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Nokia and The Ford Company
  • Making Money W/ Nokia The "Long Leverage Way" 101 comments
    Jan 22, 2013 6:24 AM | about stocks: NOK

    NOKIA LEAPS OPTIONS STRATEGY

    Based on Life Cycle Investing and Leverage Concept

    -------------------------------------------------------------------------------

    THE SCENARIO

    Buying in-the-money Options Contract using "Margin" for leverage. NOKIA P/S will increase within 1 year and beyond. The provided strategy is a way to lock in at a lower price with positional advantage through leveraging (margin). You will have one year to pay-off the premium and during this time to pay off total cost when exercising shares at expiration (JAN2014).

    Life Cycle Investing Philosophy

    By employing leverage to gain more exposure to stocks when young, individuals can achieve better diversification across time. Using stock data going back to 1871, we show that buying stock on margin when young combined with more conservative investments when older stochastically dominates standard investment strategies-both traditional life-cycle investments and 100%-stock investments. The expected retirement wealth is 90% higher compared to life-cycle funds and 19% higher compared to 100% stock investments. The expected gain would allow workers to retire almost six years earlier or extend their standard of living during retirement by 27 years.

    GOAL

    The goal of the NOKIA OPTION STRATEGY is to purchase 3,000 shares (30 contracts) on margin and to pay off with very little out-of-pocket before options expiration date JAN 18, 2014. The total cost of the 3,000 shares when exercised will be $15,300. (10,500shares+4,800 premium)

    KEY STRATEGY

    NOKIA core holding equity used as leverage

    Exercise shares (3,000) before expiration

    Cover Margin w/ Options Ladder profits and weekly payment of $300 towards account from cash reserves

    Lowering out-of-pocket cost for purchase

    -------------------------------------------------------------------------------

    Why should I sell options call before expiration?

    Taking profit on a profitable options position rather than exercising can actually be more profitable than using the given strategy depending on time decay if stock increases in value. The value between intrinsic value (delta) vs extrinsic value (gamma) Exercising a position would instantly lose all extrinsic value remaining in the option.

    Why should I exercise my options contract?

    Instead of selling the options for profit, the investors will move from a short term options to a long term investment on the underlying stock. A stock such as Nokia presents an investing opportunity for the long term. "Buying in the Money" gives you more control of the underlying stock using lesser money to hold for long term gains until exercised.

    * Only American style Options can be exercised before expiration . European Style Options do not offer such flexibility.

    -------------------------------------------------------------------------------

    * Update 1/26/13 1:03am

    (click to enlarge)

    Cost basis (margin): 6,713.05

    Gain/Loss (1/26/13): -1,613.85

    * Update 2/5/13 1:24am

    (click to enlarge)

    -------------------------------------------------------------------------------

    * Update 2/25/13 Option Calls

    (click to enlarge)

    Options is a rough game..

    Margin Call for 1456.46 to maintain requirments. Answered it with a deposit to my account for requirment. Hope this pays off or break even. Toughest experiment I've ever conducted because money is on the line. I am still bullish for Nokia Oyj.

    -------------------------------------------------------------------------------

    * Update 3/19/13

    (click to enlarge)

    With latest drop of p/s. I averaged down my 3.50 ITM strike and added OCT 19 2013 $4 for good measure.

    -------------------------------------------------------------------------------

    1st position

    • NOK APR 20 2013 5.00 CALL OTM @ .36/20 contracts
    • Cost basis: 682.95 = .34 per share
    • posted in account 1/22/13
    • Selling for profits to pay-off 2nd position
    • Option ladder pay-off system

    2nd position: NOKIA OPTION STRATEGY BASIS

    • NOK JAN 18 2014 3.50 CALL ITM @ 1.60
    • Cost basis: 4,800.45 = 1.60 per share w/ fees
    • Position posted 1/23/13
    • Shares will be exercised. 30 contracts

    Buying in-the-money (NYSEARCA:ITM). It will allow me to buy the underlying stock at a lower than the prevailing market price when exercised/purchased. It is very effective at controlling risk while still providing reward / risk profile.

    3rd position (should be my last)

    • NOK JUL 20 2013 5.00 CALL OTM @.41/30 contracts
    • cost basis: 1,230.45
    • posted in account 1/25/13
    • selling for profit to pay-off 2nd position

    I'll provide charts, graphs etc. when I get the hang of iWorks.

    -------------------------------------------------------------------------------

    DISCLOSURES

    The Nokia Option Strategy is an experiment using real human/margin capital. I am well aware of the risk and exit strategy has been implemented. (e.g. paying for the shares outright with cash)

    The idea was based on LEAPS/Options research I've done this past week and reading "LIFE-CYCLE INVESTING AND LEVERAGE:
    BUYING STOCK ON MARGIN CAN REDUCE RETIREMENT RISK" www.nber.org/papers/w14094.pdf over the weekend.

    This strategy is based on my financial standing and risk assessment. The Nokia Option Strategy (MARGIN) is not recommended for anyone to follow, but for educational purposes only. Please do your own due diligence and consult with a licensed professional before making any investment.

    Disclosure: I am long NOK.

