***Official*** 2011 Stock Market Thread

[Imp]

In and out of GMCR, 1500 shares @ 70.48/71.25



(two more trades closer to that $200 iTunes gift card on eTrade)

Grrr... You just made a week's salary for me.

 

[Pliablemoose]

Grrr... You just made a week's salary for me.

LOL, I'm pretty much doing trades to make enough to cover the brokerage fees to earn the gift card

 

[jessieqwert]

This may be applicable to your trading goals and love of AAPL..

I'm watching AAPL dive above and below 400 and feel like there must be money there. The options I'm familiar with are buy calls below 400 and puts when it's above 400. Are there better ways to leverage that?

 

[The-Noid]

This may be applicable to your trading goals and love of AAPL..

I'm watching AAPL dive above and below 400 and feel like there must be money there. The options I'm familiar with are buy calls below 400 and puts when it's above 400. Are there better ways to leverage that?

Why pay for all that gamma that is going to disappear unless you are right 100% of the time? That is a hugely levered trade but if you are right is going to obviously make money but you are paying through the noise to get into it.

 

[jessieqwert]

Had to look up gamma but I see what you're saying. So Apple is a better play for long range(time) options?

 

[The-Noid]

Had to look up gamma but I see what you're saying. So Apple is a better play for long range(time) options?

No but when the stock is at 400 or right around and you are buying at the money strikes you pay a premium for the amount of embedded gamma (the second derivative of delta) that you don't pay for when options are further out of the money. That gamma raises the cost as dealers have to hedge gamma to be fully delta hedged. The option price is going to have the most sensitivity to changes in price, however if it goes the other way (i.e. you bought puts and the price went up) you have paid for gamma that you never used. If you bought options further out of the money say even the 390's because you thought the price was going to go down you don't pay for as much embedded gamma. Find the delta you want in an OTM option and forget about trying to play the gamma moves.

 

[Miramonti]

No but when the stock is at 400 or right around and you are buying at the money strikes you pay a premium for the amount of embedded gamma (the second derivative of delta) that you don't pay for when options are further out of the money. That gamma raises the cost as dealers have to hedge gamma to be fully delta hedged. The option price is going to have the most sensitivity to changes in price, however if it goes the other way (i.e. you bought puts and the price went up) you have paid for gamma that you never used. If you bought options further out of the money say even the 390's because you thought the price was going to go down you don't pay for as much embedded gamma. Find the delta you want in an OTM option and forget about trying to play the gamma moves.

If he didn't know what gamma was (which most non-option people don't and that's normal) how do you think he's going handle this? lol

Owning gamma is just a fancy way of saying you're going to lose money over time if nothing or little happens. It's generally better to have a position where time is in your favor, but it all depends on what your objectives are, how much leverage you want, and what desired your time frame for holding the position is (and how big a move you want to bet on, etc.)

AAPL hasn't had this $395-410 range for long, ~3 weeks, but to have time decay in your favor (short gamma), then you could sell call spreads above 400 after it rallies (betting the stock sell off and go lower again), and/or sell put spreads below 400 when it sells off, betting the stock will then rally and not go below the strike prices in the spreads.

Personally I'm not one to fall in love with fairly tight ranges and then bet on them to continue.

 

[paperfist]

In and out of GMCR, 1500 shares @ 70.48/71.25



(two more trades closer to that $200 iTunes gift card on eTrade)

So you just made $1155.00? I didn't read the whole topic here, why do all the big investors & books say to hold long term when you can pocket that amount of money on slight fluctuations? I realize you had a big layout to get in, but you have to start somewhere to get to that point

 

[The-Noid]

If he didn't know what gamma was (which most non-option people don't and that's normal) how do you think he's going handle this? lol

Owning gamma is just a fancy way of saying you're going to lose money over time if nothing or little happens. It's generally better to have a position where time is in your favor, but it all depends on what your objectives are, how much leverage you want, and what desired your time frame for holding the position is (and how big a move you want to bet on, etc.)

AAPL hasn't had this $395-410 range for long, ~3 weeks, but to have time decay in your favor (short gamma), then you could sell call spreads above 400 after it rallies (betting the stock sell off and go lower again), and/or sell put spreads below 400 when it sells off, betting the stock will then rally and not go below the strike prices in the spreads.

Personally I'm not one to fall in love with fairly tight ranges and then bet on them to continue.

Explaining things easily has never been one of my strong suits...

