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Option Addict

The first hit is always on the house.

I Have the BAIDU Market Cornered

Picked up yet another position here, into weakness. Front Wkly 105 calls $0.30. My conviction in BIDU is swelling.

Still like the FB here as well.

 

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Late Night Game Plan

Top Option Plays Tomorrow: NFLX, DECK

Chinese Burrito Stocks: XIN, SUTR, CHOP, FUQI, RENN, YZC

My only blemish in the last couple weeks was buying the materials space too early. However, it looks like it will be paying off soon. If this is true, add CLF to my buy list.

See you in the morning.

OA

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Not All Charts Are Created Equal

BIDUart

Again, I won’t claim fame for picking stocks that trade up in an up market, but when you have a basket that includes 6-10 names daily that are up at  least 10% every day for weeks, it kind of makes you feel special. Not trading with a helmet and marking up charts with crayons “special.” The kind of special where you realize you know your environment well, and know where the markets appetite for risk is. More importantly, you know what is likely to get bought up next.

Here are a few charts of names I’ve accumulated. All but PPHM were posted here, on iBankcoin.

alphabitch

I would pay close attention to materials names right now. I know I was a little early on this theme, but these stocks could put together a 20-30% run no problem. As you know, I am sitting on long call positions in ANR, WLT, and X. They’ve been getting some decent volume on the upswings, and are at some interesting action points.

I’ll post a few trade ideas later this evening.

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Are You Not Entertained?

Hard to come out blogging this morning when the markets are passing out free money at such an alarming rate.

I will post something of interest later this afternoon; most likely something you can trade along with me. For right now, in the interest of full disclosure, across three different accounts…here is my book.

Long Calls in GS, BIDU, FSLR, AAPL, WFR, DECK, FB, WLT, X, ANR, RBCN, MNST, BBRY

Long shares of NBG, PPHM, CZR, MTG, JOEZ, ZNGA, GRPN, END, RSH, EXM, PACB, JKS, OSGIQ

I placed 3 orders today, filled two. YELP left without me…but managed to pick up Weekly calls in AAPL (445 @ $1.95), and BIDU (97.5 @ $0.80)

Watching BWEN, COOL, IVAN.

Something more useful later…

OA

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The Concept of “Lotto Friday,” Old Sport

Moving forward, you’ll hear me throw out this term quite a but, and its important that we’re all on the same page so that I’m not doing all the winning while you are messing shit up and getting angry at me over my trading style.

The introduction of weekly options was a game changer for me. In my career as an option trader, the one issue I’ve always had buying options is paying up for all sorts of time that I have no intention of using. If you aren’t familiar, option pricing is stupid. There is a portion of premium assigned to the amount of time the option has until expiation that you pay to have rights to. In short, the mathletes have found a way to charge you for time, and anticipated price movement to a degree, all at the point of purchase. Think about it this way, if you are buying a one month dated option to use for a few days or weeks, you are paying an extra sum of money for the luxury of time that you do not require. The end result is that it cuts into profit margins. I prefer to keep things margins lean.

Weekly options are the same exact vehicle as traditional options, sans the amount of time until expiration. Weekly options are significantly cheaper than traditional options because you are paying for less time.

Now if you’ve ever bought an option you might not be a big fan. Those that are not big fans are usually not the best at picking stocks or their timing is whack. If you are an option buyer, it is required of you to be an excellent stock picker and be able to time BIG price swings. That goes beyond calling stocks trading up in an up tape. It means you need to have tomorrows newspaper, today, and know which stocks will move the most tomorrow. Take the AAPL lotto trade I posted this week. Within 24 hours, the option had returned over 300%. During that time, AAPL also had better than a 20 point price swing.

As an option buyer, you have to buy with purpose. You cannot buy calls on any old stock you think will go up. It goes beyond that. You have to trade the stock that will move the most, and move almost immediately after you purchase. This is especially the case with short dated options.

Stock won’t move? YOU LOSE.

The great thing about short dated OTM options is that they are gamma sensitive. That’s a nerdy term for “this thing will generate a big return if I am right about price.” Each week in my trading room, we start looking for these trades by about mid-week. I anticipate being right 40% of the time, which is unheard of with this style, and I position to lose the entire premium. I might take 2-3 of these per week and one win pays for multiple losses.

Now if I were to buy more time on these trades, it would up my win % significantly. In fact, in more than half of my losing trades, buying more time would have insured victory. However, it would have also negated the chance for me to make a 1000% return in a couple days. I could care less about being right. I am here to make money.

Moving forward, I will post trades like this on occasion, and I will refer back to this as an instruction manual. Trade at your own risk. Trade small. When I hand you a win, may you let your gratitude fall upon me here for the world to read, or at least be willing to come back for more.

Have a good weekend,

OA

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