasn't the best (I'm a novice, forgive me). I realize that every day the price decays until come June 21st, the option has to stand on its own merits (is it in the money, or isn't it?).

    My thesis is simple: a momentum stock that went to the moon, and is going to crash back to reality before June 21, 2008.

    The option was purchased Monday. So far, I have gotten lucky that a part of that move happened immediately after purchase and has put me into a profit situation. Call it good timing, or blind luck. Either way, good for me.

    I purchased TWO contracts. Closing out half of my contracts (one) with a 20%, 40%, or 48% profit all sounds good on the "don't let greed win" side of the ledger, agreed. I have had an automatic sell order in place to close 1 contract at $38 from the very beginning. That would remove the principal instantly and allow the other contract to solely represent the profit to be made in the deal. However, in order to make that profit, I have to let the event I am expecting in my thesis to unfold (exercise patience). I do not believe that has happened yet, as POT is still well above its 50 day moving average, the lows are lower, the highs are lower, indicating a down trend.

    So by "time" what I was trying to communicate is that the option is only 4 days old, and I have 50 days left. Why should I cut my ABILITY to make a profit so quickly when the thesis appears to be coming true? I agree completely that when the price reaches $38 and ALL the original capital can be recaptured, to do so. I see no reason to allow an opportunity to lock in a break even, at worst, to profitable situation pass without taking advantage of it.

    In contrast, if the position immediately moved against me, and I was down 40% right now, would you advise that I sell one of the contracts to 'stop the bleeding?' If I did that, the remaining contract would have to generate an 80% profit to make up for the panic sale.

    I was willing to place a $3,800 wager on my thesis, and will recoup that investment as soon as the price allows me to do so.

    On the other hand, if 1 to 2 weeks pass and the stock has traded sideways without continued signs of distribution, then I think it would be prudent to revisit the validity of the thesis and decide if closing one or both contracts in the 20's or low-30's would be the best in order to not allow the time premium to eat away at the value and take the (possibly healthy) profit available. Translation: if the thesis appears to be faulty in 5 to 10 trading days, consider closing the position to keep the time premium from eating away at the price.

    I'm sorry I was not more clear in my past post as to my thoughts. I was under a time crunch to leave the house, and I should have abandoned the post rather than writing it quickly.

    Does that make more sense to you now Don, or am I still acting in a manner that befuddles you? Thank you for your patience and insights, I appreciate them both.

  8. #21
    anon
    Guest

    anon: Re: Time is on the other guys side yes it is

    wolf

    trust me don is not befuddled

    while we both wish you well don is too gentle to say this directly but i am not

    you are very likely taking the worst of it

    that being said i am rooting for a crash is whatever stok

    gl and gcards

  9. #22
    Don Schlesinger
    Guest

    Don Schlesinger: Re: Time

    > The premium decays away, so the price of the option
    > dwindles.

    Good start!

    > That works against me.

    And every other buyer.

    > Perhaps my choice of
    > words wasn't the best (I'm a novice, forgive me). I
    > realize that every day the price decays until come
    > June 21st, the option has to stand on its own merits
    > (is it in the money, or isn't it?).

    Right. It either has some intrinsic value at expiration or it has none.

    > My thesis is simple: a momentum stock that went to the
    > moon, and is going to crash back to reality before
    > June 21, 2008.

    OK, fine. You have a viewpoint. Not a problem.

    > The option was purchased Monday. So far, I have gotten
    > lucky that a part of that move happened immediately
    > after purchase and has put me into a profit situation.
    > Call it good timing, or blind luck. Either way, good
    > for me.

    Still right. The problem is this: Just because you have a viewpoint doesn't mean it's right. So, half the time, people who buy options NEVER see their viewpoint develop, and the option expires worthless. In your case, you have been fortunate to see a portion of that viewpoint develop right away, before time-premium erosion can rear its ugly head; so the idea is to not get too greedy, be thankful that the move occurred, and think about taking some money off the table.

    > I purchased TWO contracts.

    Oh, that may change things. I didn't realize it was that few. You don't have a lot of room to maneuver.

    > Closing out half of my
    > contracts (one) with a 20%, 40%, or 48% profit all
    > sounds good on the "don't let greed win"
    > side of the ledger, agreed.

    Glad you agree.