    Stocks: NOK
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Comments (101)
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  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » With time on my side and human capital, Leveraging my investments sounds like a good idea instead of waiting during my golden years; When risk should be kept to a minimal. I want to make sure if the provided strategy is possible. Thanks :)
    22 Jan 2013, 07:21 AM Reply Like
  • bdy
    , contributor
    Comments (150) | Send Message
     
    what are the numbers due at expiration for? I think youare using theterm ppremium incorrectly. Premium is the extrinsic value or time value. if nokia is trading at 4.45 and you are paying 1.75 for the 3.00 call, the premium would be .30. (4.45 - 3.00 = 1.45 of intrinsic value. 1.75 - 1.45 = .30 of extrinsic value). so for the 3.00 strike times 20 is .30 x 20 = 6.00 of premium.that or I don't understand your terminology.
    22 Jan 2013, 07:48 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Correct, my calculation was wrong. Did not proof read, wanted to get the idea out before my mind started thinking about work. Thank you for picking that up, reason correction and opinions are welcome.
    22 Jan 2013, 09:10 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Yes, I am aware of the intrinsic value. If the share price increases, the delta spread widens. Its all coming back to me now, just been reading about options so your opinions are greatly appreciated. Thank you.
    22 Jan 2013, 09:14 AM Reply Like
  • bilton
    , contributor
    Comments (2404) | Send Message
     
    Wrong. The premium is what the option seller collects. It has nothing to do with the internals of the option. When you buy the option at a price of 1.75, the seller immediately receives $175 (if it represents 100 shares) just like when you buy 100 shares of stock the seller receives that money. The buyer knows nothing about the internals of those shares received. The seller of the option may turn right around and buy the obligation back for a profit.

     

    Time value is against the buyer. You paid full price to reserve the right to buy 100 shares of stock within a set period of time. You paid for an "agreed upon value" plus the time allotted. As time goes by, the allotted time loses value. And as price changes, the original agreed upon value may change. It depends on what made up that value. It is not just a simple linear thing. The seller may have "overcharged" you by setting a higher price than it "should be". Volatility may have overcharged you. etc..
    24 Jan 2013, 01:34 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Its pretty clear I am bullish on NOK for the upcoming year.

     

    I am aware that call options depreciate daily due to time decay, one would want the underlying stock to rise quickly to sell call options for a profit before it expiring. Reason I bought in the money in my 2nd position. 1st position is for profit to pay towards margin for 2nd.

     

    2nd position is actual call option LEAPS for the Nokia strategy I've created. My 2014JAN contract were bought " in the money " allowing myself to own the underlying stock (NOK) at lower than the prevailing market price and exercising the option before expiration. It was my original strategy, but I realized my strategy will evolve with time.

     

    - selling for profit and exercising shares will net the same profit if price of share increases at $10 before expiration.

     

    - I also have the option to sell 50% of my 30contracts for profit and pay towards in exercising the remaining 15 contracts. Adding the 1500 share towards my core holdings.

     

    My NOKIA Strategy will keep evolving and would like for others to add to it. Again, I am overly bullish w/ NOKIA.
    24 Jan 2013, 02:01 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Need to run this through again in the lab and continue my research. Thank you :)

     

    This is pretty much the basis of my thesis, i'll work on the numbers again.

     

    "Buying in the money for those who does not have the funds to purchase the stock outright ( or saving funds for other securities), but believes NOKIA P/S will increase within 1 year and beyond. The provided strategy may be one way to lock in at a lower price with positional advantage through leveraging (margin). You will have one year to pay-off the premium and during this time to save cost when exercising shares at expiration (JAN2014)."

     

    I'll be applying this in other future investments once I figure it out. This is good debt.
    22 Jan 2013, 09:32 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    for example the $3 dollar strike price with the premium of $1.74. You will have to pay 2000 x $1.74 = $3480 to initiate the trade. Its a good trade if you plan to sell to close this before expiration. The call could be worth more or less than $1.74 at expiration depending on what the share price of nok is on jan 2014.

     

    If its worth more than $1.74 then your in luck. But if its worth less then $1.74 it will cost more to own the 2000 shares.

     

    But ofcourse you can sell to close any time to lock up profits.

     

    http://bit.ly/QNn9Cy

     

    It seems like a great trade, I will try it turtle.
    22 Jan 2013, 09:38 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Understood.. Thanks for leading the way Leon, it is possible :)
    22 Jan 2013, 09:47 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    you have to be careful about which strike to buy. If you buy lets say the $4.50 call, if at options expiration the nok stock price is under $4.50 the calls you bought will expire worthless. I think for right now the $3 is the best one to buy or even lower.

     

    The more I think about it the more I like buying itm calls with nok. But I will not hold it all the way till expiration. If I see a healthy profit I will close and buy further out itm leaps.

