RIMM ==> The USVI Winner!

[New-born baby]

NB,
you don't get to say that here. close doesn't count and in my opinion. making any type of option play any more complex than a simple call or put by itself or to hedge against a stock position without being in front of the screen to adjust the play if it turns bad leaves you at risk for what happened to your put play. it is bad judgement to make any complex set of puts or calls without being there to protect your investment. this is a prime example of it and how it happens and takes an otherwise good setup and trade with gains away from you. plus calls, puts, or any type of option play are much harder to unwind especially if the market is moving in the opposite direction that you want it to move.
anyone who hasn't the proper experience and base knowledge about options and how they work is foolish listening to anyone regarding option trading in general. i've always felt that it is the responsiblilty of the more experienced individual, especially on these forums where anyone can say anything they want to, to be careful of the advice they post and when they do they should back it up with all the variables and possibilities of the play for the less experienced.
i hope this trade works out for you NB but i am definitely thinking there is a strong possibility that you are in deep do do with this one and that you had better stay right on top of it and maybe just take the loss and forget about it. this is a very volitaile market right now and i still feel that alot of stocks and the market in general is primed for traders to get a number of good stocks real cheap. from this point would it seem more reasonalbe for the INDU to go up 500 points or go down 500 points. i agree with Spike that the chances are better to the upside from here and if that be the case then the strong stocks, the leaders, will be getting more play to the long side and move up. good luck with it.

I don't think RIMM goes much higher in the next couple of days . . . remember my plan I posted a few days ago about RIMM retesting the $210 resistance/support. IMHO RIMM retests the $210 again very soon. But of course, I could be very wrong. Your comment about the DOW moving up 500 pts from here does seem to make sense to me. There are a lot of bargain hunters out there who will probably jump in. But that is only half the market. Not so sure about the institutions here. And there is such a thing as a sucker's rally. Whether or not this one will become one remains to be seen.

Thanks for the post, Ski.

[skiracer]

You do know, don't you, that if I had not spent the day in various hospitals, I would have covered both my put and call and pocketed the profits, don't you?

NB,
you don't get to say that here. close doesn't count and in my opinion. making any type of option play any more complex than a simple call or put by itself or to hedge against a stock position without being in front of the screen to adjust the play if it turns bad leaves you at risk for what happened to your put play. it is bad judgement to make any complex set of puts or calls without being there to protect your investment. this is a prime example of it and how it happens and takes an otherwise good setup and trade with gains away from you. plus calls, puts, or any type of option play are much harder to unwind especially if the market is moving in the opposite direction that you want it to move.
anyone who hasn't the proper experience and base knowledge about options and how they work is foolish listening to anyone regarding option trading in general. i've always felt that it is the responsiblilty of the more experienced individual, especially on these forums where anyone can say anything they want to, to be careful of the advice they post and when they do they should back it up with all the variables and possibilities of the play for the less experienced.
i hope this trade works out for you NB but i am definitely thinking there is a strong possibility that you are in deep do do with this one and that you had better stay right on top of it and maybe just take the loss and forget about it. this is a very volitaile market right now and i still feel that alot of stocks and the market in general is primed for traders to get a number of good stocks real cheap. from this point would it seem more reasonalbe for the INDU to go up 500 points or go down 500 points. i agree with Spike that the chances are better to the upside from here and if that be the case then the strong stocks, the leaders, will be getting more play to the long side and move up. good luck with it.

[spikefader]

Yeah, my old friend Spike always used to say, "Buy the channel touch. That's the smart entry." Haven't seen you using the channel tool too much lately, but it sure worked again on RIMM last Thursday.

You do know, don't you, that if I had not spent the day in various hospitals, I would have covered both my put and call and pocketed the profits, don't you?

I sure haven't been channeling much lately. Last night I was studying RIMM from just about every angle, and I'm yet to find anything that seriously challenges the bullish nature of it. Below are a few more charts worth a glance.

Would you have pocketed the profit? Lord knows what you would have done. I would have hoped you would have done that, given what I'd whispered about RIMM gap support, in addition to all the stuff I've been posting about an impulsive market bounce. But looking at your comments in this thread I'm not so sure you wouldn't have looked for more bearish profits......eg. "the target has now moved lower: to $159.13. Nasty!", "gap fill coming", "RIMM has turned very bearish on us", and "In normal times, I'd immediately agree with you. But it ain't normal. In normal times we'd get a bounce to $210 between here and Friday". Anyway, it's water under the bridge. Good luck on yer exit.

[New-born baby]

And there's likely gonna be more of it ....