    > I have had an automatic
    > sell order in place to close 1 contract at $38 from
    > the very beginning. That would remove the principal
    > instantly and allow the other contract to solely
    > represent the profit to be made in the deal.

    Noble plan. :-)

    > However,
    > in order to make that profit, I have to let the event
    > I am expecting in my thesis to unfold (exercise
    > patience). I do not believe that has happened yet, as
    > POT is still well above its 50 day moving average, the
    > lows are lower, the highs are lower, indicating a down
    > trend.

    I understand. Just keep in mind that the clock is ticking, and that options die a little every day. You put your head on the pillow, go to sleep, hopefully wake up the next morning (!), and the option is worth less than when you went to bed. And, the weekends are even worse, because the markets aren't even open, but the option doesn't know that and so keeps decaying anyway!

    > So by "time" what I was trying to
    > communicate is that the option is only 4 days old, and
    > I have 50 days left.

    Understood. It's a two-edged sword. Give me more time, and an option becomes more expensive, when you're contemplating buying it, because you get more days to achieve whatever your objective is. BUT ... once you buy the option, from the very minute you own it, the clock is ticking, and time is now against you.

    > Why should I cut my ABILITY to
    > make a profit so quickly when the thesis appears to be
    > coming true?

    I always answer questions like this in the exact same manner: Don't. And, we'll see what happens. :-)

    > I agree completely that when the price
    > reaches $38

    You meant to say "if," above, and not "when," but I forgive you! ;-)

    > and ALL the original capital can be
    > recaptured, to do so. I see no reason to allow an
    > opportunity to lock in a break even, at worst, to
    > profitable situation pass without taking advantage of
    > it.

    It isn't "at worst." "At worst" is that you never see $38, and you lose money. What is the option strike and maturity -- POT June 200 put? I'd like to follow it for fun.

    > In contrast, if the position immediately moved against
    > me, and I was down 40% right now, would you advise
    > that I sell one of the contracts to 'stop the
    > bleeding?'

    Probably. The reason that so many options buyers see their positions go to zero is that when they were down "only" 40% and had a chance to close them out and move on, they stubbornly remained in their positions, only to see the rest of the 60% disappear, too. But, as you say, it's fairly early in the game, so maybe you'll achieve your objective. I wish you luck, and you aren't going to get burned with only two contracts.

    > If I did that, the remaining contract would
    > have to generate an 80% profit to make up for the
    > panic sale.

    It's the wrong way to think, but I understand. When you own something, you can't keep referring back to what you paid for it and whether you're making money from the beginning or not. The past is the past, and it's gone. You have to think, "As I wake up this morning, is this very position something that I'd want to have, from this day forward? If I didn't own this position, would I go out and establish it today?" If the answer is no, then why do you still hold it?? No one is obliging you to keep it.

    > I was willing to place a $3,800 wager on my thesis,
    > and will recoup that investment as soon as the price
    > allows me to do so.

    Or not. :-)

    > On the other hand, if 1 to 2 weeks pass and the stock
    > has traded sideways without continued signs of
    > distribution, then I think it would be prudent to
    > revisit the validity of the thesis and decide if
    > closing one or both contracts in the 20's or low-30's
    > would be the best in order to not allow the time
    > premium to eat away at the value and take the
    > (possibly healthy) profit available. Translation: if
    > the thesis appears to be faulty in 5 to 10 trading
    > days, consider closing the position to keep the time
    > premium from eating away at the price.

    So far, the best thing you've written! :-)

    > I'm sorry I was not more clear in my past post as to
    > my thoughts. I was under a time crunch to leave the
    > house, and I should have abandoned the post rather
    > than writing it quickly.

    No problem at all.

    > Does that make more sense to you now Don,

    I really understood it the first time, but wanted you to understand that time is just as much an enemy as an ally.

    > or am I
    > still acting in a manner that befuddles you?

    Unlikely that you could do that. I've seen it all. :-)

    > Thank you
    > for your patience and insights, I appreciate them
    > both.

    You're quite welcome. Good luck!

    Don

  10. #23
    Wolverine
    Guest

    Wolverine: Re: Time

    Yes Don, it is the POT $200 Jun puts. Two of them. Purchased at $18.80. Given the choice between risking $1900 or $3800 on this experience, I chose $3800 so that I could have 2 contracts and be able to lock in a profit, etc... Obviously, a green horn with just a good idea and little "working" knowledge should minimize the risk to capital--that is what I have done. However, nothing teaches better than getting in there and experiencing the actual event.