     

    Thanks for pointing this one out to me. I always sell put options and I need a lot of money set aside to cover. This one I can do with a lot less money.
    22 Jan 2013, 09:51 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Selling for profit is given because it was based on fundamentals with the share price going only upwards. I'm also looking at purchasing (exercising) the shares by securing it from a lower price point, but it never hurts to sell before expiration before profit. And you are absolutely right about having lesser risk buying in the money. I want to accumulate shares to a certain point for it to ride a number of years while collecting divs = higher % gains w/ my investment. I still can't shake of my long game. I'll eventually give in once I delve in deeper to the realms of option trading. Although in golf its all about the short game :P
    22 Jan 2013, 10:09 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    When looking to see which call to buy look for one with a Delta of higher that .80 which basically means if shares of Nok rise $1 the option value will increase by 80 cents. your $3 dollar call has a Delta of .832 which is great.

     

    So if NOK goes to $5.50 you should have made a profit of around $1600 if you decide to close to sell. This seems like a smarter way than to buy those 2000 shares for $4.55
    22 Jan 2013, 09:59 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Options Greek! Pulling the trigger on $3 strike before January 24th. Thank you Leon.

     

    My APRIL 20 2013 $5 CALL is + .01.. with a gain/loss of -2.95 lol.. Options are great leveraging tools :)
    22 Jan 2013, 10:57 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    I am waiting until after the earnings on thursday. just in case nok pulls back
    22 Jan 2013, 10:59 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Buying $3 strike bid @ 1.78 25 contract.
    I'm planning to edit this instablog with actual numbers if the bid goes through and correct calculated examples.

     

    A way to view the perils and plight of Turtledividend. Will Turtle vanquish from such an unfortunate situation. Live free or Die.. as they say in New Hampshire.
    22 Jan 2013, 11:07 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    good luck, reading this instablog made me sell my 600 shares of nok my avg cost was $2.31 so I made 96 % returns on those.

     

    I then went ahead and did a variation of your theory. I bought 20 contracts of the jul 20 2013 call for $1.28 total cost including commissions is $2578,

     

    lets see how this experiment goes.

     

    so any time before jul 20 2013, If I can sell it for higher than $1.29 ( my commissions added in ) I will make money
    22 Jan 2013, 11:20 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    update, seems to workout ok. my jul 20 call is now worth $1.31 as of 3.37 pm

     

    It seems to act pretty much like if I am owning the actual shares, but for a cheaper price
    22 Jan 2013, 03:38 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    update @3.59pm calls are now worth $1.32. my 20 calls are up $80 for the day....
    22 Jan 2013, 04:02 PM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    @leon

     

    You selling or going to ride it out a ways?
    22 Jan 2013, 05:57 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » That is part of the strategy. Owning the shares at a lower price point with a binding contract. Then closing the deal by exercising the shares before expiration. In your case you may sell your options for profit. This is perfect Leon.

     

    My bid for 2014 JAN $3 @ 1.80bid was not taken.. it went up to 1.82.. Im bidding market tomorrow to lock it in.
    22 Jan 2013, 10:13 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Im going to see how this options strategy pans out. I am so used to selling puts, which ties up a lot of capital. Buying deep itm calls requires only a fraction of that
    23 Jan 2013, 07:18 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Helsinski and NYSE pre-market is up, I doubt my bid will be processed. ITM is the closest i'll get to hedging instead of using puts.
    23 Jan 2013, 07:27 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    update jan 23 @ 9.34 am. calls are now worth $1.42 am up $ 261.30 so far.
    ______________________...
    another trade I did I want to talk about. Its my bread and butter.

     

    sold 28 contracts of the April 20th $5.50 put with a premium of $1.33 on 1/14/2013

     

    I need to have $15400 n my account to secure this trade in case I get assigned early. As of today the premium drop down to $1.06 my profit if I buy to close right now would be $731

     

    here is a link that explains selling cash secured puts in detail http://bit.ly/W02VYK . I am actually long nok by selling puts.
    23 Jan 2013, 09:41 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Thanks Leon,

     

    AMD is climbing as well... my $3 Calls for FEB 16th, I might sell it for a loss. Although I have 2013 APRIL NOK CALL $5 strike to hedge.. Options are a joy.. getting a bit risky due to over confidence.
    23 Jan 2013, 09:56 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    with the feb 16th calls Theta is your enemy ( time ) The closer the options expiration date become the less those calls will be worth. You are right with the leaps strategy you described in this blog.

     

    just remember to look for a strike price to sell with a Delta higher than .800

     

    Options really is a powerful and dangerous tool lols , I do really suggest a lot of paper trading via a virtual account on optionsxpress or something for people reading these things
    23 Jan 2013, 10:04 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Options greek, gotcha Leon. I've been working on the gamma, delta, theta waves.. familiar with the terms, but not with options though :) more like brain waves.. very interesting stuff.
    23 Jan 2013, 10:07 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    yeah, options greeks. In the beginning it was all foreign to me too. But the more I trade options, The more I understand how to read those greeks. Really cool stuff.

     

    Once again, thanks for posting this buying deep itm leap calls strategy, it really works ( if the market goes up lol, if it goes down, it will give you equally amounts of pain :P) But that is why we buy the leap, so it has time to recover in case the stock tanks
    23 Jan 2013, 10:13 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Dividend investing got pretty boring. I'm glad you agree with the strategy. It offers a safety net to an option trader as long as the fundamentals are intact... gives you a bit more of a challenge if you've done your due diligence :)
    23 Jan 2013, 10:19 AM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    Thanks leon, the cash secured puts sound interesting.
    I'll let you know if I dive in.
    23 Jan 2013, 05:59 PM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    " In the beginning it was all foreign to me too."

