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  3. Jeff - EarningsViz

    Introducing EarningsViz: Earnings Trades with an Edge

    Just an update on the project - in the future, I'm planning on adding not only pre-earnings trades, but post earnings trades (comparing the implied volatility on options after "all information is known" to the historical volatility after earnings reports. Currently, the site is still free so you should feel free to take a look and hopefully benefit from its data - feel free to reach out to jeff@earningsviz.com if you have any comments or questions. When more features are added in the future, I plan on making the site subscription based - however, I may give a discount or free access to SteadyOptions subscribers.
  4. RapperT

    Welcome to Steady Futures

    i closed the outstanding GC call from two weeks ago
  5. Michael C. Thomsett

    Options: Debt and Net Return

    Too often, options are selected based on the immediate return of the option itself. This invites higher risks. Volatility is expensive, so you pay more for risky options (on risky stocks). Writing covered calls appears to offer higher profits due to this relationship; but in practice, when you accept higher risks in the underlying, you expose yourself to higher overall risk, both in the underlying long position and in the short covered call position. A wise method for deciding which stocks to use for writing options, is to first quality a company based on strong fundamentals; and to then identify covered calls that offer better than average annualized returns. This usually means writing a series of short-term covered calls rather than a long-term series. Due to more rapid decline in time value, shorter-term covered calls are more profitable. For example, in the final week of an option’s life (from Friday before expiration up to last trading day), an option will decline significantly in value. That Friday to the next trading day, Monday, options typically lose one-third of remaining time value. Short-term trading is highly profitable. Writing 52 one-week calls is more profitable than four 90-day calls or one 360-day call. The money value of longer-term calls is higher, but there are two problems with selecting those contracts. First, you accept a longer time for exposure, meaning a greater change the call moves in the money and the underlying gets called away. Second, annualized return is better on one-week and two-week calls than on the longer-term alternatives. Another way to test for quality stocks, which will be used for writing covered calls or uncovered puts, is to analyze the relationship between debt to total capitalization ratio, and net return. Total capitalization consists of long-term debt and stockholders’ equity. Dividing long-term debt by total capitalization produces this ratio. The higher the ratio, the more the company depends on debt capitalization. This means future profits will be less available to pay dividends or fund expansion. But how does this affect option pricing? The option price is determined by historical volatility of the underlying; and the more danger in ratios like the debt ratio, the greater the market risk. A study of two companies with exceptionally high debt to total capitalization ratio is revealing: Lockheed Martin (LMT) Fiscal Year Debt to total cap ratio Net return 2018 81 9.4% 2017 100 3.9 2016 90 10.9 2015 78 8.9 2014 64 9.1 2013 56 6.6 2012 97 5.8 Source: CFRA Reports Philip Morris (PM) Fiscal Year Debt to total cap ratio Net return 2018 128 26.7% 2017 130 21.0 2016 142 26.1 2015 148 25.7 2014 148 25.2 2013 112 27.5 2012 84 28.0 Source: CFRA Reports In both cases, changes in the debt ratio did not have any obvious relationship to the level of net return (net income divided by total revenue). A logical assumption would be that higher debt translates to higher net return, if the long-term debt is used to expand product and territory. But in this case, net return was not affected by higher debt. However, dividend per share was affected. The LMT dividend moved from $4.15 per share in 2012 and was increased every year to $8.20 in fiscal 2018. The PM dividend also grew from $3.24 in 29012 up to $4.49 per share in 2018. Although there is nothing illegal about using debt to pay higher dividends, it is not a wise use of working capital. It would make more sense to hold long-term debt at the same level and reduce dividends per share. But that would be unpopular. Options traders may be aware of higher dividends per share and may even use this as a method for picking stocks to write covered calls or uncovered puts. But the choice is limited unless two other fundamental trends are also studied: long-term debt to total capitalization, and net return. There are a good number of companies that have managed to increase dividends every year while also increasing net return and maintaining a cap on the debt level relative to total capitalization. And in those cases, option profits do not suffer, even though overall market risk is lower. This comes down to a logical conclusion: You do not need to take equity positions in volatile and high-risk stocks to achieve better than average returns on options. This is true especially for covered calls and uncovered puts. It is a mistake to make selections on any one fundamental test, such as dividend yield or dividend per share. That test makes sense only when studied in conjunction with long-term debt trends and net return. These tests should be applied over several years. The examples of Lockheed Martin and Philip Morris made this point. Both paid impressive dividend per share and increased the dividend every year without fail. For some investors and traders, this test is enough. But it does not tell the whole story. No single test – fundamental or technical – is reliable enough to use exclusively. The strength of a fundamental indicator is made more powerful when two or more factors are considered. This idea – for example, evaluating several years of dividend yield, dividend per share, debt to total capitalization ratio, and net return, makes the analysis more insightful and leads to more informed decisions. Options traders easily fall into the trap of focusing just on premium yield, while ignoring degrees of risk in the underlying. Even though many traders shun fundamentals and favor technical analysis, there is value to be gained from articulating the fundamental strength or weakness of the underlying as a starting point. This emphasis also leads to insights about the value of historical volatility (a true test of risk) versus the fuzzy estimates and unreliable conclusions of implied volatility. Michael C. Thomsett is a widely published author with over 80 business and investing books, including the best-selling Getting Started in Options, coming out in its 10th edition later this year. He also wrote the recently released The Mathematics of Options. Thomsett is a frequent speaker at trade shows and blogs on his websiteat Thomsett Guide as well as on Seeking Alpha, LinkedIn, Twitter and Facebook. Related articles: 3 Dividend Traps To Watch For Dividends And Options What Options Traders Need To Know About Dividends The Effect Of Dividends On Options Pricing
  6. ex3y7s

