@itradevol From what you have posted it follows that selling at-the-money calls into earnings would be a losing strategy. The quote below indicates that stock price goes up in 83% of cases historically. How is selling call options can be profitable into rising stock prices? Please explain?
QCOM has seen its stock price go up in the 2 days following earnings for 10 of the last 12 quarters (83%), for an average gain of +2.6%.
@jalea148 Just an idea: use pre-market session to establish stock bid/ask. What problem are you trying to solve though? It is rather difficult to know where derivatives will trade (or whether options are undervalued or overvalued) if you do not know where the underlying stock is trading.
Income with Options
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Nov 12 GBX has declined to $33.37. Today, only 10 days later, I sold my long Nov 35 puts that I bought as a cheap protection anticipating GBX stock and options volatility to continue . This morning Connors RSI for GBX declined to 10 indicating a severely oversold condition prompting me to sell the puts for $2.15. Here is the trade log brought up to date. The balance of my trade has turned positive. Though it means little as long as the short position remains open.DateTradePosition AfterTotal Profit (Cost) /share 06/16/2015SLD GBX Sep15 50 Put @ $3.30Short Puts3.30 09/14/2015BOT GBX Sep15 50 Put @ $10.80---7.50 09/14/2015SLD GBX Oct15 40 Put @ $3.10Short Puts-4.40 09/15/2015SLD GBX Dec15 40 Put @ $1.63Short Puts-3.77 10/13/2015BOT GBX Oct15 40 Put @ $0.75Short Dec Puts-4.52 10/16/2015SLD GBX Dec15 35 Put @ $2.65Short Puts-1.87 11/02/2015BOT GBX Nov15 35 Put @ $0.40Short Calendar-2.40* 11/12/2015SLD GBX Nov15 35 Put @ $2.15Short Puts0.45*
'*' - indicates per share number is adjusted to match basis lot number ( the lot number that trade was opened)
Current option prices are captured in this snapshot:
Option Hedging Strategies
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Greetings, I am new to options trading and would like to answer a 'simple' question about how payouts are calculated. I want to buy a Call Option to hedge a spot trade in FX and am trying to determine how many options I need to buy to cover my exposure.
At the moment I have the following formula for the payout of an option that is in the money at expiry
Payout = (-OP + (EP - SP)) x Lotsize = Profit/Payout
OP - Option Price
EP- underlying price at Expiry
SP - Strike Price of Option
Please let me know if this is correct
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Options Tools | Options Brokers
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F.A.Q. | Announcements
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@thenewguy Good questions.....
It really comes down to your strategy, and being realistic. My core strategy is I sell put credit spreads on the SPY over and over again. I don't adjust. I risk around 10% of my capital in any one trade. Some years I return 90% and some years I have a loss. I have found over 7 years a 30% CAGR is about right.
Many pro options traders that I know aim for around 20 - 30% a year return. I think if your shooting for returns beyond that you most likely will not have long term success. But once again it all comes down to your strategy.
Here is what my returns look like starting with 30k from 2009 - 2016.
One thing I like to do is have a pot of "FU" money. I use this money to try to make more risky trades (such as trading futures directionally). My goal with the "FU" money is to offset some losses when there is a drawdown. There is also times when I totally blow up my "FU" money account. I notice with this "FU" money I either return over 10x or I loss everything. More or less there is a chance to get much better returns by using "FU" money as a hedge.
But with that said I recommend nailing your core baseline strategy before getting too fancy.