     

    You missed the opportunity for the pun of a lifetime..

     

    i.e., "it's all Greek to me." ;-)
    23 Jan 2013, 06:04 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Strike price @ 3.50 ITM. Good Luck Leon :)

     

    You should download the "Stock Plus" app on your 920.. Options can be seen for selected ticker symbol..
    22 Jan 2013, 11:30 AM Reply Like
  • Andreas Hopf
    , contributor
    Comments (7872) | Send Message
     
    Last July, all I wanted was to buy NOK, because it seemed like a good idea at the time, without much research. Then other stock came along. Then week-trading as I like to call it. And now, after looking through your thoughts and making it sound so, well, straightforward, I re-read http://bit.ly/107OzrR here and will try some deals - but only in Excel first :)
    22 Jan 2013, 06:44 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » I wish I knew about options before System. I've always been a dividend guy due to influences from family members, father and close friends. I felt that using options should be of modern investing strategy.

     

    You can hedge and leverage if you have equity. Good Debt.
    The strategy can be applied to any stock of your liking as long massive due diligence has been done :).
    22 Jan 2013, 10:20 PM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    Thanks for the strategy turtle.
    I've no dry power ATM, but I hope to have some before too long then I can revisit this and other option strategies.
    22 Jan 2013, 06:59 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » My pleasure Luke, for my fellow Nokia "Long" bag holders : )

     

    Still need to due some corrections with the calculation. Also, learning Extrinsic to Intrinsic value. Leon has been my motivator. I was bit sketchy doing puts, LEAPS and calls caught more of my attention.
    22 Jan 2013, 10:24 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    playing around with options either buying or selling puts or calls is pretty risky. Do paper trade with a virtual account like optionxpress or something. Leverage can be a friend or your worst enemy lols
    23 Jan 2013, 08:27 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Its to late for that Leon, I went down a black diamond first time at the mountains and Gravity became my friend thereafter :)
    23 Jan 2013, 10:38 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Turtle sorry for hijacking your thread lols.

     

    But I got so inspired by this itm call strategy that I took all my profit from last year trading NOK ( around $8000) and bought the

     

    AAPL May 18 2013 440.00 Call today is jan 23 2013.
    total cost is 100 x $81.31 ( premium ) = $ 8130.63. Delta is .822 meaning for every dollar apple rises my options rise .82 cents.

     

    With earning coming from Apple tomorrow I feel like the price of apple shares will rise. I have until at least march to make money off this trade. If it goes up by $50 dollars I will have made 50 X.822 X 100 shares = $4110. Wish me luck. Always wanted to play with apple, but not I actually get a shot at it lols
    23 Jan 2013, 10:47 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Hope you read my discretion Leon LoL...

     

    Thread was made to be critiqued, advised, informed and welcomes suggestions. It's more like an ode to you Leon and Nokia S.A. board contributors. Well enough w/ sappy stuff :P

     

    Thats a big call Leon... WOW Wish you much luck, I was thinking of playing Apple as well but that'll be getting to ahead of myself. I love to use their products, but the shares are a bit overwhelming.

     

    GOOD HUNTING & GOOD LUCK....
    23 Jan 2013, 10:57 AM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    "With earning coming from Apple tomorrow I feel like the price of apple shares will rise."

     

    :-((

     

    Sorry man.
    23 Jan 2013, 06:06 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Its ok, it aint over till options expirations. Maybe it will recover lol. And I can always roll it over further down the road. But so far my first ever Apple trade has been a downer :P
    23 Jan 2013, 06:08 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Thanks Turtle, I will keep you updated on how I fare with this reckless gamble lols. Hopefully apple shares takeoff and I profit a bit. If not, lesson learned lols
    23 Jan 2013, 10:59 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » You'll have your answer by tomorrow.. Isn't there CC this afternoon??
    23 Jan 2013, 11:01 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    update on the apple calls. It seems I will be taking a beating on these calls. AH its down to $460 already. Instead of up 50 I am down 50 lols. so I have a loss of 4000 plus already. But I still have until at least march to recover. Shows the power of this strategy. Its win big or loose big lols.