Yeah, my old friend Spike always used to say, "Buy the channel touch. That's the smart entry." Haven't seen you using the channel tool too much lately, but it sure worked again on RIMM last Thursday.

You do know, don't you, that if I had not spent the day in various hospitals, I would have covered both my put and call and pocketed the profits, don't you?

[spikefader]

. . . lots of bears grumbling about RIMM...

And there's likely gonna be more of it ....

[spikefader]

...let's say MM's pick here rockets to $1000 per share....SELL the same strike for the same month......I have sold a $220 SEPT call on RIMM, so I would SELL a SEPT $1000 call. Then I would BUY back my SEPT $220 call. There would be a profit involved because options include a time premium.

NB, if RIMM gapped up on Monday to $1000 per share, what would that $220 call that you sold be worth? I'm imagining that it would be worth an insane amount relative to the small premium you received when you sold it.

And whether you sell another call at $1000 strike or not, you still take the hit on that 1st call you sold, plus the put you bought is worthless at that point. So the combined spread loss you're facing at that point is significant.

Your intended course of buying the RIMM stock on Monday and covering that call is obviously the correct and logical action. And if she opens about where she closed on Friday no problemo. But if it does gaps up large you've missed the profit on owning the stock, and are looking at significant short call losses, plus the lost put premium. You're naked.

Let's face it, the play you made the other day was a distinctly bearish one.....for you were looking to profit the premium from selling a call and then whatever premium growth the put experienced during your expected plunging RIMM price......and excellent, it worked for a couple of days and yes, had River followed you, she could have covered the call for a great profit......but the way you were talking you were expecting even lower prices.....not a word about covering. Precipitous drop I recall you saying. Profit now gone.........and whether distracted by personal misfortune or holding with green bearish hope it nay matters; you're still naked and now in the red rip.

So now you've got to buy the stock to limit your risk, start selling more calls, take the hit on the call you wrote, and hope it doesn't gap up and give a short squeeze. How is there profit in your play if that happens?

In reality, RIMM probably won't gap up large.....probably won't short squeeze, but who ever knows these things for sure? How can you start counting your chickens before they've hatched?? Yes, naked puts and calls are dangerous.

Good luck wit' your strategy; may th' force be with you!

[billyjoe]

Newborn,
I find the whole CAPS concept interesting , but have to do more research on it. When I went to the link with wcwhiner it wanted to compare my picks with his on a graph. How did they get my password? Must have signed up and forgot. I've never picked any stocks for CAPS.

-----------billyjoe

I see that Motley Fool CAPS people like NE and has announced a split. Didn't know that. Bought it for son's Roth a few weeks ago.

[New-born baby]

RIMM is a very interesting stock to speculate about. I just hope it isn't in the last stages of appreciation and meanders for the next 12 months.

----------billyjoe

Been reading over at Motley Fool . . . lots of bears grumbling about RIMM there . . .like this one:

http://www.fool.com/investing/general/2007/08/13/5-stocks-splitting-shares.aspx

And this guy, wcwhiner, he ranks 12 out of 34467 CAPS players at the Fool site, he dogged RIMM short at . . . $149. Eating a lot of dirt on this one. But he's a 71+% stock picker, long or short, but he dogs RIMM as overpriced.

http://caps.fool.com/ViewPlayer.aspx?t=01001607032191429882

[billyjoe]

RIMM is a very interesting stock to speculate about. I just hope it isn't in the last stages of appreciation and meanders for the next 12 months.

----------billyjoe

[New-born baby]

No doubt a sophisticated options trader with a healthy respect for support and resistance, and a good trading edge, might have handy means and ways to turn a spread loss back to a profit or b/e. Whether it's simple or difficult is open for debate, and depends on one's experience, knowledge, ability, and financial situation I guess.

The fact is, some options strategies do have a potential to get complicated, although granted the more conservative options strategies clearly define the risk and can't get out of control; worst case scenario is you experience the maximum risk and that's it.

Yes, there are many options with options, but some are simpler than others, and some riskier than others.

Newbies should have a healthy respect for them and crawl before they walk, and not assume too much, or too little, and take care when trying to replicate someone on a message board because trades often don't go according to original plan, and we all have different abilities and financial situations.

Yes, New-born's spread trade was nicely green.....but the tide turned and RIMM rallied from gap support along with the rest of the market and the nice little profit disappeared in a flash.