    Welcome to Steady Futures

    Thanks for the update! I've noticed a bunch of weird stuff with KC as well: the bid/ask spreads tend to also be really wide, etc.. I assumed some of it was because I don't have market permissions for the ICE contracts so I trade off delayed data, but maybe it's a TWS issue or simply the ICE feed/order book is not as good as some of the other exchanges.
  7. KC was one of those weird IB things where it stopped treating my position as a spread randomly. I think it is just a software glitch with them but I've had it happen more than once. I am running their linux version of TWS though so I think I sometimes see more bugs than people on other OSs. I started using the spreads a couple of weeks before we made the transition. We've been trying to just let most of the old positions trade off like normal and then reposition them with spreads for the new trade. Gold was one where it made sense to roll early just from an administrative standpoint.
  8. ex3y7s

    Welcome to Steady Futures

    Thank you--I had closed mine but was unclear on what the "official" stance was. Also while I'm here typo on this week's KC alert: should be calls and 1.175 not 1.75.
  9. RapperT

    Welcome to Steady Futures

    I will be closing my position and the official trade will be the spread. We decided to go this route after I boarded a flight.
  10. ex3y7s

    Welcome to Steady Futures

    I'm confused--are we adding to the gold position this week (keeping the old call open and adding a spread)? Also looks like @Jjapp's prior KC position was different? Is that prior put spread closed now? Edit: I see the KC spread is shown closed as two separate legs. Still confused on the GC though.
  11. Earlier
  12. Often times I can have a conversation with the average investor about markets/trading and know what they're going to say because the same questions and comments come up time after time. We're just wired to think short term and worry about the apocalypse du jour that's likely to make the market crash soon. Rarely do I hear "Jesse, what do you think is the right lifetime investment strategy to reach my long-term financial goals." Something I've observed about option writing, is that at some point, since it's a strategy that requires you to act every month, you're going to deviate from the model because your emotions trick you into thinking you know better. The apocalypse du jour will take your mind captive, so just be aware of it. You're probably still going to eventually give in and do it even after reading this, because good advice is like Vitamin C that the body can't naturally retain on its own. It must constantly be injected! You'll say "the market is at all time-highs, it can't possibly go higher!?" The next roll will come along, and you'll decide to sit it out for a month. In fact, almost every time it's time to roll, this thought will cross your mind. And if you act on this impulse history tells us there's a roughly 80% chance you'll miss a winning trade and the market will be even higher...or flat or not down much, all situations that lead to winning short put trades (one of the many attractive qualities of the strategy). So the next roll will come around, and now you're really stuck. You thought it was too high last month, and now it's even higher! Stop and think about this for a second...go look up what the S&P 500 was at the day you were born. Since you're probably not going to do it, let me share some data. Today: SPX $2,975 12/31/99: $1,469 12/31/89: $353 12/31/79: $108 12/31/69: $92 12/31/59: $60 Note this is just the S&P 500 cash index, which excludes dividends. Dividend adjusted, which all shareholders obviously get paid, the results are much more dramatic. By definition this means it was at "nose-bleed all time high levels" year after year after year, with the occasional multi year periods of temporary decline before it resumed the permanent uptrend. How else does something average 10% per year for a century other than routinely putting in new all-time highs? So can you outguess the market? Anything is possible, but it's more probable that 10 years from now you'll look back and realize you'd have made a lot more money if you'd have just followed the dumb model. Just like most of us would if we look back at our investing career up to this point and realize we'd be better off today if we had kept it simple and bought and held a reasonable portfolio of equity ETF's or mutual funds or just sold a simple put each month. The markets are ready to endow us all with forever increasing wealth if we would just get out of our own way and allow it to happen. I believe a model is the ceiling on potential performance, not the floor. Any human intervention is likely going to cost us money over the long term. Our time is better spent in the strategy construction process than trying to outguess it during the heat of battle when emotions tend to give us tunnel vision. I believe in evidence based investing, so we can also look and try to learn lessons from the data. For example, Dimensional Fund Advisors regularly updates