Options: Low Cost Investing

[New-born baby]

Bid=sell

Greetings NBB,

I feel I have done something wrong as far as seeling the call.I left clicked ''bid'',entered 2 contracts to cover 200 shrs.Transmitted order,yet I see no credit on acct page.Only shows options security value,which is changing with the cost of the call.

I should have researched this better,since i fear Ive bought the call.Any help would be appreciated.

cordially Tom

When you click on "BID" you are SELLING the calls.
When you click on "ASK" you are BUYING the calls.
On the account page, you should see something like this:
EOG 200 [shares]
EOG JUN $75 calls

The other day, when you bought EOG, you clicked on bid to sell the calls, correct? If your account page shows the cost of the calls changing with the change of the security, you sold those calls. Everything is cool

[TFred]

Greetings,

I likely got too aggressive and bought 200 more shares at 73.70,and sold May $75 for 1.60.

My thinking was $320 + $260 = $580 in 9 days if call away.Around 3.5 % ,but then I looked at acct page,and I got #s all over.I was expecting to see a credit to acct.

I'll wait and see how it plays out,it just confuses me when it appears that I'm buying the call.Thanks again NB.

cordially Tom

[New-born baby]

Greetings,

I likely got too aggressive and bought 200 more shares at 73.70,and sold May $75 for 1.60.

My thinking was $320 + $260 = $580 in 9 days if call away.Around 3.5 % ,but then I looked at acct page,and I got #s all over.I was expecting to see a credit to acct.

I'll wait and see how it plays out,it just confuses me when it appears that I'm buying the call.Thanks again NB.

cordially Tom

EOG is a good stock. You'll be okay. You are making money. ROB, where's that green flashing light?

[TFred]

Greetings NBB,

I found out my problem,my hotkeys are backwards.I actually bought the $75 calls,as left click on bid is indicating ''buy''.

Its listed just the opposite in option trader,just like you described,left click bid to ''sell''.

The help desk suggested selling double the options tomorrow to get to my covered call position,since I am now long.

I should have used option trader to begin with,since it appeared to be confgured the way you described.I dont remember why I set up the hot keys that way,I think it was for exiting futures in a hurry.I cant remember.

I thought I was going crazy,as the more I looked,every position or profile showed that Ive been buying calls.Oh well,live and learn.

cordially Tom

[New-born baby]

I don't use hotkeys

Greetings NBB,

I found out my problem,my hotkeys are backwards.I actually bought the $75 calls,as left click on bid is indicating ''buy''.

Its listed just the opposite in option trader,just like you described,left click bid to ''sell''.

The help desk suggested selling double the options tomorrow to get to my covered call position,since I am now long.

I should have used option trader to begin with,since it appeared to be confgured the way you described.I dont remember why I set up the hot keys that way,I think it was for exiting futures in a hurry.I cant remember.

I thought I was going crazy,as the more I looked,every position or profile showed that Ive been buying calls.Oh well,live and learn.

cordially Tom

Tom,
You MADE money on those JUN $75 calls! You're accident profitted you
How those MAY $75 calls come out--that's debateable just yet . . . .
Personally I don't use hotkeys.

But congrats on the good trades you made on EOG.

[TFred]

Greetings NBB,

How do you feel about FTO and its option chain.Spike is stalking as it has broken an ascending triangle.

Buy today at $65,and sell May $65 calls for $2,expire in 9 days,maybe get a higher premium if it moves up?

cordially Tom

[New-born baby]

Greetings NBB,

How do you feel about FTO and its option chain.Spike is stalking as it has broken an ascending triangle.

Buy today at $65,and sell May $65 calls for $2,expire in 9 days,maybe get a higher premium if it moves up?

cordially Tom

That play you mentioned would be fine, imho. FTO is running to a split on 6/27/06. It has had a hard run, so you have to expect a consolidation pullback sometime or another. Yesterday it was up nearly two dollars, so I think today's action is nothing more than normal price action.

[TFred]

Greetings NBB,

I have covered calls on EOG and FTO,both appear they will be called away,if so I'll wind up with about 4.5% profit in 2 weeks time.I sold the closest to the money calls,and bought both below the strike price.