     

    Its not over yet for this trade, I might escape unharmed. But so far not looking good for that 8000 bucks lols Apple got at least another 3 months to recover...
    23 Jan 2013, 06:00 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    I have until may for this trade to work out. maybe I should start hyping apple now :P
    23 Jan 2013, 11:06 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » HAHHAHAHAHAHAHHA! That'll be cool... LOL
    23 Jan 2013, 11:07 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Imagine if i bought in, I would hijack and do a hostile takeover on the Apple stock talk.. LOL HAHAHA

     

    Oh, and get my 4s reconnected. Wait, never mind, realized I had switched to AT&T for the Lumia 920... oh wells : )
    23 Jan 2013, 11:08 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » My 2014JAN$3.5 @1.59 posted. increased my bid to 1.59 to locked-in with 30 contracts. Im in the Money, will work on it later :)
    23 Jan 2013, 11:39 AM Reply Like
  • ylseekingalpha
    , contributor
    Comments (107) | Send Message
     
    Fear and greedy, that's two sides of the coin.
    23 Jan 2013, 12:56 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Uncertainty is the one flipping the coin :)
    23 Jan 2013, 08:29 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    I try to be greedy when others fear, like Buffet always tells us to. Wonder if it will apply to Apple this time
    23 Jan 2013, 01:01 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Leon, I'm hoping apple gets a pop by Friday. The algorithmic cowboy traders will get a green light and Apple will get an overwhelming influx of trade. A pop will occur followed by a high exodus of selling afterwards. Just my honest opinion, reason I feel a bit overwhelmed with Apple. I do wish you luck. You do have until May, again you just put yourself in another roller coaster. Wasn't Nokia enough or its never enough. I have a good feeling that you will create a portfolio to hedge yourself out of this mess, let the force be with you...... live free or die :)
    23 Jan 2013, 08:26 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    lol turtle. live free , no need to die. I am sure apple will recover most of the aftermarket drop pretty soon. I might escape with just a 1000 or 2 loss.

     

    But this shows the flaw of selling itm calls. It will go up fast, but drops like a bomb. I will keep this updated until I am out of this trade some time in the future :)
    23 Jan 2013, 08:29 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » I was just quoting the New Hampshire's license plate slogan.. lol

     

    It definitely has its flaws, so does any investments we make. I didn't know much about Apple's fundamentals other than its products, so I didn't make a call. I was actually looking to buy some puts, but then you mentioned ITM and was a bit shocked.

     

    I hope my Nokia LEAPS strategy holds it bearing with my option calls.
    I didn't want to use this strategy with other securities until I had put enough DD in a company and learn their fundamentals... I would love to hear your progress. I wrote down your AAPL CALLS to keep in my records, so i'll be keeping track of it as well. Using it as a reference if you don't mind. They say the biggest risk takers tends to bode pretty well... lets hope so.
    23 Jan 2013, 08:45 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    I think the Nokia leaps strategy will do just fine. Nokia is trending upwards while Apple is clearly trending down

     

    Still seems to me a 10 percent drop is kinda harsh. Hopefully it will recover somewhat in the next 2 months. I understand now why this strategy should be used with leaps, just in case in the short term the market turns against you. Another lesson learned.
    23 Jan 2013, 08:46 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » 10% is very big, looks like institutions pulled out to hedge profits. They'll be back in, I will keep my hopes up as well.
    23 Jan 2013, 08:51 PM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    turtle .. this action happened after hours though.. my feeling is that a lot of the big guys may get out tomorrow at market open. I don't think we're done yet.

     

    However I agree on the longer term that leon will have a chance to recover after the dust settles and people start buying back in. I would however get out asap .. just a personal opinion.
    23 Jan 2013, 08:59 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » I feel the same way.. @8000 AAPL calls. A portfolio can be created to hedge his lost. He can easily make up the 8k within four months.. Leon is not on margin, so he can write a 3k tax lost if he gets out now.. i have a feeling he will hold and continue his quest as he stated from his last comment.
    23 Jan 2013, 09:03 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    @Luke, no way, still way to soon to give up on this Apple trade. The most I could lose is whatever premium I paid for this call. But there is still a whole quarter for it to recover. I consider this a learning experience for us all.

     

    @turtle, your right, I am not on margin. I will hang on see what I can salvage. I am still up overall trading nokia. I will just chill and see. Its more like 4000 if I get out now. More if the shares keep tanking tomorrow. I got into this knowing my max loss, I will not chicken out because this trade turned against me in the short term. This is Apple we are talking about.....
    23 Jan 2013, 09:03 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » roger that :)
    23 Jan 2013, 09:05 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Update 01/24/13 8am premarket apple shares seems to be recovering a bit. After sleeping it over for the night my shock has subdued lolz. I do feel in the next 3 months apple will recover from the 10 percent drop. So I will keep updating my trade. Something for people to look at
    real time. Might prevent some people from playing the quarterly results with leverage
    24 Jan 2013, 08:10 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Notice a good number of traders uses quarterly results using Option Ladders.. Apple should pop, NOK is seeing it today.
    24 Jan 2013, 09:22 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    UPDATE 1/24/13 I rolled over my may 18 2013 $440 call. which means I sold the call and I now bought the jan 18 2014 $440 call.

     

    I took a loss of around $2500 right now, but I have bought myself another 6 months for Apple to recover. I sleep easier at night this way. I hope you do not mind Turtle if I use your blog to document this :P

     

    Now hopefully Apple will regain some of those losses this year!

     

    So far with this new jan 18 2014 call, cost me $57.16 X 100 = $5716.