    I completely understand what you have been trying to say, and appreciate your interest. I'm sorry that I did not communicate EXACTLY what my thoughts were. I should have known better, given who I was conversing with. ;-)

    Thanks Anon for the well wishes. I believe the thesis is sound, but am willing to revisit it and close my position if things look different.

    Now that you are going to follow it, I won't have to post updates for you to follow. :-)

  11. #24
    Don Schlesinger
    Guest

    Don Schlesinger: $15.10

    > Now that you are going to follow it, I won't have to
    > post updates for you to follow. :-)

    Not such a great week, huh? How quickly $27 can become $15.

    Don

  12. #25
    Wolverine
    Guest

    Wolverine: Re: $15.10

    > Not such a great week, huh? How quickly $27 can become
    > $15.

    > Don

    Couldn't agree more, but being a novice and admitting it, and trying to learn, takes time, effort, and mistakes. When it is all said and done, I will "read the entrails" and look at the whole experience and see what I think. I'm trying to learn, pay stupid tax, and not go broke in the process--don't worry, I'm not betting the mortgage payment. Just some of my mad money.

    At this point, one of my biggest "problems" (among many) is that I am a novice at using the trading software and setting up correct risk management stops (mostly a trailing stop issue). That would have helped tremendously. Ah, live and learn--but I didn't know what I didn't know, but NOW--I know! Real world experience is a great teacher. And I **will** keep learning, because that is what I love to do.

    If I can learn to play blackjack with an advantage, I can learn to do this too. I didn't become proficient overnight at BJ, and I won't become an expert this year (or maybe, this decade) either.

    I'll look forward to dissecting this whole trade in the end. Thanks for looking after me, Don. When are those seminars again? ;-)

  13. #26
    Don Schlesinger
    Guest

    Don Schlesinger: $9.60

    > Couldn't agree more, but being a novice and admitting
    > it, and trying to learn, takes time, effort, and
    > mistakes.

    But selling at $27 would have taken 10 seconds. Now, we're at $9.60. Do you have an exit strategy, or do you watch it go to zero?

    > When it is all said and done, I will
    > "read the entrails" and look at the whole
    > experience and see what I think. I'm trying to learn,
    > pay stupid tax, and not go broke in the process--don't
    > worry, I'm not betting the mortgage payment. Just some
    > of my mad money.

    Here's a good rule to begin with: If you absolutely HAVE to buy an option, which is a faulty premise to begin with, and you're lucky enough to see that option increase 50% in value in the first week of owning it, TAKE THE GODDAMN PROFIT!!

    > At this point, one of my biggest "problems"
    > (among many) is that I am a novice at using the
    > trading software and setting up correct risk
    > management stops (mostly a trailing stop issue). That
    > would have helped tremendously. Ah, live and
    > learn--but I didn't know what I didn't know, but
    > NOW--I know! Real world experience is a great teacher.

    Listening to people with real-world experience can also help, BEFORE you have to experience the real world for yourself! :-)

    > And I **will** keep learning, because that is what I
    > love to do.

    Then here's rule #2: Most options that you buy wind up being worth less than what you paid for them! Simple, no?

    > If I can learn to play blackjack with an advantage, I
    > can learn to do this too. I didn't become proficient
    > overnight at BJ, and I won't become an expert this
    > year (or maybe, this decade) either.

    > I'll look forward to dissecting this whole trade in
    > the end.

    Little to dissect. You got lucky early, failed to take the profit, then watched all the profit and half the original premium disappear. Happens a thousand times a day. Now, you're thinking: "In for a penny, in for a pound. I've lost half, so why not stick around a little longer? Maybe it will come back again, and I can recoup my loss and get back to even." And that, my friend, is how you will lose the remaining half.

    > Thanks for looking after me, Don.

    I tried.

    > When are those seminars again? ;-)

    July and August. :-)

    Don

Page 2 of 3 FirstFirst 123 LastLast

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  

About Blackjack: The Forum

BJTF is an advantage player site based on the principles of comity. That is, civil and considerate behavior for the mutual benefit of all involved. The goal of advantage play is the legal extraction of funds from gaming establishments by gaining a mathematic advantage and developing the skills required to use that advantage. To maximize our success, it is important to understand that we are all on the same side. Personal conflicts simply get in the way of our goals.