My question is,how much over the strike price does a call usually get exersized?Bought FTO under $64 and sold Mays $65 for $2.What are my chances of keeping this,as Id like to sell some June calls withthe same shares after expiry.

Theoretically,correct covered call strategy could over time pay for you shares.I'd be happy with 4+5 a month,no matter how its done.

Your call on ENT was righton,dropping hard again,last upswing was a bulltrap I think.Looks like under 12 soon.

cordially Tom

[New-born baby]

Fred

Greetings NBB,

I have covered calls on EOG and FTO,both appear they will be called away,if so I'll wind up with about 4.5% profit in 2 weeks time.I sold the closest to the money calls,and bought both below the strike price.

My question is,how much over the strike price does a call usually get exersized?Bought FTO under $64 and sold Mays $65 for $2.What are my chances of keeping this,as Id like to sell some June calls withthe same shares after expiry.

Theoretically,correct covered call strategy could over time pay for you shares.I'd be happy with 4+5 a month,no matter how its done.

Your call on ENT was righton,dropping hard again,last upswing was a bulltrap I think.Looks like under 12 soon.

cordially Tom

IF FTO is over $65 at the close on May 19, they will take your shares. I owned FDG and they took my $35 calls away at $35.03. I owned GM ($20 strike) and they did not take my shares at $20.05. FTO is going to split, so they will take your shares.

As for selling JUN calls, you'd best wait until expiry or else be prepared to buy the shares. Going naked this close to the strike is a pure gamble if the chart isn't exceedingly bearish. And you may want to sell the JUN $70 strike--this dog is going to split 27 JUN 2006. Or at least you might want to take that fact into your strategy. It may run up to $80, I don't know.

ENT--delete it from your streamer and pretend the stock doesn't exist. Oil is $75 a barrel and they can't make money. I have no regard for that type of "management."

[spikefader]

ENT--delete it from your streamer and pretend the stock doesn't exist. Oil is $75 a barrel and they can't make money. I have no regard for that type of "management."

ENT is a good short. I think it'll test 8.00 soon. It's on my stalk sheet.

[TFred]

Greetings NBB,

I have covered calls on EOG and FTO,both appear they will be called away,if so I'll wind up with about 4.5% profit in 2 weeks time.I sold the closest to the money calls,and bought both below the strike price.

My question is,how much over the strike price does a call usually get exersized?Bought FTO under $64 and sold Mays $65 for $2.What are my chances of keeping this,as Id like to sell some June calls withthe same shares after expiry.

Theoretically,correct covered call strategy could over time pay for you shares.I'd be happy with 4+5 a month,no matter how its done.

Your call on ENT was righton,dropping hard again,last upswing was a bulltrap I think.Looks like under 12 soon.

cordially Tom

Greetings NBB,

What a difference 2 days can make.From being up and fearing being called away,to being down almost 10% without the cover.

With your expertise in options,to preserve capital,do you usually close your existing cover,at a lower price,and then sell more in the money calls to prevent more losses?

I closed everything today,since I dont know the strategy in a free fall.Without covering I would have been down much more.

cordially Tom

[New-born baby]

Cover yourself

Greetings NBB,

What a difference 2 days can make.From being up and fearing being called away,to being down almost 10% without the cover.

With your expertise in options,to preserve capital,do you usually close your existing cover,at a lower price,and then sell more in the money calls to prevent more losses?

I closed everything today,since I dont know the strategy in a free fall.Without covering I would have been down much more.

cordially Tom

Tom,
Remember, our plan is to make 5% per month, but if things turn against us, to sell calls to cover ourselves and yet ensure that we still make money at about the 2.5% level. So what should you have done?

Lots of ways to protect yourself. When you are up that much, easy to sell a lower strike. Or else sell the stock before you take a loss on it. Then cover the call at a profit. Or sell a JAN 07 $70 call for $9.70.

