Stocks

[Rupert Pupkin]

Originally Posted by MaTH716

Rupert, Do you know that they now offer weekly contracts as well?

The problem with the Dec puts are that they are 27 pts out of the money. So you are going to need another major sell off for these things to go up. Volitility most likely exploded this week with the market getting creamed, so the puts are skewed to the high side causing you to pay up. But that goes for any kind of strategy you would have put on (spreads, straddles, combos etc....)
I like the July's better. Only a couple of points out of the money and could become good with another dip.
I always hear that you should never buy out of the money options. But reguardless and good luck with your positions. I also think we are going lower, but unfortunately I am also a conspiricy theorist and think Washington will just cook up some good numbers to stop any kind of temporary spirals.

I practically never buy options that are way out of the money. The only reason I'm doing it in this case is because Harry Dent is predicting a huge crash between now and December. So I'm taking a shot. I could just short some Spyders but then I would have unlimited downside risk. I'd rather just buy these puts.

[MaTH716]

Originally Posted by Rupert Pupkin

I practically never buy options that are way out of the money. The only reason I'm doing it in this case is because Harry Dent is predicting a huge crash between now and December. So I'm taking a shot. I could just short some Spyders but then I would have unlimited downside risk. I'd rather just buy these puts.

Obviously you mean upside risk.
But I should have mentioned it before while the market was still open. Maybe you should have considered rolling those July puts into August. Because now you are going to have those July options decay for 3 days. It is a very short month expiration wise and you only have another 9 trading days for your puts. So if you have a chance maybe consider rolling them into August, even if you have to go down a strike to make it a little less expensive.

[Rupert Pupkin]

Originally Posted by MaTH716

Obviously you mean upside risk.
But I should have mentioned it before while the market was still open. Maybe you should have considered rolling those July puts into August. Because now you are going to have those July options decay for 3 days. It is a very short month expiration wise and you only have another 9 trading days for your puts. So if you have a chance maybe consider rolling them into August, even if you have to go down a strike to make it a little less expensive.

No, I meant unlimited downside risk. You don't limit your upside risk by buying options. You only limit your dowside risk. Let's say I would have shorted 1,000 Spyders. I would have unlimited downside risk. If the market went straight up, you could lose tens of thousands of dollars if you were short Spyders. I don't think it's going to happen but let's just say that the Dow went up to 14,000. If you were short 1,000 Spyders, you would lose over $40,000. If you buy 20 puts instead for $2.00, the market can go straight up and the most you lose is $4k. Yet you still have the big upside with the puts. If the Dow goes to 5,000, you would make around $40k with the puts.

The one big negative with buying the out-of-the-money puts is that you need a big move down. If you just get a small move down, you will lose money.

With regard to the July puts, they are obviously more of a gamble than the August puts. You don't have as much time but you pay less premium. I figured that if we are in a free-fall right now that I wouldn't need the extra time. If we get a bounce and the big drop doesn't start until August, I still have my December puts.

[MaTH716]

Originally Posted by Rupert Pupkin

No, I meant unlimited downside risk. You don't limit your upside risk by buying options. You only limit your dowside risk. Let's say I would have shorted 1,000 Spyders. I would have unlimited downside risk. If the market went straight up, you could lose tens of thousands of dollars if you were short Spyders. I don't think it's going to happen but let's just say that the Dow went up to 14,000. If you were short 1,000 Spyders, you would lose over $40,000. If you buy 20 puts instead for $2.00, the market can go straight up and the most you lose is $4k. Yet you still have the big upside with the puts. If the Dow goes to 5,000, you would make around $40k with the puts.

The one big negative with buying the out-of-the-money puts is that you need a big move down. If you just get a small move down, you will lose money.

With regard to the July puts, they are obviously more of a gamble than the August puts. You don't have as much time but you pay less premium. I figured that if we are in a free-fall right now that I wouldn't need the extra time. If we get a bounce and the big drop doesn't start until August, I still have my December puts.

If you short the SPY stock/ETF (which is what I thought you were talking about) you're risk is to the upside.

In reguard to the August puts, all I was saying is that if you act quick enough you might be able to roll the position for a more limited cost than if you should just let the July expire and then eventually buy August or even Sept. puts.

And like I mentioned, for some reason you think a selloff/mini crash is coming look into those weekly options. They offer them in a number of products (including SPY). Those things are usually cheap because of the limited time value of the option and makes them a good gamble.

[clyde]

This stuff is even worse than your Thanksgiving day yuk 'em up story.

[MaTH716]

Originally Posted by clyde

This stuff is even worse than your Thanksgiving day yuk 'em up story.

Coming from the guy who likes soup..............

[clyde]

I did not say I liked soup.

I said there was one certain soup at a certain time that was the best ah ever et.




Don't you have a nice Friday Aft. at the Meth's House story to pound out?