His reaction at this point is "no problem, it's easy, buy the stock and you'll profit". OK, buy the stock Monday.....perhaps whatever price he can get it pre-market, or perhaps he'll wait for a discount first. What does he do if it gaps up 20%, and what does he do if it gaps down 5%, and what does he do if it opens right where it closed? Does he decide now and enter orders into his trading platform now or will he be at the screen early Monday to make the decision? Variables that newbies might want to know about if they followed him.

I guess I have a problem when I see people painting rosy pictures about options, and how easy they are. The fact is, the unsophisticated and learning traders should be very cautious with options and take the time to research them, watch them, see how they work, papertrade them.....before opening an account and trading live. Good profit can turn into good loss if one isn't careful.

Yes, Newbies: options can eat you alive if you are uneducated about them. You do not need much education to sell a call, buy a call, or buy a put. But when you run around naked: naked calls and naked puts, that's where the danger is. Just remember that.

Okay Spike, let me explain. Monday: if RIMM gaps up even to $250, $300, $350, $1000, whatever, just buy the stock. Easy, right? For our purposes here, let's say MM's pick here rockets to $1000 per share. Then at the same time SELL the same strike for the same month as your current call, in this case, I have sold a $220 SEPT call on RIMM, so I would SELL a SEPT $1000 call. Then I would BUY back my SEPT $220 call. There would be a profit involved because options include a time premium. Sure, it'd be only $300 or $250 profit--not much percentage wise, but then again, it ain't a loss. And remember, the time premium goes away as the stock moves past the strike. In this case, the time premium on the $220 strike would be evaporated; the $1000 strike would still have time premium left in it.

If I paint too rosey a picture, my apologies. I am not trying to put one over on anybody. But I use options on stocks so I don't have to sell for a loss. Most often I simply sell a deep in the money call. I have always told readers to sell calls on stocks they own to initiate them into the action.

Hey, let's say River took my advice and sold a RIMM AUG $185 call on her stock; if she covered that call Friday morning, she'd have made $2200 right there--and still owned the stock. What's wrong with that?

My view is that stock prices move up and down, and sometimes the down can be a 25% hit. Why lose 7% on a stop loss, or more without a stop loss, when you can make adjustments with options without selling for a loss? That's my view.

RIMM's future: I am not convinced that RIMM is through to the downside just yet. Friday was impressive; and if RIMM goes higher, that is fine with me. But I wonder if the market is through "adjusting itself" lower just yet. I am holding onto my RIMM SEPT $200 PUT.

[spikefader]

Well the thing of it is, he is right, in that it's easy to walk away from a properly-planned options strategy with a profit nearly every time. But that one time you're surprised by the big unexpected move, you can get brutalized. Say you could easily make $400, and maybe $4000, 90% of the time, but there was a 10% chance you could lose $40000, would you take the risk? (The correct answer is "no.") That's sort of like this situation, where if the stock prices kept moving up at today's pace until the next trading day (Monday) RIMM could open at $260, and that $3/shr loss on the 220 call becomes a $50/shr loss (or more). Not saying it's likely, because stocks tend not to move 20% over a weekend, but who knows?

If you really know what you're doing, I think options can work. But for me, that kind of risk is just too scary. You need to be able to assess the risk that an unlikely event will occur, and put a value on that. Your long-term success will be determined by how much damage you take on those infrequent (maybe <1% of trades) killer losses, and whether your profits in between those events will be able to sufficiently offset it.

I prefer making several safe bets on high-probability events, with the cost of any one of them being wrong having a small impact, rather than betting against fewer low-probability events, where being wrong can be devastating. I think this keeps the pressure low, and allows me to consider my decisions more carefully (sometimes).

No doubt a sophisticated options trader with a healthy respect for support and resistance, and a good trading edge, might have handy means and ways to turn a spread loss back to a profit or b/e. Whether it's simple or difficult is open for debate, and depends on one's experience, knowledge, ability, and financial situation I guess.

The fact is, some options strategies do have a potential to get complicated, although granted the more conservative options strategies clearly define the risk and can't get out of control; worst case scenario is you experience the maximum risk and that's it.

Yes, there are many options with options, but some are simpler than others, and some riskier than others.

Newbies should have a healthy respect for them and crawl before they walk, and not assume too much, or too little, and take care when trying to replicate someone on a message board because trades often don't go according to original plan, and we all have different abilities and financial situations.

Yes, New-born's spread trade was nicely green.....but the tide turned and RIMM rallied from gap support along with the rest of the market and the nice little profit disappeared in a flash.