Just on an aside you would generally worry more about change in price of the underlying and delta rather than the passage of time with gamma. Only if you were buying extremely short dated options would the passage of time have more of an effect than a movement in the underlying and you have to be dead at the money in that case. Underlying movements and delta, changing Vomma (Vega Gamma) and passage of time in that order would effect gamma the most for an ATM short dated option...

 

[jessieqwert]

So you just made $1155.00? I didn't read the whole topic here, why do all the big investors & books say to hold long term when you can pocket that amount of money on slight fluctuations? I realize you had a big layout to get in, but you have to start somewhere to get to that point

I think I can answer this one.

1. Holding stocks longer moves you in to the lower tax bracket for long term capital gains.

2. Most don't have the capital to make significant money off slight fluctuations.

 

[KB]

If we fell to 10,700 on little old Greece's issues, I can only imagine we are gonna fall hard on Italys issues, which most us know would come. I took out some, into about 30% cash two days ago. I feel bad, like I have left the other 70% to the slaughter.

 

[Arachnotronic]

Bah. I see today as a GREAT day for sales. If stocks are losing value for macroeconomic reasons, then they WILL come back eventually.

TIME TO BUY!

 

[chusteczka]

For believers in a coming bear market, like me. The macroeconomic reasons foretell domestic issues that will eventually crash our market also. For this reason, I think the market needs to sink more before it is time to buy.

My ideal time to purchase is when shares in a company cost less than or equal the following amount.

Purchase Value(?) = Book Value/share + Earnings/share + Dividends/share


My preferred purchase opportunities are when:
Share Price / Purchase Value <= 1.0

I will often purchase at 1.5-2.0 and hesitate for anything above 2.0.


Of course, the market will bounce a few times and it will take more time for the NYSE and American public to realize the situation our economy is truly in. This will provide opportunities to make money by timing the market bounces in which our fate rests in our individual ability to properly time purchases, holds, and sales.

Disclaimer:
My education and experience is in engineering and NOT in finance. In no way am I qualified to provide any investment advice and what is provided is purely my misguided opinion.

 

[JTsyo]

So you just made $1155.00? I didn't read the whole topic here, why do all the big investors & books say to hold long term when you can pocket that amount of money on slight fluctuations? I realize you had a big layout to get in, but you have to start somewhere to get to that point

How do you think HFT makes money? In his case he had to put up over 100K for that $1K profit.

 

[The-Noid]

For believers in a coming bear market, like me. The macroeconomic reasons foretell domestic issues that will eventually crash our market also. For this reason, I think the market needs to sink more before it is time to buy.

My ideal time to purchase is when shares in a company cost less than or equal the following amount.

Purchase Value(?) = Book Value/share + Earnings/share + Dividends/share


My preferred purchase opportunities are when:
Purchase Value / Share Price <= 1.0

I will often purchase at 1.5-2.0 and hesitate for anything above 2.0.


Of course, the market will bounce a few times and it will take more time for the NYSE and American public to realize the situation our economy is truly in. This will provide opportunities to make money by timing the market bounces in which our fate rests in our individual ability to properly time purchases, holds, and sales.

I am completely confused did you write this wrong?

So what you are saying then is you like momentum names and service companies?

Share price / Purchase price makes a lot more sense. Otherwise you are buying momentum names that are trading at premiums to earnings and book value but not trading at too high a premium...very confusing. You will end up overweight smid, overweight service and overweight fallen growth angels.

 

[chusteczka]

I am completely confused did you write this wrong?

So what you are saying then is you like momentum names and service companies?

Share price / Purchase price makes a lot more sense. Otherwise you are buying momentum names that are trading at premiums to earnings and book value but not trading at too high a premium...very confusing. You will end up overweight smid, overweight service and overweight fallen growth angels.

You are correct. I wrote the ratio incorrectly. My apologies and thank you for catching mistake. This mistake is the result of interrupting my work to provide my thoughts on the subject. The ratio is now corrected above and repeated here:

My preferred purchase opportunities are when:
Share Price / Purchase Value <= 1.0


Additionally, the rest of what you mentioned regarding "momentum names and service companies" is beyond my rudimentary understanding of investing.

I also added my personal disclaimer to inform everyone that I am an amateur investor.

Disclaimer:
My education and experience is in engineering and NOT in finance. In no way am I qualified to provide any investment advice and what is provided is purely my misguided opinion.

 

[paperfist]

How do you think HFT makes money? In his case he had to put up over 100K for that $1K profit.

I think I can answer this one.

