[markchap]

Great! I look forward to hearing about its progress!!!

Thanks again,
Mark

[markchap]

AMZN is plunging $3 today and is in-the-money by about $4.75. I’m very interested to see what you do. Entering trades is always so easy while managing them can be quite challenging!

If you can post any AMZN adjustments either here or in “Latest”, I’d be very appreciative. The opening trade doesn’t show up when I type in (AMZN) in the search area.

Thanks as always!

[markchap]

Thanks Teddi. I look forward to seeing your adjustment here or elsewhere on the site!

[markchap]

Just for the record, Teddi, I did have my Visa attached to Paypal. I guess for my next renewal I’ll try charging it directly on a credit card instead of going through Paypal. If there’s a fee, I’ll call up B of A again and request it be reversed.

Thanks for responding!

[markchap]

I was thinking that when the bear market is over you might consider using mediium to long-term bull call spreads (maybe even instead of put selling) to leverage “bounce back” gains. I remember buying some stocks in early 2009 that rocketed up afterward — nearly every stock. So might there be a time — after stocks have stabilized — where you might suggest some bull call spreads?

I’m not thinking of today but rather some number of months ahead. I’m asking since it seems like once stocks resume an uptrend it might be steep enough to warrant medium to long-term bull call spreads.

Thanks and I’m sorry if I wasn’t clear enough the first time!

[markchap]

I don’t really have a concern. Your emphasis (in Tomorrow’s Trades for example) is selling put spreads which makes sense given that the market tends to trend up over time. My question is whether selling call spreads in this type of market has advantages over selling puts or put spreads.

One advantage I see is illustrated with the beta weighting I mentioned. That is, since many of us have long portfolios, it might make sense to offset that with short deltas obtained through selling call spreads. This way the short call spreads help to reduce our total market exposure.

Please don’t feel obligated to reply if this either makes no sense or you have no opinion about it. It just seems like a logical thought to me.

Thanks for your reply.

[markchap]

Teddi, this refers to the strategy Thomasj_tx outlined in this thread. What was omitted was the strategy used to close the trade should it move against you. It appears that’s especially crucial in an extremely high probability trade. Please let me know if the following makes sense.

In a trade where the sold option is 12% out-of-the-money 3 months out, the probability it will expire in the money is about 9% per thinkorswim. That means nearly 10% of the time it will expire in-the-money. If according to the strategy, one collects even 40 cents on a risk of $9.60 a total loss would wipe out about 24 successful trades. Shouldn’t there be a strategy going in that limits the loss if possible? That is, if the market doesn’t plummet the whole 12% at once, shouldn’t the trade be closed early at a partial loss rather than waiting/hoping for it to recover resulting in a possible total loss?

I dismissed extremely high probability trades for this reason. If one sells a put with a delta of 10, the probability is about 10% it will expire in the money. And if one wins 90% of the time and suffers a total loss 10% of the time, all trades together end up breakeven.

I am suspicious of entering trades that have no exit strategy should they turn against you. And with a three month time frame the chances of crossing that short strike is probably close to double the probability of it expiring in-the-money. In this case, it means about 1 of every 5 trades at some point could cross the short strike. My assumption are derived from thinkorswim’s platform where the probability of touching the short strike is usually about double the probability of expiring in the money.

In extended bull markets these trades can look like easy money until they aren’t.

Thanks!

[markchap]

Yes, but we should be notified ASAP of any errors. Doesn’t 2+ days seems a bit long? She did “correct” it in yesterday’s Tomorrow’s Trade when she discussed the prior day’s trade. Too late is all I can say.

[markchap]

Denis, you probably know this but if you’re with TD Ameritrade have you considered downloading & using their thinkorswim platform? It is full-featured with a strong tilt toward options trading. Features are too extensive to cover completely here, but it’s definitely worth a look. It also can stream data (option greeks as well as stock info) into Excel when using Windows.

I’ve attached a screenshot of my short put position in CLX. It currently has a 13.56% probability of expiring at a loss. The turquoise line shows profit at expiration while the pink line shows current profit.

The one caveat is to make sure you negotiate a satisfactory commission schedule as their default rates are high. As long as you’re with TD Ameritrade, download TOS and see how you like it. You can practice in a paper account if you wish.

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