QSII ==> The Merry Christmas Winner

[New-born baby]

Jimmy Eugene Cramer

What will happen if QSII beats earnings by 50%?

MM,
Part of your problem is that Jimmy Eugene Cramer (Mr. Know-it-all) hammered this stock tonight on his program during his "lightning round."

[spikefader]

correction sorry, those QCRMNs traded at 0.85 today, so that's +112.5% lol

[mrmarket]

Well that will be a horse of another color. You know our disciplines are different. I was just looking at the daily and weekly charts and giving an opinion of where I thought it was going over the short term. I know there are alot of people in it because of your lead an I do want to see it do good regardless of what I see in the chart because of that. I could be way off base on my interpretation which is just my opinion and not meant in any non positive way. BTW when does it report earnings? If it does beat consensus by 50% then all of us who looked at it negatively will have our fingers up our asses when it takes off.

Earnings early next month...I was hoping I'd be out of it before then but that does not look likely now.

[skiracer]

Those +QCRMN Jan 70 puts that were asking 0.40 traded +88% today

Spike,
I never looked at them early this morning only after closing an haven't really been following the stock. Just saw a post on it late today and took a look. Kind of late now don't you think. Would you buy them now? I don't think I would have bought the Jan 70 puts today anyway. Pretty close to expiration.
Just saw that you had a post on those puts back on 12/29 when they were .30x.40. That would have been a nice play but did anyone take it?

[spikefader]

The numbers have changed somewhat now, and the ideal time would be to have bought them the other day, and you'd still likely be holding them if you were still long the stock. If the stock drops to 60 those will really pay, but the idea is to hedge the stock position that is in doubt, and since those Feb calls are so expensive and the fact that there aren't cheaper ones kind of makes the equation trickier.

I'd probably look at the Febuary calls now I think, but this morning's strength has these Jan ones trading at 0.55, which is getting cheap again, but you know the risk with buying close to expiry out of the money options, they erode very fast. All I know is if I were long the stock, I'd be hedging it. Perhaps the better play now is closer or deep in the money options where there is more volume and more ability to sell them closer to expiry. But that involves more capital than the 1st play.

[skiracer]

My thoughts exactly. To expensive farther out and to close to expiration in close.

[spikefader]

Ideally you want protection rather than thinking of it as a regular entry for a profit play. That reason will make a worried stock holder pay that 'insurance'. Sure, it's only 13 trading days left until expiry. But this stock, just like other MM picks, and ANY stock as you well know has the ability to just fall out of the ugly tree. That's what you're paying that premium for; insurance if it does, which the chart whispers. If the chart were stronger you'd hold it more confidently. And if a holder is well diversified it shouldn't matter if it does fall out of the ugly tree. But for those who may not have the luxury of diversification, who may be overallocating in the hope MM is going to be right again cuz he's so huge then this kind of put insurance is a good thing to have, despite it's seemingly high price. But what's $50 (last trade price) for every 5K invested? 1% of your capital to protect it from disaster. Those puts will look cheap if the stock falls 10% in 5 days, so it's all a matter of perspective, and completely dependent on the amount of risk you want to assign to MM's pick. But for a profit-making play, this isn't the one to be looking at. It makes no sense to try and profit from these puts.

[Adam]

MM, Thats very understandable to be using the puts as protection. However, for the faint of heart it hurts to see your puts up 150% like yesterday. With a $15,000 position I hold 4 $.40 Jan $70 put options. During the downturn the 150% increase in the put value was well below the 5-6% QSII was down. My question is, if I understood your explanation the put value should grow exponentialy and cover the loss of the stock holding, what happens as we near the option expiration, if the stock value is still above 70 but your holding is still at a loss, the options should be worthless, is there an exit point we should look for in this case?

Always lookin to learn! Thank You $$MM$$

[spikefader]

I think you've got a case of mistaken identity Adam lol MrMarket (MM) would probably get a chuckle too.

But to your question! Yes, exponentially is probably a good word. I think you'll find that the closer those puts get to being in the money (i.e. the stock value gets to 70.00) the value will increase more. But I admit I took a guestimate of what they will be worth and HOW many one would need for each 5k position......and you never really know how much they'll be worth cuz it all depends on demand and the volume of them being traded. Options are a very gray area and it takes a genius to know all there is to know. I don't and don't pretend to. But I know enough to make a few dollars on them, and to know when I'm SUPPOSED to be using them. I think you are wise for buying some as insurance no matter what happens; up/down/sideways. I see the risk there and I'm sure others do too.

As to value and when to sell them, honestly that's a tuffy, when there's true fear and people are scrambling to buy puts to hedge THAT's when their value will rocket. Ideally, you want to buy them cheap when no-one wants them and sell when everybody want's them and bid the price up.....it's the people who haven't been tracking the put movement and the stock too well will be the ones just buying at any price, they just want in!

