Frx

[riverbabe]

NBB, the entry price was 48.98 including commissions (400 shares). river

[New-born baby]

Option Mania

NBB, the entry price was 48.98 including commissions (400 shares). river

Okay. You basically have $49 in a stock now valued at $47.30. It has incredible resistance at $49.87, so it doesn't look like $50 is in the cards this month. Since I am writing one hour before the market opens, prices may change from this post. But what you can do for cheap insurance is sell the $50 NOV call for $.25 per share, and buy the $45 NOV PUT for $.40. So for $.17, you can protect yourself for now. ($.15 plus $.01 for each transaction if you are using InterActive Brokers for your brokerage firm). THAT'S CHEAP insurance, imho.

If we had acted earlier, we could have sold the $45 call for $4.40, and guaranteed yourself a small profit with a lot of insurance, and you'd be out of the position by NOV 17 (my opinion: the quicker out of this one the better).

IF FRX starts to drift even lower (below $46 is trouble because it makes a head and shoulders target of $38 minus), you may be wise to buy two puts for every 100 shares so that you can make money on the fall in price. It may be wise to sell two calls for every 100 shares also. Once the direction of the stock becomes clear, get in a position, and when the stock hits support, you could get out of a position if it seems advisable. In addition you may want to consider selling calls at a closer strike. For instance you could sell the DEC $45 right now for $3.30. You'd only do that if you are convinced FRX is going to take a dump. Again, I don't like this one below $46.

With options there are 10,000 things you can do. If I figure I made a mistake, I won't let the position drift so far down that I can't sell an option to at least break even. This one has already drifted too far South for that now. Let's hope for an up day today

[riverbabe]

Baby, everything you have said makes total sense. Thank you! And I am working on it.

Also, what you have made me realize is that I need to learn much more about options. I went to several options lectures at the Money Show in Vegas and what I heard made me a little nervous because there are so many different strategies with "foreign names." I also have the free CD from Optionetics but haven't taken the time to play it yet (my BAD!). Thanksgiving resolution: Do it! The way you explain your strategy is straightword and it makes me realize that I CAN do this if I just do some studying! I really like the idea of being able to break even on a bad trade just by buying insurance. Now, it's just a matter of learning what insurance to buy and when. river

[New-born baby]

Baby, everything you have said makes total sense. Thank you! And I am working on it.

Also, what you have made me realize is that I need to learn much more about options. I went to several options lectures at the Money Show in Vegas and what I heard made me a little nervous because there are so many different strategies with "foreign names." I also have the free CD from Optionetics but haven't taken the time to play it yet (my BAD!). Thanksgiving resolution: Do it! The way you explain your strategy is straightword and it makes me realize that I CAN do this if I just do some studying! I really like the idea of being able to break even on a bad trade just by buying insurance. Now, it's just a matter of learning what insurance to buy and when. river

Excellent.

Nice to see FRX moving up a little this morning. I am watching it for you. I'd like to see a nice play for you for $$$ and safety. If I find one, I"ll let you know.

What is your broker? If you have Interactive Brokers, then you can buy or sell an option for $1. But if you trade two or more, the price drops down to $.50 per option. CHEAP. Some folk are paying $9.95 per trade plus the $.95 per contract.

[riverbabe]

NBB, I talked to my broker by email this morning. Basically, I think the difference between him and us is the definition of "short term trade." He is looking much further down the road. Also, he told me he has his own $ invested in FRX too and has faith in his "analysis."

I have asked him to give me an outline of his analysis and what his strategy would be if the shorts got hold of it and it sank fast.

He really got freaked out by talk of options strategies. At this point, I'm not sure I can convince him to do this in FRX, and my hands are tied because the shares are held in the brokerage account.

Anyway, he closed with..."Out goes my neck, I'd rather add than bail. Now I'll watch doubly closely .... ." That last sentence at least is good. river

[DSteckler]

Ask why he freaked out when you talked option strategies. Unless buying or selling options is contrary to your account's investment goals and objectives, or the risk tolerance level selected on your account application, he has to carry out your instructions.

[riverbabe]

Ask why he freaked out when you talked option strategies. Unless buying or selling options is contrary to your account's investment goals and objectives, or the risk tolerance level selected on your account application, he has to carry out your instructions.

Thanks, I need to look back at that paperwork!

[riverbabe]

The broker got back to me. His analysis is for a 2-4 month term and it makes some sense to me in this time frame. Also, he would rather use stops than options on this one. I'll stick with him and his plan for now. He has considered all the alternative scenarios, but is still overall bullish. river

[New-born baby]

He really got freaked out by talk of options strategies. At this point, I'm not sure I can convince him to do this in FRX, and my hands are tied because the shares are held in the brokerage account.

Anyway, he closed with..."Out goes my neck, I'd rather add than bail. Now I'll watch doubly closely .... ." That last sentence at least is good. river

River,
Let me say something about brokers. Most cannot read a chart. I have two family members who work for brokerage firms, and most within their firms cannot read a chart or execute option strategies. Frankly just a few bigwigs in the main office in [city deleted] call the plays and they encourage their clients to purchase suggested products. Is that how your broker works? Anyone who "freaks out" over a covered call, or a straddle is really ignorant of options. I will tell you why he freaked out: he doesn't know anything about options. And when a person adds to a losing position, that is very dangerous. Ask any experienced trader. Doubling down is dangerous.

Yes. I am a hard nose. But I do think you should realize that most brokers know much less than you know. And they get paid to give "advice."

[riverbabe]

NBB, without revealing the exact words of his email to me, the impression I have is exactly the same as yours re. options. He has sold calls for me in the past, but got freaked over "complicated" strategies. 'Nuff said. Per my previous post, I am going to learn these for my mad money account because I believe they are very valuable. Thanks for all your help and consideration. river

[DSteckler]

What brokerage firm does he work for?

[riverbabe]

What brokerage firm does he work for?

Actually, I don't want to divulge that in this public forum. Hope you understand. It really is one of the biggies. river

[DSteckler]

If it's ED Jones, that explains it. The firm is very much opposed to all option strategies except covered calls, and even then it's like pulling teeth to get them to do it.

[New-born baby]

If it's ED Jones, that explains it. The firm is very much opposed to all option strategies except covered calls, and even then it's like pulling teeth to get them to do it.

And I wonder why.

[Tatnic]

River,
Let me say something about brokers. Most cannot read a chart. I have two family members who work for brokerage firms, and most within their firms cannot read a chart or execute option strategies. Frankly just a few bigwigs in the main office in [city deleted] call the plays and they encourage their clients to purchase suggested products. Is that how your broker works? Anyone who "freaks out" over a covered call, or a straddle is really ignorant of options. I will tell you why he freaked out: he doesn't know anything about options. And when a person adds to a losing position, that is very dangerous. Ask any experienced trader. Doubling down is dangerous.

Yes. I am a hard nose. But I do think you should realize that most brokers know much less than you know. And they get paid to give "advice."

I don't think this is necessarily true. This guy is being conservative because he knows his client is inexperienced and may panic and do something rash. And even though writing calls can be a pretty conservative play, it can also be pretty stupid depending on which calls you write. So we really don't know enough to say whether or not he's doing right by her.

And as Dave said, Ed Jones as a rule does not even deal with options, in fact I thought they didn't period but I could be wrong on that. And just because they don't doesn't mean they're not doing right by their clients, I believe they have one of the highest ratings of client satisfaction as most of their clients are people who could care less about trading for themselves or working on their own cars, etc.