     

    its now up $194, my road to recovery is on its way!
    24 Jan 2013, 10:21 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Not at all Leon. This is our playing field :)
    24 Jan 2013, 10:25 AM Reply Like
  • Andreas Hopf
    , contributor
    Comments (7872) | Send Message
     
    Sorry to chime in on AAPL - I'd like to see them making useful computers again (apart from the stunning MBPr), and get their f#*%ing act together on Final Cut Pro and Logic Pro. They should not forget those that made them grow :)
    24 Jan 2013, 01:14 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Apple is going back up slowly! So is NOK!
    29 Jan 2013, 10:30 AM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    I think NOK holding/creeping back up is significant as it demonstrates that the dividend cut wasn't the catastrophe some feared.
    29 Jan 2013, 01:36 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    I have full confidence NOK will have a great 2013.
    29 Jan 2013, 01:37 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » +8.44 :)
    29 Jan 2013, 09:51 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Update on my Apple calls, my jan 18 2014 calls are worth $67.50 now. I am up $1000 on those and still down on my apple trades by $3000 overall

     

    With Einhorn talking to Apple, I might have a chance to turn a profit by the end of the year :P

     

    If the do offer a special dividend , I will make sure to sell before the ex dividend date.
    8 Feb 2013, 01:07 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    I sold my Jan 18 2014 calls for $67.05 down overall on apple about $3000. I'll just make it back with NOK.

     

    bought the May 18th 2013 $530 call for $10 now cost $1000 freed up around $6000 that I will use to sell nokia puts
    12 Feb 2013, 10:53 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Your -3000 on Apple. NOK should be a good play especially with rumored NSN spin off. Hopefully it doesn't happen until next year just enough time to exercise my ITM 3000shares. It'll be pay day :)
    Still have a good amount of equity on my NOK shares, my margin is safe. Haven't been updating lately, don't have enough time at the moment. Been posting with the 920, bit tedious.

     

    Just sold my first option play with AMD at a lost of -30.45 due to transaction cost. lol
    12 Feb 2013, 11:08 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Strange, I feel much safer trading Nokia than Apple lols.
    12 Feb 2013, 11:12 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Because you had ridden the volatility waves many times.
    12 Feb 2013, 11:25 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Glad I got rid of Apple today, its tanking right now. If it goes up, I will gain some with the with May calls I bought.

     

    Overall I learned a lot about trading ITM calls. Its well worth the $3000 dollars I lost. I understand Delta a lot more now in relation to buying calls.
    12 Feb 2013, 11:28 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Like what you stated in the past, you learn more if your actually playing :)

     

    A friend of mine gave me a $10000 lesson on swing trading, a lost he had made from a mistake he learned from. Follow the 20 day moving average and Bohlinger Bands. He makes a living doing this. I had a chance to shadow him last week. Ex I.T. network employee for JPM. Although he advices to have 50k capital that you are not afraid to lose, if not you will think like a loser. He also leverages 4 to 1 margin accounts as well. A bit overwhelming for the moment, but my jaw dropped watching him in action.
    12 Feb 2013, 11:37 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    True Turtle, you learn the most actually trading. I have about $60000 I use to sell nokia cash secured puts with and I feel really safe doing so. Its when I venture into other stocks I lose money in. But Nok is always there for me to make my money back with.
    12 Feb 2013, 11:45 AM Reply Like
  • bilton
    , contributor
    Comments (2404) | Send Message
     
    I hate to break it to everyone in the discussion here but per usual, it all depends on your broker's cost structure. There is a 0.50 or higher fee per option per trade. And most charge a flat trade transaction fee on top of that. And most charge a large fee for option exercise. Here are a few well known US broker fees:

     

    - Scottrade: 7 flat fee + 1.25 per option + 17 flat exercise fee
    - Schwab: (8.95 flat fee + 0.75 per option) x 2 for buy/exercise
    - Fidelity: (7.95 flat fee + 0.75 per option) x 2 for buy/exercise
    - Merrill Edge: (6.95 flat fee + 0.75 per option) x 2 for buy/exercise
    - TD Ameritrade, eTrade: 9.99 flat fee + 0.75 per option + 19.99 flat exercise fee

     

    In a low dollar stock like Nokia that adds a lot of burden to your goal.

     

    So, I don't know what your broker charges so using Schwab in the your scenarios. The least in fees you would pay to buy/exercise :

     

    25 options is 8.95 x 2 + 0.75 x 50 = 17.90 + 37.50 = 55.40 = $2.22/option

     

    buy/exercise 30 options is 8.95 x 2 + 0.75 x 60 = 17.90 + 45 = 62.90 = $2.10/option

     

    Step by step explanation.

     

    Scenario 1:
    25 contracts NOK JAN 18 2014 3.00 CALL@ 1.78

     

    25 contracts of 3 option @ 1.78 has a real per unit cost of:
    Add the per option fee: 1.78 + 0.75 = 2.53
    Add the transaction fee: 8.95 / 25 = 0.36 + 2.53 =2.89
    So your purchase basis is 2.89/potential share

     

    The stock price will have to hit 5.89 for break-even.

     

    But you want to exercise. Your real basis per share needs to add the exercise fees which for Schwab are the same as purchase:

     

    Add the per option fee: 2.89 + 0.75 = 3.64
    Add the transaction fee: 8.95 / 25 = 0.36 + 3.64 = 4.00
    So your total basis is 4.00/share

     

    The stock price will have to hit 7.00 for break-even.