But because QSII options appear relatively thin you want to try and get rid of them with a week to go if the stock doesn't get closer to 70, and consider getting Feb puts if the stock chart is still weak and justifies it.

But so much can happen between now and expiry. MM stocks have been known to drop fast and you'll find that if that happens, having what might appear to be cheap and dwindling to worthless the closer it gets to expiry, a suddenly tanking stock price will rocket those put prices back into value.

And one last thing; if you really want to have the puts equal the drop in the price, then you have to track those puts for a while to get an idea of how they trade. Options specialists can really be manipulative and the market can be fickle, and it's only by watching for a long time that you'll really know. That, plus perhaps talking to an options expert You may need more puts than I suggest.

If there's anyone that can add to this discussion please do! If we're gonna speculate on speculation we may as well make it accurate haha

[skiracer]

MM, Thats very understandable to be using the puts as protection. However, for the faint of heart it hurts to see your puts up 150% like yesterday. With a $15,000 position I hold 4 $.40 Jan $70 put options. During the downturn the 150% increase in the put value was well below the 5-6% QSII was down. My question is, if I understood your explanation the put value should grow exponentialy and cover the loss of the stock holding, what happens as we near the option expiration, if the stock value is still above 70 but your holding is still at a loss, the options should be worthless, is there an exit point we should look for in this case?

Always lookin to learn! Thank You $$MM$$

I just looked at the Jan. 70 (QCRMN) puts. They were bid .60 asked .85 and last trade was .80 or +.23 today. I'm not sure when they expire this month but at what they are trading at right now (last trade .80) you're +$160 on the puts and - $900 (6% of $15000) on the position. $900 - $160 = $740 which brings your loss % down to around 4.9 % from the original 6%. This was 15 minutes ago now the puts are down to .60 bid and .75 asked with the last trade at .70. The stock was -.14 15 min. ago now is down -.20 and the puts decreased in price also. These options can be strange. Your still up in the puts position and the stock is still moving down. You should probably hold for the time being. This is one reason I don't like to buy the options to close to expiration. Makes it harder to exit quickly with your gains. Remember this experience and how it went as it will help you next time.

[Adam]

Thanks Spike(sorry 4 the miss Identity, I hope it's a compliment to you)
Thanks for the #'s Ski.
If I understood you right I may be a little light on the put position? I'm pretty new at this computer chat and trading. My broker was making more from my money than I was had to give that up. I'm not new to the market but I have been trying to study and work with options. This position is my first put. I belive Expiration is two weeks from friday so I'll have to watch next week for a good sell position for the Jan puts as well as an opening for a good Feb put position. I have been working and watching several option positions as well as the ones I own. The price fluctuation over the holiday weekend made many positions very appealing. Hesitent to jump in and also limited available capitol kept me from capitolizing on the positions I was watching. I watched two separate options down 30-40% on fri only to return all strength by today. Should I be upset? I know and expect the volitility. Both positions I own and was comfortable knowing their strength and the options are far enough out not to cause immediate worry. Many say not to average down. In hindsite the answer is obvious. If you can put yourselves in that position, whats the call knowing we were dealing over the New Years weekend and I expected to see the light down trading.

Question: Open intrest on an option. Is that defined as how many are involved in the bidding at the time or the number of positions held. Is more open inrest = more liquidity of the option? Or am I just completely OFF?

Any comments are greatly appreciated!

[spikefader]

Thanks Spike(sorry 4 the miss Identity, I hope it's a compliment to you)
Thanks for the #'s Ski.
If I understood you right I may be a little light on the put position? I'm pretty new at this computer chat and trading. My broker was making more from my money than I was had to give that up. I'm not new to the market but I have been trying to study and work with options. This position is my first put. I belive Expiration is two weeks from friday so I'll have to watch next week for a good sell position for the Jan puts as well as an opening for a good Feb put position. I have been working and watching several option positions as well as the ones I own. The price fluctuation over the holiday weekend made many positions very appealing. Hesitent to jump in and also limited available capitol kept me from capitolizing on the positions I was watching. I watched two separate options down 30-40% on fri only to return all strength by today. Should I be upset? I know and expect the volitility. Both positions I own and was comfortable knowing their strength and the options are far enough out not to cause immediate worry. Many say not to average down. In hindsite the answer is obvious. If you can put yourselves in that position, whats the call knowing we were dealing over the New Years weekend and I expected to see the light down trading.

Question: Open intrest on an option. Is that defined as how many are involved in the bidding at the time or the number of positions held. Is more open inrest = more liquidity of the option? Or am I just completely OFF?

Any comments are greatly appreciated!

heh, no prob, yep a compliment indeed. I wish I had those 19" biceps lol

I think averaging into an option position often makes sense, especially where the downside risk is so small; i.e. my GOOG calls. The position started off poorly but that was cool because the downside was completely limited, as were the adds at lower prices to bring my total average down. Sure, the $s risked increased, but it was still within limits I'd set. Now it's done impressive things and it's making money. Options can be good to average into weakness for the right stock! GOOG is one of them.