research about mutual funds. Here's what their most recently updated "2019 mutual fund landscape" study found. So for example, 20 years ago, there were 2,414 stock mutual funds at the beginning of the period. By 12/31/2018, only 42% even still existed. Do funds shut down because their performance was great or because it was poor? And of those that survived, only 23% outperformed their prospectus benchmark. This includes the most talented market timers and stock pickers in the world, and only 23 out of 100 could add value, net of all costs, above a basic benchmark that is available today at almost no cost (and even no expense ratio in some situations). Note that this degree of outperformance is less than would be expected by random chance alone, so attempting to just find and invest with those few winners has not been a good approach either as the data shows there is a significant degree of randomness (aka luck) in performance data. And good luck is not something that is expected to persist in the future. So what can we learn from this? If 77% of professionals can't time the market, do you really think you're going to be able to do it consistently enough over time to add value vs. just relaxing and following the simple model (meaning, the trade alerts)? When you get the urge to deviate off course, try laying down until that urge goes away. And if it's still there when you get up, ask yourself what you know that the rest of the market doesn't? A foundation of an efficient market is that all know relevant information is already reflected in the price, which is obvious in the above mutual fund data that highlights how hard it is to outguess it. A better approach is to just be prepared for the inevitable periods of outstanding performance (like we've seen since launch), along with the inevitable periods of poor performance and even double digit declines in your account value. For example, don't put your emergency fund in the strategy. Don't take out a HELOC to invest more in the strategy. Just be patient and sensible. Surprise is the mother of panic, and if you're surprised in the future when we have a double digit portfolio drawdown (because we will), it means you haven't reviewed the charts in our strategy description post or read my posts like this that attempt to remind subscribers what to expect. The market makes us money (geek speak, a combination of the equity, volatility, and term risk premiums), not my perfectly timed trade alerts. This also means the market will at times cause us to lose money, and my trade alerts will not prevent that from happening. We will accept what the markets give us, knowing that we get paid to bear risk that others don't want to take over the long term. For example, option buyers are typically hedging their position, and are willing to pay a premium to do that. We step in, and sensibly collect that premium, like an insurance company. So only take the risk that you have the ability (time horizon), willingness (emotional tolerance for volatility), and need (long term required rate of return to reach your goals) to take. Above screenshot from Ben Carlson's excellent post that has related thinking: The Problem With Intuitive Investing Jesse Blom is a licensed investment advisor and Vice President of Lorintine Capital, LP. He provides investment advice to clients all over the United States and around the world. Jesse has been in financial services since 2008 and is a CERTIFIED FINANCIAL PLANNER™ professional. Working with a CFP® professional represents the highest standard of financial planning advice. Jesse has a Bachelor of Science in Finance from Oral Roberts University. Jesse manages the Steady Momentum service, and regularly incorporates options into client portfolios. Related articles Combining Momentum And Put Selling Combining Momentum And Put Selling (Updated) Steady Momentum ETF Portfolio Equity Index Put Writing For The Long Run
  13. Scott Green

    eOption Brokerage Special Offer

    Hi There! Scott from eOption here....the commission fee is per leg. If you'd like to talk to us directly you can contact us at support@eoption.com or 1-888-793-5333.
  14. When you say web service, do you mean an API that you could call from your program?
  15. mustafaoe

    RV charts : Volatilityhq.com Official Thread

    Thx, I know, I am using the download as well. I was thinking to automize some of my activities. Therefore, the question regarding a web service. Do you plan to offer such stuff in future?
  16. The documentation is a bit limited. Most of the features have been implemented after being requested by some members in this thread. I recommended reading this thread. Are you looking for something specifically? You can download the csv file from the scanner page and import that. There is no api at this moment.
  17. mustafaoe

    RV charts : Volatilityhq.com Official Thread

    @DjtuxIs there a documentation of the web services you provide? I am asking myself if it is possible to read the scanner results daily into a program?
  18. Good call. Had the wrong multiplier in my spreadsheet.
  19. RapperT