     

    So, you get the stock at $3 per share but you pay $4 extra per share for the privilege. If you had just bought at $4.50 per share you would have a $2.50 profit per share if it hit the break-even price and only paid $8.95. And if the stock goes below $3, you would only be out a little more than $1.50 per share.

     

    Scenario 2:
    30 contracts JAN 18 2014 3.50 CALL @1.59

     

    30 contracts of 3.50 option @ 1.59 has a real per unit cost of:
    Add the per option fee: 1.59 + 0.75 = 2.34
    Add the transaction fee: 8.95 / 30 = 0.30 + 2.34 = 2.64
    So your purchase basis is 2.64/potential share

     

    The stock price will have to hit 6.14 for break-even.

     

    But you want to exercise:

     

    Add the per option fee: 2.64 + 0.75 = 3.39
    Add the transaction fee: 8.95 / 30 = 0.30 + 3.39 = 3.69
    So your total basis is 3.69/share
    The stock price will have to hit 7.19 for break-even.

     

    So, you get the stock at $3.50 per share but you pay $3.69 extra per share if you exercise. If you had bought at $4.50 per share you would have a $2.69 profit per share and only paid $8.95 to buy it. If the stock goes below $3.50, you would only be out a little more than $1.00 per share.

     

    Bottomline, you have to analyze the situation including total basis and what is the gain/loss risk. In the case of NOK, you are paying almost as much per share than you could lose if the share price went to zero. The whole reason to use the buy/exercise option method is to limit risk. If it was a $100 stock that $3.69/share would be worth the risk of losing up to $100/share. In this case. it is just a waste of money with little risk to gain.
    23 Jan 2013, 09:24 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Thank you Bilton for the break down, but the option fee is per contract not per share with my broker.

     

    For Scenario 2: My calculations.
    30 contracts JAN 18 2014 3.50 CALL @ 1.59

     

    30 contracts 3.50 @ 1.59.
    Option fee is per contract. My broker chargers .75 per contract
    which = 22.5. 3000 (30contracts) / 22.5= .0075.
    .0075 is the actual transaction fee peer share.
    1.59 + .0075 = 1.5975 cost per share in the 30 contracts.

     

    $1.5975 is my cost per share with 30 contracts =
    total cost of contracts @ 1.5975(3000)= 4,792.75 is what my broker charged me for the 30 contracts.

     

    The exercise option vs selling options for profit is what i'm working on currently. I would like to exercised the contracts, but if the extrinsic value is greater and with the possibility make more $$$, I will sell the options to close. I may exercise 50% of the contract... In progress.

     

    I will work on the calculations later, please make any corrections. Your opinions are greatly welcome bilton. Thank you.
    23 Jan 2013, 09:44 PM Reply Like
  • bilton
    , contributor
    Comments (2404) | Send Message
     
    Oops, I wasn't thinking. I did screw up the math by multiplying the broker fee into the premium. Maybe after hours earnings trading rotted my brain. Now I'll go bury my head in the sand but before I do: I still stand by my point that you are paying too much for such a low risk. You are still paying per contract 159.75 + any broker trade fee + any exercise fee to save 1.00 per share if the stock was 4.50. That is pretty expensive (over 35% of current price) when the risk is so small. Could be implied volatility ahead of earnings. We'll see if it goes down after they are reported. The idea only makes sense if you are trying to leverage against a lot more downside risk than 4.50 per share. Example of other 2014 LEAPS cost/risk: IBM 190 is a little over 10% of current price 205. XOM 85 is 9% of current price 90. AMZN 255 is 11% of current price 268. NFLX 125 is 8% of current price 140. Anyways, that's my 2 cents with a BIG rounding error disclaimer.
    24 Jan 2013, 04:29 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Its just a minor calculation, I appreciate your honesty bilton.

     

    Low risk / high price, but it'll be rewarding at the end : )

     

    Please check my instablog once in awhile as it evolves. I need people to observe and critique when I make any moves. All Contracts presented had been bag & tag marinating in my account.
    24 Jan 2013, 04:59 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    Bilton, your explanations are really detailed, will add a lot of info for newbies. Commissions are not a big deal on trade king like 5 trade and 60 cents a contract. Each way
    24 Jan 2013, 08:04 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Placed a bid for JAN2014 $7 strike @ .25 for 100 contracts.. this is a buying opportunity..
    24 Jan 2013, 09:19 AM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Bid was not accepted :P Added more information with the instablog.
    I will start a new instablog monthly to update progress and to refreshen thread.
    24 Jan 2013, 11:56 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Looking to buy some contracts for JULY2013 CALLS.
    24 Jan 2013, 11:59 PM Reply Like
  • gwenace
    , contributor
    Comments (61) | Send Message
     
    Just came across this blog. I am also a super bull. (So I don't know if I can correct/criticize you much lol). On top of buying calls, I am also selling naked puts.