Just did some research on Protective Puts cuz I don't want to steer you wrong. Online guides I've read from cbot recommend buying 1 "in the money put" for every 100 shares owned. It gets complicated when you start buying out of the money options that have the benefit of being cheaper and require more of a move to get in the money. The fact that they are so cheap is the incentive, but you've got to be prepared to accept the risk of your premium eroding fast the closer to expiration (3rd Friday of the month). So with out of the money puts, it's pretty obvious that 1 put per 100 shares isn't enough.....and double that recommendation hasn't YET been enough to offset the price drop cuz they are out of the money still.

So now do you buy more puts to hedge, and if so which month, and which strike, or do you go for more fancy plays like trying to get out even with a 'repair strategy' as described by the second link. But that second one is getting pretty intricate and involves selling calls in a margin account.

http://www.cboe.com/Strategies/EquityOptions/ProtectivePuts/Part1.aspx

http://www.cboe.com/Strategies/EquityOptions/StockRepairs/Part1.aspx

Read those, and do some more options reasearch. There are plenty of free resources if you google long enough. It might be helpful to post a question in an option forum where people love talking about this stuff and have much more experience and knowledge than I.

Anyone on this board want to throw into this discussion, please do. It's an interesting one and I'm sure there are other thoughts out there about it. This stuff can only help MM followers who don't necessarily diversify like MM does.

If it were me in your shoes now Adam I'd seriously consider your risk/reward and your plan and make sure you're within limits and tolerability. 4% loss (if ski's calculations are right) is still an acceptable loss in the world of professional traders and accountability. Work out what your tolerance is, and draw the line in the sand to exit, or the time when you execute your option repair strategy or whatever. Risk management and selling a losing position and taking the hit is very hard to do, everyone feels the same. Plenty of MM picks recover nicely from falls, and this one probably/might/should/could will too. But bottom line is we hedge for a reason and many use stop loss orders for a reason; protection of undiversified capital. MM is diversified with his picks and has resolve as to his total port risk. Make sure YOU are too. Make your plan, execute YOUR plan, and be happy with yourself no matter if the stock makes you look/feel foolish or like a genius.

Me? I'd probably sit tight on those 4 puts until a week to go and until that chart gets better, i.e. a channel long day with nice intraday bullish reversal pattern or something like that. If that happens, sell those puts for what you can get and if that nice new support/buy play fails then consider a fresh hedge again with Feb 70s. If the pattern holds, then invest any put profits on a drop back into the stock to lower your average.

May MM's QSII pick rocket for yall. I hate seeing them drop. Makes me feel ill

Oh, and your open interest question: Open interest is the total number of option contracts that are currently open, have been traded but not yet liquidated by either an offsetting trade or an exercise or assignment.

[mimo_100]

Thanks Spike(sorry 4 the miss Identity, I hope it's a compliment to you)
Thanks for the #'s Ski.
If I understood you right I may be a little light on the put position? I'm pretty new at this computer chat and trading. My broker was making more from my money than I was had to give that up. I'm not new to the market but I have been trying to study and work with options. This position is my first put. I belive Expiration is two weeks from friday so I'll have to watch next week for a good sell position for the Jan puts as well as an opening for a good Feb put position. I have been working and watching several option positions as well as the ones I own. The price fluctuation over the holiday weekend made many positions very appealing. Hesitent to jump in and also limited available capitol kept me from capitolizing on the positions I was watching. I watched two separate options down 30-40% on fri only to return all strength by today. Should I be upset? I know and expect the volitility. Both positions I own and was comfortable knowing their strength and the options are far enough out not to cause immediate worry. Many say not to average down. In hindsite the answer is obvious. If you can put yourselves in that position, whats the call knowing we were dealing over the New Years weekend and I expected to see the light down trading.

Question: Open intrest on an option. Is that defined as how many are involved in the bidding at the time or the number of positions held. Is more open inrest = more liquidity of the option? Or am I just completely OFF?

Any comments are greatly appreciated!

Hello Adam,

Here is a link to a free options calculator using the Black-Scholes method. I have no experience as to its accuracy, so beware.

http://www.blobek.com/black-scholes.html

We probably need to move this discussion to an "Options" thread if anyone wants to continue.What do you think?

Tim

[New-born baby]

Hello Adam,

Here is a link to a free options calculator using the Black-Scholes method. I have no experience as to its accuracy, so beware.

http://www.blobek.com/black-scholes.html

We probably need to move this discussion to an "Options" thread if anyone wants to continue.What do you think?

Tim

Mimo,
Why don't you fire up the options thread? I'd enjoy it, and I am sure others would profit as well.

[sisterwin2]

Mimo,
Why don't you fire up the options thread? I'd enjoy it, and I am sure others would profit as well.

I would love to have a thread on options...... I would run it except I am very green on the subject..