    Welcome to Steady Futures

    @Jjapp and I will take a look
  20. RapperT

    Welcome to Steady Futures

    If you're willing to deal with the volatility, you could keep trading it. The other option is to close and wait until you have a bit more capital. This is probably what I would recommend to be honest. Our initial target minimum was 50k but we really wanted to make it accessible to more members if possible. On a 100k account we are down a few percent this year which is in line with most of the big shops. 2% is most likely too hot for this type of system but the recent struggles were compounded by trading far OTM options as mentioned above. The latter issue is one that became more apparent to us over the last couple of months.
  21. dho99

    eOption Brokerage Special Offer

    Is the 1.99 per leg or per entire trade for spreads/butterflys/collars etc...
  22. ex3y7s

    Welcome to Steady Futures

    I was updating my spreadsheet with Friday's trades and noticed two very small issues with the silver alert for anyone playing along at home: It lists total debit of $207 but since SI trades at $5 per 0.001 tick I believe it should actually be a debit of $1035. It doesn't indicate call/put but obviously it's a put spread (signal is down)
  23. ex3y7s

    Welcome to Steady Futures

    You are no doubt aware but IB confusingly has two ways to describe futures options, either just by contract month, or by expiration month/underlying futures contract. Additionally, the contract month is the same as the expiration month for some symbols, but not for others (see image below for KC). Depending on your individual IB configuration and what screen you're on, you may see one or the other. I just wanted to give people a heads up and also verify that you guys are just copying the description from IB for the alerts. That means if we see just one month (like "Bought Oct 0.1275 Put" from today's alerts) we'll know that means the contract month, and if wee see month/month we'll know that means expiration/futures expiration (so Sep/Dec here, not Oct/Dec).
  24. lrfsdad

    Welcome to Steady Futures

    If we're unable to trade the larger account size how would you recommend treating current positions?
  25. RapperT

    Welcome to Steady Futures

    Tomorrow we begin trading Steady Futures on a 50k model account, a few notes: we will limit risk to 1% or less per trade to solve for the issue with OTM options, we will be trading spreads in some cases with the long leg ATM. The shorts will vary depending on the delta we are targeting. We will likely add a few new contracts over the upcoming weeks. we will continue to work to get the signals up early in the day, but our official trades may not always be right at open. Beginning with July, our monthly performance will be based on this account size John will be posting the new trades tomorrow as I have a terrible travel day. We are working on a solution for that too as we both spend a lot of time on the road....more to come
  26. While a lot of information comes from real experience of people that have used a brokers’ services, some may have a hidden agenda of promoting the broker. Promoting a broker is OK, as long as it’s done in a transparent way. Let’s see the 5 ways to identify fake reviews: Look at the site: if this officially a forex news site / education site, but the first thing that you see is a big list of forex broker reviews, then you can take the reviews with a grain of salt – the site’s sole purpose is to make money on affiliates and not necessarily have up to date news. So are the reviews genuine? Check the link: If you see something like landingID=3 or affiliate=fxsite at the end of the link that leads from the review page to the broker’s site – this is definitely an affiliate link – the reviewer gets paid for referring clients to the broker. Getting paid for referrals is legitimate, but hiding the fact that the reviewer is paid for the service isn’t proper. For site owners, the solution is to write a disclosure about the affiliation. This way, the readers can judge for themselves if this genuine or not, having the knowledge about the affiliation deal. Option to comment: If the site has an option to add your own comment on the review, actually your own mini-review on the broker, that’s a good sign of openness. But this may be tricky as well. Try commenting and see if your comment really appears on the site, or if it’s held for moderation forever. Sometimes comments are automatically posted, but are later deleted when they aren’t convenient. Such sites’ openness, but it’s fake. Check the forum member: if a forum member posts a reply with a recommendation about a forex broker, even without an affiliate link, he could be associated with the broker. If he’s officially representing the broker, that’s like a full disclosure – you can judge him for yourself. But if he’s not? Well, check out what else he wrote on the forum. If he’s a regular participant, it could be genuine, but if his main agenda is promoting the same broker, don’t take his word. I must say the Forex Factory is doing a good job at getting such promoters out of the forums. Search the web for negative commentary: A common check if to search for the name of the broker with the word “sucks” – this will easily bring you to negative reviews, and you can see how bad they are. Getting results for this search doesn’t mean the broker is necessarily bad, but this is how you’ll get some negative words as well. Do you have additional ideas about how to find false broker reviews? This is a guest post from FXStreet, a leading provider of data, real time analysis and actionable tools for Forex traders.
  27. ex3y7s

    Welcome to Steady Futures

    Yep, mercifully we had a partial rebound today. Looking forward to the upcoming changes and continuing tweaks.
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