<p>Well…the dividend trade did not work. Assigned on everything. Out the commissions. </p>
<p>@dstark – sorry that the trade didn’t work out for you. I was going to comment that it seemed rather complicated to set up to recover a comparatively small dividend. A lot that can go wrong. And more nerve-wracking than that bear call spread I had in SPY last month. (The one that went well for me but kept me nervous the whole time because I could “lose” the amount I received at the outset as a credit).</p>
<p>Right now in my tiny, one-option-at-a-time self-schooling fashion… I’ve got a simple 3-call 257.5/260 bull spread setup on TSLA, expiration 9/26 – entered earlier this week for a 1.32 net debit when TSLA had a bad day. Right now the spread value is just shy of 1.7, so I’m doing well with so far. I’ll let you know next week how it ends up. Don’t know how far I will go with it – I’ve got a limit order in place to close it out for 2.05- but I’ll keep an eye on things and my tweak that along the way. Unlike DocT I don’t consider it a “loss” if I leave a some potential profit on the table – I’d rather see the trade close prematurely when it’s a sure gain than risk a bad market day at expiration. </p>
<p>calmom: There is a huge difference between taking a profit in tsla and spy. Your method may work for tsla but not necessarily for spy. My goal is to at least meet or beat the s&p market return. If that isn’t everybody’s goal, you should question why you’re trading unless it is just to gamble or have fun. I’m sure you’ve heard the saying in regards to time in the market. As you’re aware, there are many times when not being in the market for a few days has a large impact on your return relative to a market benchmark. That 1.36 gain that I didn’t get is a real loss relative to the market. I now have to do something most likely more risky to make up that difference. When I get out of spy using options and since I don’t claim to know what direction the market is going in, I need to get back in as fast as possible which in this case mean’t selling yesterday and getting back in today because of ex div. Your methodology for trading makes big assumptions in regards to what you think the market including tsla is going to do. Most traders who try to time individual stock and / or the market lose relative to the market over time. Fortunately in this particular case and due to dumb luck (I want to emphasize dumb luck), I was overweight the spy because I bought these calls when spy had dropped so now I’m again market weighted in that account.</p>
<p>Calmom, thanks. I am not going to do the trade again in spy. At least not the way I did it. The percentage of options exercised was too high. Good luck with tesla.</p>
<p>I’m trying to do nothing today. Zen.</p>
<p>Lol…</p>
<p>I like that. Really.
I am going on a long hike. Going to have a great meal. </p>
<p>Doct, so for example, if you want to catch a move in the spy that represents 500 shares in spy, you are putting on these call spreads 10 times instead for close to one tenth the cost? Then you are buying 1 put spread and selling another to give yourself small protection for small moves on the downside or to make a few bucks?</p>
<p>Spy had a huge rally since aug 12. So maybe my above numbers are wrong. (I am using 500 shares because you said you were overweight the market. The 500 shares is just a guess). Doesn’t matter…is the above concept correct?</p>
<p>Next time…not that there will be a next time… If you can’t watch the market… Consider rolling up. For example…the 195 calls were trading for around .20 over premium. You could sell the 182-195 call spread for 12.80 on Monday. </p>
<p>Now you can’t lose. Turns out you could sell the 195-200 call spread on Thursday…for 4.95… Easy. Maybe a higher price. </p>
<p>You gave up .25. Total. </p>
<p>Or… You roll the 182 calls to the 195 calls and buy in the 200 calls. Now you have the upside, you participate in the rally and you probably can’t lose. (I cant remember where the 200 calls were trading for on Monday).</p>
<p>And nobody cares about baba?</p>
<p>Doct, I wrote the above examples because it looks like you never want to miss the up moves.</p>
<p>A very screwed up day for me in the market especially since I was in court. In one account, I had 100 1/17 spy 168 - 173 contracts and 10 1/17 143 - 200 contracts. I was assigned 9500 shares of spy at 173 for which the broker sold 85 168 calls and 10 143 calls so now I have 15 168 calls, -10 200 and -5 173. When I called them tonight they weren’t certain why they went to the 143’s so they have to ask who did this and he’ll get back to me on Monday. In another account, I had 10 1/17 qqq 74.63 - 79.63 call spreads, I was assigned 700 79.63, sold 7 74.63 calls and am left with 3 contracts.</p>
<p>Looking at the accounts, the long calls in all cases were not sold but exercised.</p>
<p>@DocT – as I have explained above, my goal is to learn about option trading by doing live, limited risk trades for practice, because I do need to have real money on the line for the lessons to stick. I have used a spreadsheet to create a $2000 budget for myself for trading spreads, within a Roth IRA account. I put on trades one at a time and track them in the spreadsheet. Before I entered the TSLA trade, I was down -$140. Because it cost about $400 to open the TSLA trade, that left me down about $540. TSLA was up, but then it went down again – so without considering time value on the open long call, I’ve got about $80 I could recover – but I’ve got a week to go to expiration, and I think that the market might have been weird today because of the BABA trading. But anyway, I can potentially lose $400. </p>
<p>My goal is to keep that $2000 budget in play for as long as possible. If it goes down to -0- - I quit. I mean in terms of trading options – obviously I have other investments and even if I exhaust the $2000 in my option spread “account” that doesn’t mean my portfolio is necessary down that amount. </p>