1. Holding stocks longer moves you in to the lower tax bracket for long term capital gains.

2. Most don't have the capital to make significant money off slight fluctuations.

Yeah, I know he had to put up $100k, but I'm sure he didn't just start off with that. Even if he did and you had less to work with there's no reason you can't move up from say $10k to where he's at, it's obviously going to take longer.

I wonder how much you really save on capital gains for long term holdings vrs profits off slight fluctuations?

 

[Imp]

Yeah, I know he had to put up $100k, but I'm sure he didn't just start off with that. Even if he did and you had less to work with there's no reason you can't move up from say $10k to where he's at, it's obviously going to take longer.

I wonder how much you really save on capital gains for long term holdings vrs profits off slight fluctuations?

I think the capital gains arguement is stupid... So, because you don't want to be taxed, you're going to sit still and make nothing?

During the time you held long for a few years, your stock probably crashed and rallied more than once. But sweet, you got to collect a ~4% dividend per year... Oh wait, you can make that on a one day rally. Obviously some people don't and end up losing their money, but there's a chance.

And sweeeeeeeeet... Market finally crashing. But shite, I bought in a bit yesterday. Oh well, I was smart enough to be 75% in cash this time around.

 

[Ns1]

The U.S. bond market was the beneficiary of the fear trade, with 10-year U.S. Treasury yields sliding to 1.95 percent, in an inverse move to bond prices. The dollar index leapt 1.26 points to 77.85, a 1.7 percent increase, as the euro fell towards 1.35.

Sooooo now that all my money are in bonds, when the fuck do I get out? I was planning to move it back into stocks when it goes < 10500 or so

 

[Pliablemoose]

So you just made $1155.00? I didn't read the whole topic here, why do all the big investors & books say to hold long term when you can pocket that amount of money on slight fluctuations? I realize you had a big layout to get in, but you have to start somewhere to get to that point

I'm not holding anything long term right now except some callable corporate bonds that are paying 11&#37;

Europe is a mess right now, I don't want to take a hit.

I figure a thousand in a day (actually $1500,I was in and out of BRK.A too, and made another $500, was surprised, expected the website to tell me to call for the trade like the last time I bought BRK.A, but now eTrade will let you trade it online.) so $1500+ in a day is pretty good.

Better than having to work for it

I do have some GMCR, just a few thousand worth And some DPK, holding the DPK to see what happens tomorrow... will likely sell it tomorrow, holding leveraged ETF's is sort of foolish...

Etrade is giving away a $200 iTunes GC is you make 30 trades in this quarter, so, I'm just playing anyway.

Also, I don't do options, I've read a bit about them, and took a $10K hit on them once, hate investments that bite you in the ass...

 

[Imp]

Wonder if I should start swapping US of A money to Canadian dollars. Nice 5&#37; spreads coming up. Must figure out a cheaper way to convert though. Banks raping me with a 1%+ commission at a time.

 

[RbSX]

Fuck, I sold my VXX leveraged shares at 31, now it's at 38 after yesterday. Derp derp derp.

Oh well. I rode it up from 22.

 

[Pliablemoose]

Wonder if I should start swapping US of A money to Canadian dollars. Nice 5% spreads coming up. Must figure out a cheaper way to convert though. Banks raping me with a 1%+ commission at a time.

eTrade recently started offering currency trading...

 

[Miramonti]

Explaining things easily has never been one of my strong suits...

Haha...fair enough. I can't say I'm capable of writing an un-edited reply about options that would make sense without rewrites, lol. In any case, iirc you are possibly the only one on this board that I've seen who seems to have experience in options on a professional arbitrage level (altho I don't frequent this thread very often.) Risks and spread/position behaviors are really difficult to explain in layman's terms because of all of the greeks and factors that effect them (and therefore that affect prices/values), so it's really impossible to give full scenarios or explanations in a paragraph or two without over-condensing or leaving out a ton of details.

Just on an aside you would generally worry more about change in price of the underlying and delta rather than the passage of time with gamma. Only if you were buying extremely short dated options would the passage of time have more of an effect than a movement in the underlying and you have to be dead at the money in that case. Underlying movements and delta, changing Vomma (Vega Gamma) and passage of time in that order would effect gamma the most for an ATM short dated option...

Very true, outside the lead month will have much less time decay risk (altho more 'implied volatility' risk...but yet another example, so many factors, is impossible to create a single reply listing everything)

 

[jessieqwert]

speaking of GMCR - ouch