Comments on: The Crazy Market http://theoptionguru.com/blog/2009/11/the-crazy-market/ Option Spread Trading for Income Fri, 18 May 2012 01:40:00 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Bruce http://theoptionguru.com/blog/2009/11/the-crazy-market/comment-page-1/#comment-425 Bruce Thu, 12 Nov 2009 18:21:19 +0000 http://theoptionguru.com/blog/?p=1187#comment-425 The stock I can't believe is AMZN. I was hearing so much positive news before earnings, I was tempted to break my own rule and buy before earnings. After looking at the fundamentals I just couldn't justify it. That was 35 points ago! I'm glad I also resisted doing the bear spread following its day after earnings run up. I don't know anything anymore. Which way is up? Is it ^? The stock I can’t believe is AMZN. I was hearing so much positive news before earnings, I was tempted to break my own rule and buy before earnings.

After looking at the fundamentals I just couldn’t justify it. That was 35 points ago! I’m glad I also resisted doing the bear spread following its day after earnings run up.

I don’t know anything anymore. Which way is up? Is it ^?

]]> By: Jeff http://theoptionguru.com/blog/2009/11/the-crazy-market/comment-page-1/#comment-424 Jeff Thu, 12 Nov 2009 14:42:39 +0000 http://theoptionguru.com/blog/?p=1187#comment-424 Rob, Oh yes, I certainly am - the Probability and Return are not the only things I look at. If you look at my Trading Plan you will see the minimum factors that I look at in determining what I will enter a trade on and when. So, you are right. If the short strike is not at or outside support or resistance, I tend to look for something else. <em>- Jeff</em> Rob,

Oh yes, I certainly am – the Probability and Return are not the only things I look at. If you look at my Trading Plan you will see the minimum factors that I look at in determining what I will enter a trade on and when. So, you are right. If the short strike is not at or outside support or resistance, I tend to look for something else.

- Jeff

]]> By: robl http://theoptionguru.com/blog/2009/11/the-crazy-market/comment-page-1/#comment-423 robl Thu, 12 Nov 2009 13:40:25 +0000 http://theoptionguru.com/blog/?p=1187#comment-423 Jeff, Corredct me if I am wrong but aren't you also looking at support and resitance lines as well? Wouldn't you take less than 10% of you needed to move a little to get above or below a suport/resistance line for safety? Jeff,

Corredct me if I am wrong but aren’t you also looking at support and resitance lines as well? Wouldn’t you take less than 10% of you needed to move a little to get above or below a suport/resistance line for safety?

]]> By: Jeff http://theoptionguru.com/blog/2009/11/the-crazy-market/comment-page-1/#comment-422 Jeff Thu, 12 Nov 2009 13:04:30 +0000 http://theoptionguru.com/blog/?p=1187#comment-422 You could do it that way and depending on the stock, strike spreads and volatility, the premium could be lower or higher. I just don't do it that way. I use Probability of Expiring and I look for strike prices that have a 80-85% probability of expiring OTM. The Probability calculation includes volatility and days to expiration for the final figure. For instance, if I wanted to do a DEC Bear Call Spread on GOOG, my strike price at 10% would be 624. The DEC 620/630 would be a credit of 0.90 and the DEC 630/640 would be 0.57, neither of which would meet my minimum of 10% return on risk. Using the 80-85% Probability rule, I would do a DEC 610/620 that has a 1.32 credit and meets my 10% rule. The 10% Return rule is in there to allow enough credit to adjust the trade and hopefully stay profitable and also to allow for an attractive risk/reward profile. It comes down to using a consistent methodology and if it stops working, adjust the plan and move on. <em>- Jeff</em> You could do it that way and depending on the stock, strike spreads and volatility, the premium could be lower or higher. I just don’t do it that way. I use Probability of Expiring and I look for strike prices that have a 80-85% probability of expiring OTM. The Probability calculation includes volatility and days to expiration for the final figure. For instance, if I wanted to do a DEC Bear Call Spread on GOOG, my strike price at 10% would be 624. The DEC 620/630 would be a credit of 0.90 and the DEC 630/640 would be 0.57, neither of which would meet my minimum of 10% return on risk. Using the 80-85% Probability rule, I would do a DEC 610/620 that has a 1.32 credit and meets my 10% rule. The 10% Return rule is in there to allow enough credit to adjust the trade and hopefully stay profitable and also to allow for an attractive risk/reward profile.

It comes down to using a consistent methodology and if it stops working, adjust the plan and move on.

- Jeff

]]> By: MR http://theoptionguru.com/blog/2009/11/the-crazy-market/comment-page-1/#comment-420 MR Wed, 11 Nov 2009 21:26:13 +0000 http://theoptionguru.com/blog/?p=1187#comment-420 why not do the spreads with the written option strike a few percent (say +/- 10%) from the current stock market price? Sure the premium from the spread is lower but you do have some margin of safety... or are you doing this already for the majority of your trades? Just wondering... why not do the spreads with the written option strike a few percent (say +/- 10%) from the current stock market price? Sure the premium from the spread is lower but you do have some margin of safety… or are you doing this already for the majority of your trades? Just wondering…

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