<p>So basically I am committing up to $2000 for my education. Given what I paid out of pocket for my daughter’s education, this is a rather trivial amount, even for a median-income earner like myself. </p>
<p>I appreciate what you have written, but I have difficulty relating to the what you said, when you wrote:
</p>
<p>Every day my smart phone gives me a little chart that shows how my portfolio doing relative to the market (DJIA & S&P 50). Last week the lines on my graph were way, way, above the market – this week, my line is up, but not as much as the market as a whole. As a general pattern, I “outperform” the market when the market is going down, and underperform when it is going up – that is probably because overall I am in less risky and less volatile investments. (The chart doesn’t show dividends, however - important given that some of my relatively stable investments are also good dividend payers).</p>
<p>Yes, I would like to outperform the market, but I don’t see how I could do it if I thought I had to get the maximum possible return from every single investment, on every single day. I am hoping that on average that I can do better. If I sell a position at a gain, I have guaranteed profit, even if that stock or position later goes even higher. If I hang onto a position because I am hoping that it will go up even more, it is very possible that I will turn the gain into a loss. I can’t predict the future, so every single investment or trade I make is based on the hope that I am guessing right, whether it is guessing that TSLA will bounce back up or guessing that AAPL is worth hanging onto or whatever. </p>
<p>My goal is not merely to “outperform” the market because the market doesn’t always do well. I mean, if you are “out” a few days and those happened to be days that the market goes up – then I supposed you can worry about the money you’ve lost. But what about the days are “out” and the market goes down? </p>
<p>My goal isn’t “outperform” precisely because when the market goes down, I prefer not to be going along for the ride. My goal is to come out ahead. That means if there is a market correction and the market goes down by 10%, I will not see it as good if my losses are only 8%. That’s “outperforming” but it is not my goal. </p>
<p>@dstark – I was definitely following BABA today, but for obvious reasons, I’m not invested in BABA. I think that I am something of a victim of BABA fallout – it seems that a lot of other stocks went down today for no particularly good reason, except maybe that people were pulling out of other stocks to invest their dollars in BABA. So we’ll see. </p>
<p>If TSLA doesn’t rally on Monday, I’ll probably close the position. </p>
<p>If your goal is not to necessarily outperform the market over time, why are you wasting your time doing what you’re doing. You might as well just buy spy and enjoy your time doing something else.</p>
<p>As far as the Jan 173 options being exercised…it is a little weird…but…</p>
<p>The dividend was .93. There is going to be another dividend. Should be at least another .93. The interest costs to hold the stock for 3 months are less than .93. Even if you buy the jan 173 put for 1,10, you come out ahead by exercising the jan 173 calls.</p>
<p>The margin for some firms is very low if they are long stock and long 173 puts. </p>
<p>The owner could have also just sold the stock today.</p>
<p>Doct, Whoever exercised those calls cost you 9500 times 93 cents. That is a lot of money.</p>
<p>I think the open interest in the 168 calls is just 100 coming in to today. I think it is all you, doct.</p>
<p>Whoever exercised the 143 calls instead of the 168 calls did you a favor. That is 25,000 less you have to have in a cash account. Plus…they gave you the equivalent of the 168-143 put spread for free. You kind of sold the 168-143 call spread for $25.</p>
<p>I wouldn’t argue too much about this.</p>
<p>Calmom, ok…I see tsla took a little hit today. I have no clue about baba. A guy I know got 5500 shares of baba on the ipo. According to razorsharp, that makes the guy smart. I don’t quite see it that way. :)</p>
<p>Monday is a new day…</p>
<p>I have to admit I was taken by surprise for both the spy and qqq 1/17 calls being assigned.</p>
<p>We learn all the time. If the cost of carrying the stock plus the put price is less than the dividends…those calls with the same strike price as the puts are in danger of being exercised. That includes farther out months.</p>
<p>I am shocked I was assigned on all my short calls. I could swear tens of thousand of calls were not exercised the last time I looked at the spy dividend play.
Getting old…</p>
<p>What is the process for determining whose calls get assigned</p>
<p>@DoctT (post #9752) Did you even read what I wrote? </p>
<p>Let me say it again: my GOAL is to LEARN by DOING. </p>
<p>I have set aside $2000 as my EDUCATION FUND. The longer I keep the $2000 in play, the more I am LEARNING.</p>
<p>If I only have winning trades, I will never LEARN. People learn from MISTAKES. If I never make mistakes, I will might mistakenly believe that my earnings are due to talent rather than blind luck. </p>
<p>I guess you were already an expert trader the first time you ever opened an option contract and so you could always make sure that you would come out ahead of the market on every single trade you have ever done… but I’m just here to learn. Maybe it’s a dumb way to learn… but that’s my personal goal. </p>
<p>I already traded stock and I knew my behavior with losses. Therefore I learned by trading options in a virtual trading account which I believe was on the Cboe website. We all learn by doing and all of us have more to learn.</p>
<p>Doct, I don’t know what the process is…but.the open interest in the Jan 173 calls is 43.</p>
<p>Because almost all the calls in the strikes I was short were assigned, I did not call and find out. If the open interest was 10,000 today and I was assigned on everything, I would have called.</p>