Options

Update: One lesson learned – not to trade when you are tired and not focused. I bought the opinion on oil because I thought the Change in EIA Oil Inventories is going to be published. But this one was yesterday… today there was the Natural Gas… stupid mistake!

1) Weekly USD/JPY 20/08 8800 call. Opened price: 20.5 why? because I do believe it is near bottom and 20/8 gives some time to recover.

2) Daily oil 8060 put opened price: 5.9 why? Change in EIA Natural Gas Inventories will be announced in 40 minutes. The black gold tends to react strongly in the 30 minutes after.

Hi all,

For a while I was trying to fight the trend. This is a mistake. Although sometimes swimming against the flow can be profitable most of the time it is just difficult.

That’s why when the market direction is up, there is no point to go short. But… it is not a secret that since March bottom the market was going in one direction with very few corrections. Many people will say that a big correction is due to come and September is a bad month anyway!

They may be right and we may see a change of direction but until that happen, I would not recommend to open a short position. But you can do what I’ve done: Bought some shares that I believe their trend is up but back-up it with a put option for October. You can still find them cheap so for 40-50 points you can have a back-up if something will change.

I myself bought FTSE 4500 put for October a bit expensive at 86 points, but still I am happy with this insurance.

On the last article Simon Grifin from Share magazine has recommended to sell the FTSE 100 at 3950. He called the latest rally as typical bear rally or in other words false rally. By the time I was reading his article the FTSE 100 was around 4100 and the Dax was 4650. Then came Friday and markets continue to move up around 0.5%

All of these put my Dax 4000 Put for May call value on the lowest you can imagine (6 points when I bought it for 36). This wasn’t good. I was speaking with my friend that holds the same positions and both of us agreed that the market is almost on its peak and the only way is down.

So we checked to buy the Dax 4400 Put for May. The price was 66 around 17:00. I though that if the Dow will finish on high note then the option will be worth 60 or less and I will buy it. But I forgot to check. You know Friday evening is not the best time to deal.

Anyway it touched 62 and the weekend has started. A new week and the markets again see red. The Dax lost 190 points in one day. This means two things:

1) My 4000 Put worth 34 now (300% in one day)

2) 4400 put that I didn’t buy worth around 125 (100% in one day)

All I can do is blame myself. I knew that the market will go down but combination of tiredness and fear of losing more prevented me to take a huge profit. Another painful lesson has been learned.

Hello all,

I have bought today a put option on the Dax. Why the Dax? The FTSE 100 didn’t jump as high as the German one or the Dow. While the Dow jumped from 6500 to 8000, and the Dax from 3600 to 4500, the FTSE was much more solid and jumped from 3500 to 4000.

So if I am right and the market will change direction, my logic says that the FTSE will slide slower than the other two. So I left with 2 options. The Dow options seem to me expensive so I’ve decided to choose the German index.

Bought it for 36.3. The lowest price today was 30 but I missed the bottom. I guess you can’t catch the bottom. So I have 4.5 weeks and my target is to double the money. I will keep you updated.

Hi all!

I am not that impressed with the last rally. It is nice to see the market changing direction, but I don’t think that this is the end of the bad period. But I do think that the rally will continue for one or two days depends on the Goldman Sachs results tomorrow. If I am right then I will buy a put option on the FTSE 100 and maybe on the Dow Jones as well.

So I am looking to buy the PUT 3750 for May. I think by Tuesday it should be cheap enough. The nice thing about options is that you know how much you can loss. In fact every time that I buy one I consider it as ‘lost money’ and I am always looking to double my investment. Sometimes it works, sometimes not, but I have more than 50% success which is enough

Hi all,

I am back from my holiday and as every holiday it was short. I tried not to follow too much of what’s going on, but I couldn’t ignore the bounce that the markets had. As I said I put my FTSE 4000 Call option for April in my friend hands because he holds the same option.

But I didn’t know when he closed the position. On Friday when I saw that the FTSE 100 is around 4100 and the option price is almost 200 I couldn’t resist the temptation and gave him a call. “I am sorry, but I closed the position a bit early at 99″. Dam! still I understand why he did it and it was wise to do so.

And the bottom line is that I made more than %100 on this option so I don’t want to be greedy. We bought it on March the second for 47 and sold it on 27/3 for 99. Not bad… if my friend would waited another week we would have made 400%. I just love options!

So what’s next? I don’t know. I am still in holiday mood and I need to read what I missed for the last 3 weeks. But I will continue to buy options against the trend.

After I bought it for 47 points (I thought it was 57… but the position was opened on 47) it went down all the way to 16 this morning. I was already though to write off this option. But then today came an amazing rally on the FTSE 100 and on the Dow and the option now worth 58 points. So for those who bought it this morning…

This is important week for this option. If the rally will continue tomorrow then the sky is the limit for this option. If not it will go back to 15-20.

This just prove that if you have patients with this market condition you can make lots of profit. When you have days that the FTSE is up or down by more than 4% you can double your money in just one day.

Hello all,

what a day… there is no other words than ‘sale’. The FTSE 100 has lost 5.3% in just one day. So when everyone are selling for me it is time to buy. Together with a friend of mine we bought the FTSE 4000 APR Call for just 57 points. We don’t risk a lot and when (it is not even if) the market will rally it will wroth more.

Remember there are still 7 weeks to go and unless we are going to see the FTSE 100 at 3000 this week I am sure buyers will back to the market. After all there are some good shares out there that are priced very cheap.

I will keep you updated about this Call option.

Yesterday I recommended to take the 4100 PUT option Feb 09 on the FTSE. The price was 59. Now it is 93 and it was during the day 141! those who took my advice had a nice profit and it could be more.

Did I take it? no. No? no. Why? because… it was late I was tired and god knows why.

Instead this morning I bought a 7740 CALL option on the DOW at 42. I though the DOW was way too down in the pre-hour market and I hoped it will bounced back. So I bought it when it was 7680. Now (19:30) hour an half before closing time my option worth nothing.

That’s ok sometime you lose sometimes you win. But my mistake was not to hedge my position. On that time I could buy the 7640 PUT at 55. Now it worth much more and it would cover my losses from the CALL. It is true that when you hedge your position you limit your profits but it is better to have little profits than big losses.

In the bottom line it is all depends what you are looking for. For me if I can make 10%-15% on each trade I am happy. For some they are looking for much more. But then when they lose they lose more.

For the ones that followed my advice from yesterday and bought the 4100 put Feb-09 on the FTSE can take nice profit of 25% in less than 12 hours.

The FTSE starts the day on the red and now the option worth 74, 15 points more than yesterday night – 25% profit.