His reaction at this point is "no problem, it's easy, buy the stock and you'll profit". OK, buy the stock Monday.....perhaps whatever price he can get it pre-market, or perhaps he'll wait for a discount first. What does he do if it gaps up 20%, and what does he do if it gaps down 5%, and what does he do if it opens right where it closed? Does he decide now and enter orders into his trading platform now or will he be at the screen early Monday to make the decision? Variables that newbies might want to know about if they followed him.

I guess I have a problem when I see people painting rosy pictures about options, and how easy they are. The fact is, the unsophisticated and learning traders should be very cautious with options and take the time to research them, watch them, see how they work, papertrade them.....before opening an account and trading live. Good profit can turn into good loss if one isn't careful.

[jiesen]

Well the thing of it is, he is right, in that it's easy to walk away from a properly-planned options strategy with a profit nearly every time. But that one time you're surprised by the big unexpected move, you can get brutalized. Say you could easily make $400, and maybe $4000, 90% of the time, but there was a 10% chance you could lose $40000, would you take the risk? (The correct answer is "no.") That's sort of like this situation, where if the stock prices kept moving up at today's pace until the next trading day (Monday) RIMM could open at $260, and that $3/shr loss on the 220 call becomes a $50/shr loss (or more). Not saying it's likely, because stocks tend not to move 20% over a weekend, but who knows?

If you really know what you're doing, I think options can work. But for me, that kind of risk is just too scary. You need to be able to assess the risk that an unlikely event will occur, and put a value on that. Your long-term success will be determined by how much damage you take on those infrequent (maybe <1% of trades) killer losses, and whether your profits in between those events will be able to sufficiently offset it.

I prefer making several safe bets on high-probability events, with the cost of any one of them being wrong having a small impact, rather than betting against fewer low-probability events, where being wrong can be devastating. I think this keeps the pressure low, and allows me to consider my decisions more carefully (sometimes).

[spikefader]

Spike,
I am ALWAYS interested in your charts, esp. the stuff I am trading. RIMM: no problem. Just buy the stock and I'll have a $290 profit from the put/call spread. It's that Easy. Sold the call for $10.50; bought a put for $7.60.

I'm guessing it's probably more complicated than you suggest, NB. Isn't your options spread (short call, long put, both out of the money at the same expiration) also known as a "costless collar" or fence? And if so, doesn't "a stockholder forgoe any profit should the stock price appreciates beyond the striking price of the call written"? (especially if one buys the stock after a rise in stock price like RIMM has done). So how can you profit from your collar at this point in time, bearing in mind that price has now risesn above the point at which you opened the collar? What false assumptions, if any, are you making about your so-assumed future profit? What will continuing rising price do to your position at the end of the day? Obviously, this strategy is great for those looking to hedge their long stock positions with no cost, which I gather is one of the considerations River is looking at. But at the same time, one really must know the consequences of the play should market direction surprise them......i.e. being prepared to miss the upside gains from the time of the hedge. You often say options are so easy, and I'm very often quietly skeptical of it. There's more to the equation, and many more variables than first meets the eye.

[New-born baby]

NB, sorry t' hear yer loved ones are ill; my prayers are with you and yours. Also sorry to see your +$2100 options profit turned into a 500 buck loss..... what a bummer....and what a rally off that gap support! Whodathunk it, eh? Anyway I'm very interested to hear the steps you take going forward with it, whether you just take the loss, or exit break-even next week, or whether you buy and/or sell more options in an attempt to get into green waters again. So if you get a chance, post your new positions for River, me, and anyone else interested. Personally, I think the potential for RIMM bullish 5 wave move in the days ahead is very real. I posted a chart at my site for it if you're interested. And below are the options charts for NB's put/call trade for those interested in seeing just how amazing options price movement can get.

Spike,
I am ALWAYS interested in your charts, esp. the stuff I am trading. RIMM: no problem. Just buy the stock and I'll have a $290 profit from the put/call spread. It's that Easy. Sold the call for $10.50; bought a put for $7.60.

[spikefader]

NB, sorry t' hear yer loved ones are ill; my prayers are with you and yours. Also sorry to see your +$2100 options profit turned into a 500 buck loss..... what a bummer....and what a rally off that gap support! Whodathunk it, eh? Anyway I'm very interested to hear the steps you take going forward with it, whether you just take the loss, or exit break-even next week, or whether you buy and/or sell more options in an attempt to get into green waters again. So if you get a chance, post your new positions for River, me, and anyone else interested. Personally, I think the potential for RIMM bullish 5 wave move in the days ahead is very real. I posted a chart at my site for it if you're interested. And below are the options charts for NB's put/call trade for those interested in seeing just how amazing options price movement can get.