I just closed a calendar spread for 28% gain in 7 days. I guess I should start advertising that I made 1456% annualized return. And then do it week after week and become a millionaire in no time.
Building A 6% Income Portfolio For 2013 (Part 1): Investment Plan & Strategy [View article]
I'm not sure how it is related to the goals. 10-12 stocks is still a great diversification. If you don't trust your judgement, you can be wrong when you choose 30 stocks as well.
Building A 6% Income Portfolio For 2013 (Part 1): Investment Plan & Strategy [View article]
Excellent article.
The only issue I have is the number of stocks you recommend. I believe that 20-30 stocks is too much for the average retail investor. One of the problems with diversification is that during times of turmoil, asset classes tend to become highly correlated, defeating the purpose of the diversification in the first place. So there is a good chance that during bear markets, most of the 20-30 stocks will be down anyway.
I think that 10-12 stocks provide adequate diversification. If you own too many stocks, it will also become a bit tricky in terms of hedging with options - unless you have fairly large portfolio.
RICs make sense only on higher priced stocks like AAPL or GOOG. For lower priced stocks, I'm using mostly straddles/strangles.
A stock like AM is not a suitable candidate. The liquidity is very poor and the spreads are wide. There are much better candidates for the next week. We already booked a 10% winner in NKE and some members closed RIMM trades. We have a detailed discussion on each candidate regarding the its suitability, price and timing.
As a side note, we also do theta positive trades like calendars and condors.
Normally I would suggest buying puts, but right now they are insanely expensive since everyone is buying them. Like they say, you buy insurance when you want it not when you need it. You can sell some covered calls around the current price, but that of course limits your upside. Another option is to buy a delta negative butterfly.
There is more than one way to Rome. If that's what is working for you, continue doing that. That's your way to make money, and I respect that. All I ask is that you respect mine, don't call it gambling, and don't imply that investors are in any way better than short term traders. My best month in the recent years was August 2011 when everyone was losing their shirts.
LJTAX1, please read the article and look at the P/L graph. Your 2 620 options are covered by 100 shares of the stock and 1 545 call, so the P/L above 620 remains the same.
I guess the strategy depends on your outlook. If you own the stocks and think it is going lower, then by all means just sell it. The strategy described in the article was intended for those who think the stock will recover, but want to get their money back faster than just owning the stock, and lower the breakeven point, without having to commit an additional capital. Your strategy might work, but like you mentioned, it does require additional capital.
Well, I guess you didn't really take the time to read the article and/or to look at the P/L graph.
Your position is: Long 100 shares of the stock; Long 1 545 calls; Short 2 620 calls.
For each dollar that the stock exceeds $620, you gain $1 from the stock and $1 from the long call, and lose $2 from the short calls (all numbers should be multiplied by 100 of course). This is the reason that from P/L point of views, there are really no four scenarios, since the stock at OR above $620 is the same scenario. If this is too challenging for you, just look at the P/L graph I attached.
I actually mentioned scenario 4 as part of scenario 3 - (If the stock continues rising above $620, your P/L stays the same). So scenario 3 is actually "stock at or above 620", because the P/L is the same.
I mentioned the numbers in scenario 3: "Your gain is 9k+ from the stock and an extra 7.5k from the calls." I could probably go into more details, but the numbers could be also clearly seen from the P/L graph. Like they say, one picture is worth thousand words.
This is so true OldWarriour. In fact, owning stocks without some kind of hedge is like driving a car without insurance. Options trading can be gambling if you just blindly buying calls/put and hope it will go up in value. But if you are ready to invest some time and effort and learn the stuff, the rewards can be amazing, with much less risk.
A Safer Way To Play Apple [View article]
I just closed a calendar spread for 28% gain in 7 days. I guess I should start advertising that I made 1456% annualized return. And then do it week after week and become a millionaire in no time.
Building A 6% Income Portfolio For 2013 (Part 1): Investment Plan & Strategy [View article]
Building A 6% Income Portfolio For 2013 (Part 1): Investment Plan & Strategy [View article]
The only issue I have is the number of stocks you recommend.
I believe that 20-30 stocks is too much for the average retail investor. One of the problems with diversification is that during times of turmoil, asset classes tend to become highly correlated, defeating the purpose of the diversification in the first place. So there is a good chance that during bear markets, most of the 20-30 stocks will be down anyway.
I think that 10-12 stocks provide adequate diversification. If you own too many stocks, it will also become a bit tricky in terms of hedging with options - unless you have fairly large portfolio.
Apple, I Want My Money Back! [View article]
RICs make sense only on higher priced stocks like AAPL or GOOG. For lower priced stocks, I'm using mostly straddles/strangles.
A stock like AM is not a suitable candidate. The liquidity is very poor and the spreads are wide. There are much better candidates for the next week. We already booked a 10% winner in NKE and some members closed RIMM trades. We have a detailed discussion on each candidate regarding the its suitability, price and timing.
As a side note, we also do theta positive trades like calendars and condors.
Kim
Apple, I Want My Money Back! [View article]
Apple, I Want My Money Back! [View article]
Apple, I Want My Money Back! [View article]
Apple, I Want My Money Back! [View article]
Apple, I Want My Money Back! [View article]
Apple, I Want My Money Back! [View article]
I don't really see any practical way to repair OTM calls (other than pray..)
This is what happens when people gamble, and this is a true gambling which creates a perception that options are risky.
Apple, I Want My Money Back! [View article]
Apple, I Want My Money Back! [View article]
Apple, I Want My Money Back! [View article]
Your position is:
Long 100 shares of the stock;
Long 1 545 calls;
Short 2 620 calls.
For each dollar that the stock exceeds $620, you gain $1 from the stock and $1 from the long call, and lose $2 from the short calls (all numbers should be multiplied by 100 of course). This is the reason that from P/L point of views, there are really no four scenarios, since the stock at OR above $620 is the same scenario. If this is too challenging for you, just look at the P/L graph I attached.
Apple, I Want My Money Back! [View article]
I actually mentioned scenario 4 as part of scenario 3 - (If the stock continues rising above $620, your P/L stays the same). So scenario 3 is actually "stock at or above 620", because the P/L is the same.
I mentioned the numbers in scenario 3: "Your gain is 9k+ from the stock and an extra 7.5k from the calls." I could probably go into more details, but the numbers could be also clearly seen from the P/L graph. Like they say, one picture is worth thousand words.
Apple, I Want My Money Back! [View article]