I Will Get Money From AMZN After All...

[spurge0n 0]

Time for some payback on the double calendar loss.

 

This morning I shorted next week's AMZN 302.50 call for 1.64.

 

I hedged by purchasing the 320 call for .16.

 

I don't think AMZN will see 302.50 again for a while. Personally, I don't think that stock has anything going for it.

[Kim 7,943]

Well, this is a good trade IF you believe AMZN will not go above 302.5 by the next week.

 

It is not a good trade IF you made it to get your money back. 

 

So I assume your title was more humoristic than serious. We all know that the market doesn't know and doesn't really care that we lost money and we "need" to get that money back. 

[spurge0n 0]

Oh it's an emotional as well as a financial investment...

[spurge0n 0]

Just for kicks, I have a bid in at .54 to close this out for a .94 gain.

 

Let's see what happens.

[Yowster 9,180]

I'd be leery of this trade purely from a risk vs reward perspective - with this trade your best case is $148 gain per spread and you worst case is a $1602 loss per spread.   In all likelihood AMZN will stay below your short strike and you'll make your $148 per spread, and when making these type of trades you'll usually have over 90% winners, but the losers can be huge and wipe out all the other winners.  I got burned by one of these many years ago when I first started playing options and won't do it again.   Your thesis of AMZN staying below 302.50 over the next week is fine, but there are other ways to play this thesis that are better from a risk/reward perspective.  You can do an ATM or below butterfly using next week's options, you can do a calendar using ATM or lower strike if you think its going to drop.  Both of these strategies can make the same $148 (or more) per spread within the next week if your thesis holds, but your max loss is much less than the $1602 per spread if the stock does not behave as you expect.

[spurge0n 0]

Thanks. I'll take a look at those strategies for something like this.

[spurge0n 0]

Mission accomplished.

 

Closed out the short call at .49 for a gain of $99/contract.

 

I'll leave the long call open in the unlikely event that AMZN skyrockets in the next few days.

[Optrader 128]

I should have bought that call from you for 100%gain today

Imagine if you were still holding today ?

You need deep pockets and strong stomach to br seller of options

And what is the reward

Small change

Thats the nature of selling

People get lured into theta and probability

And one fine black swan day they are out of business broke

[Kim 7,943]

I don't think this is black and white. Take a look - http://steadyoptions.com/articles/post/general/risk-reward-or-probability-of-success-r91

 

You can have good risk/reward or good probability of success. You cannot have both. When you have high probability of success and bad risk/reward, you just need to make sure that you control risk, so one big loss doesn't wipe out months of gains.

[luxmon 233]

I actually applaud him for removing the risk yesterday for 0.49 and not trying to squeak out the last dime with four days to go.  Nice trade.

Edited October 28, 2014 by luxmon

[spurge0n 0]

I should have bought that call from you for 100%gain today

Imagine if you were still holding today ?

 

 

I'm not. So I have no reason to imagine it.

 

But to entertain the proposition, it's still well below $320.

 

Now the TWTR trade, that one could hurt if it goes against me.

[Optrader 128]

What I mean is going after small dollar profits does not make sense for options trading.

option trading is for high leverage .

For 3% profit, you can just do stock trading and be fine.

 

Another way to look at it is what is the use of making 3% and have a run of 30 profitable trades and have one bad looser take it way ?

 

I have been burned, so I am just advising. Its up to you to decide how you want make money and be rich.

 

Also what if you become rich and start trading millions of dollars. Will you still sell this call to risk 100K to make just 3K. Never . So the strategy does not scale.

[Kim 7,943]

Options trading has many flavors and styles. Using options for leverage is one of them - this is not our style. We aim for steady and consistent gains. Our average return is about 5-6% per trade, and as you can see from our track record, we doing very well over time. You don't have to aim for a double in each trade to do well.

 

I see sales pages all the time that show you 200%+ returns on some cheap options they bought. But what they don’t tell you is that those trades happen once in a while and are not consistent. Maybe they did make 200%+ on a trade, but that doesn’t happen all the time and to set your expectations that high would be very ignorant. They also don't tell you how many 100% losers they have before they hit this homerun.

 

And whoever is telling you that you can get rich with options quickly - just ask him to show you his track record.

 

Again, it's all about probability of success and risk management. And yes, those strategies are scalable. Some hedge funds trade hundreds of millions of dollars.

 

Here is some reading in your free time:

 

http://seekingalpha.com/article/396701-myths-and-misconceptions-of-options-trading

http://seekingalpha.com/article/407971-how-to-become-your-own-options-risk-master

[Stephen 4]

I was just going to post our 5-6% profit per trade.

[spurge0n 0]

Even though I made money on this trade, I was wrong when I wrote "I don't think AMZN will see 302.50 again for a while."

 

It's there today.

 

So I have some food for thought here, too.

[Optrader 128]

This is the reason we stay away from such trades

When they bite you they really hurt bad

Market sometimes is crazy

Why bother making few dollars

You cannot get rich with this strategy but the doors are always open to poor house