     

    This might sound crazy, but I've got out of all my positions in other stocks (with a gain in every stock :D) just to have the cash handy in case NOK falls more.
    25 Jan 2013, 12:07 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (7872) | Send Message
     
    Until MWC, it will. So you can accumulate soon.
    25 Jan 2013, 02:15 PM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    "Until MWC,..."

     

    Just a word of caution...

     

    Last MWC I was in Nokia and VERY excited about what they would be showing. The stock rallied the days before the show, but then tanked during the opening speech by Elop..

     

    So while I have high expectations for MWC, I've also been bitten before so I'm prepared - mentally at least.
    25 Jan 2013, 06:39 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Isn't Elop hosting the WMC? We may see some surprises. Last show NoK attended YTD, Nokia just brought a bus w/ with written words on the exterior stating, "MEETINGS with benefits"
    25 Jan 2013, 11:51 PM Reply Like
  • gwenace
    , contributor
    Comments (61) | Send Message
     
    I also think it could go down again to 4.10~4.20 level, or even $4 or under relatively soon. However if RIMM blows out, NOK will probably get a boost.
    28 Jan 2013, 07:01 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (7872) | Send Message
     
    Just like I suggested the day before NOK crashed, also all that hot air escaped RIMM. I think the money from both is partially going into Apple or Lenovo or elsewhere.
    28 Jan 2013, 07:06 PM Reply Like
  • gwenace
    , contributor
    Comments (61) | Send Message
     
    I agree with you. Although I didn't take profit on my calls before the earnings - I was overly optimistic. NOK is a long-term play. Probably will take 2 years for the comeback in market share.

     

    I'm getting RIMM puts for BB10 launch.
    28 Jan 2013, 07:15 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    gwenace(like u already know ofcourse) now is the time to sell those naked puts. I just sold a bunch of the july 20th $5.5 puts.
    25 Jan 2013, 02:21 PM Reply Like
  • gwenace
    , contributor
    Comments (61) | Send Message
     
    :) Those naked puts are easier money than the cheap calls at this point.
    25 Jan 2013, 07:16 PM Reply Like
  • gwenace
    , contributor
    Comments (61) | Send Message
     
    I sold $3.5 FEB16 calls bought yesterday for a quick 10% gain today. The long leverage way is simply the right way to play NOK so far...
    28 Jan 2013, 06:58 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » I should've bought some puts to hedge my calls, my options are getting creamed.

     

    This is the same crashed we experienced on Sept 5th, 2012 with the WP8 Lumia Launch.
    25 Feb 2013, 09:02 PM Reply Like
  • Mr. Knowitall
    , contributor
    Comments (7388) | Send Message
     
    Same here.
    The market needs to just knock-off this irrational bullshit.
    26 Feb 2013, 01:39 AM Reply Like
  • Andreas Hopf
    , contributor
    Comments (7872) | Send Message
     
    Since I am new to stocks since last July, could it be that turnaround companies are seemingly eternally trapped in a price range so larger traders and optionistas can turn the wheel on and on, making profits from minuscule movements as were seen in recent months?
    26 Feb 2013, 02:23 AM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    turtle have not heard from you for a while. I would like to put a close to this thread by summing up what happened with the Apple trade and also reflect back onto my nokia trades.

     

    That apple trade was a eye opener for me and was my biggest loss to date.

     

    I since bought 51 contracts of the jan 18th $3.50 call with a average premium of .99 when the news of msft taking over nokia devices came out I sold them.

     

    09/03/13 Sold to Close -31 NOK Call Nok Jan 18 2014 3.50 Call NOK Jan 18 2014 3.50 Call $1.65

     

    09/04/13 Sold to Close -20 NOK Call Nok Jan 18 2014 3.50 Call NOK Jan 18 2014 3.50 Call $1.73

     

    So this method of yours does work. But I will only use this technique sparingly, I much rather keep selling cash secured puts.

     

    see you around turtle

     

    btw I did sell a bit to early because right now the premium for those calls is @ $2.42....

     

    but I am happy with the results of this experiment.
    11 Sep 2013, 08:09 PM Reply Like
  • turtledividend
    , contributor
    Comments (281) | Send Message
     
    Author’s reply » Leon! It worked! LOL :)

     

    Very happy with the results and made a pretty penny. Planning to use this strategy with certain companies in the future (mainly large caps) 2014 looks like a great year for puts due to the market being overvalued. I went 50% cash for next year's discount extravaganza (including my retirement 403b plan). Rumor has it will occur around 2014 Q1 due to less quantitive easing activity.

     

    Haven't been on SA for awhile, but folks at the NOK thread are still going strong. I was busy cultivating my relationship with my fiancé.. tying the knot in January, right after I sell off the rest of my options :).
    I'll continue to follow you Leon and will start working on secured PUTS. See you around Leon and I'll continue stalking you on the down low, lol. Happy investing!
    18 Nov 2013, 11:08 PM Reply Like
  • Leont68
    , contributor
    Comments (1356) | Send Message
     
    great for you turtle, hope you have a great wedding.

     

    I have learned a lot and will be selling secured puts on more stable companies like alu .
    19 Nov 2013, 05:39 AM Reply Like
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