If I recall, you bought EOG at $71.62, and sold calls for JUN $75 at $2.60. When your stock hit $75 and then began to retrace powerfully, you could have sold the $70 calls and made money as the stock dropped. As the stock begins to move near $70 you sell the $65 strike and cover the $70 at a profit. You hold the $75 strike until the stock proves to you that $75 will be back in style again. I did note that the $65 call fell as much as the stock today (as per usual since the delta determines the price).

Watch yourself of PEIX Monday. PEIX's formation today looks pretty bearish for the next two or three days. This one may return to $35. Fortunately PEIX has a good option chain.

[TFred]

Greetings NBB,

Im closed on all positions,I jumped in too fast,selling calls on everything.A good learning experience.My main concern was selling more options on the same shares of stock.A strong move up could catch me buying more at a higher price?

cordially Tom

[spikefader]

VIX; Let's throw the subject around dudes!

Something that is very relevant today is VIX, and below you'll see that interesting VIX discussion that dmk and I had just 5 weeks ago after Jim made his VIX option play.

dmk made the very valid observation that resistances were there for VIX and the market was bullish. And he was spot on, because you'll recall that after his quotes the market rallied impulsively after the Dow bounced off that C test and rallied for 600 points. He nailed the bias, and has been for a while correct about VIX direction. But I revisit the discussion now as VIX is doing the breakout thing and spiking up to the high of 17.09 today as the market corrects savagely to the same levels we were at when we started this VIX conversation 5 weeks ago.

And the question remains.......where is VIX headed short and long term? Jim, where are those call options now? In the money yet? I would hope so. For you were spot on looking for 18.00 VIX by June.

Please read on, cuz at the bottom of this post I make a rare and bolt prediction about the future of the markets.

I am speculating with VIX May 12.50 calls expecting the VIX to spike to 18+ near term.

I like your strategy. The potential sure is there for VIX to do that.

18?? LOL the market would have to crash

Historically VIX has been at levels of 18 during corrections that wouldn't be considered 'crashes'. VIX is a quirky thing for sure, but I think it's entirely possible that a quick correction in the market would send VIX over 18.00. Right now there is potential for it...doesn't mean it will happen, but it's still possible.

http://img104.imageshack.us/img104/1429/vixhistoryrecently6et.gif

That's my mindset when I play the lottery NOT the market.

lol fair enough dmk. BUT, have a look at that chart again, and tell me it's not just a matter of time before we get a pop in volatility that sends VIX to 18.00 and over. All we need in the market is a decent bearish correction and we're there. That chart is only a few years old too....if you have a look at the 10-year chart for VIX you'll see that VIX prices were over 18.00 just about every day from mid-97 to mid-03. It was normal to have VIX up there.

And what has changed since mid-03??......VIX has "made a habit" of remaining below 18.00. Does it signal severe market complacency? Admittedly it's been a bull market for a few years, but I think the reason for low VIX goes deeper than that. And come the day that the markets feel real blood in the streets, the complacency reflected in that VIX chart is going to reveal itself with a massive spike in volatility that may well exceed levels of 42.00. 18.00 is kiddy stuff, and it's certainly not lottery ticket chances of getting there. It's just a matter of when and not if...

Spike, I was just beating up on you ..hehe. Jim said 'near term' and I don't think it will go there near term. I"m still bullish on this market and this pullback is a good buying opportunity IMO. Actually the VIX is right at the trend line resistance, doesn't mean it won't break but until it does, it going dooowwwnnn! heh... It is what it is dude, yes you're right it will go to 18 one day, I'm not disputing that.

OK, you made it this far in the post, and perhaps formed an opinion on VIX and what it means for us. If you have any conclusions you'd like to share, have at it.

For me, having studied the long-term VIX chart in depth tonight, I make this bold prediction:

If VIX makes a weekly close over 18.00 the market will find a significant low within 10 trading days and rally extremely bullishly from that point in time.

Meltdown in the market coming? I don't think so. This is just some healthy correction that sets up for a wonderful buying opportunity. And I say that as I am +550 points short the Dow futures looking to take profits soon

Make 'em pretty dudes! Trade what you see, not what you feel.

[New-born baby]

Bounce

This thing will bounce soon. We are walking in extreme fear territory.