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Sep 30, 2005
- I was listening to your conference call today. In your example of Sell 1000 shares stock at $55 and Buy 20 55 calls, how far out do you buy your options - 30, 60 90 days?
Question>
I was listening to your conference call today. In your example of Sell 1000 shares stock at $55 and Buy 20 55 calls, how far out do you buy your options - 30, 60 90 days?
"How Would You, Too, Like to Peek Into the Mind of a Former FloorTrader, Market Maker, and Specialist in DELL Computer Who Has Over 120K Career Trades Under His Belt -- and Finally Discover the Virtually Unknown, 'Insider' Trading Techniques and Strategies Proven to Make Millions for Traders Across the Globe?"
There is no black and white answer to this one. The general rule of thumb is that when you locate a good gamma trading opportunity, you should select the time frame that best suits your expectation of the length of time that the opportunity will exist. Normally, this is estimated by using technical analysis.
Second, by using a volatility cone (volcone), you can determine which month or time period offers the best deal in terms of it's implied volatility being away from its mean. If the first month is 5 ticks below it's mean and the second month is 7 ticks below its mean, then obviously the second month is the buy.
However, the best way is probably a combination of these two ways.
Personally, if there is no clear cut choice, I like to buy a 60 day option position and use it for 30 days. In this way I don't feel the real big bite of decay (theta) because theta does most of its damage once the option is within 30 days to expiration. At the 30 day mark, I can sell it out and roll to the next 60 day mark or sell it out, step back and re-evaluate the situation.
...thanks
for the trust you've shown in MrSwing and my business.
Enjoy
your options...
Ron
Ianieri, a.k.a. “The Options Master-Maker”
Co-Founder,Options
University
Who
is Ron Ianieri, and Why Should
You Trust His Options
Insight?
Ron Ianieri is Co-Founder and Managing
Partner of OptionsUniversity.com.
A former professional options trader,
market maker, and 10-year floor trader on the Philadelphia
Options Exchange, Ron played an integral role in the
development of proprietary trading and strategic risk
management programs for large, fast-growing specialty
units. He was the specialist in DELL Computer options during
the early 90’s, when it was recorded as one of the busiest
books in history.
Ron is the active Chief Options Strategist
for The Options
University, where he continues to receive tremendous
accolades for his pioneering educational developments,
such as The
Options 101 Home Study Course and The
Options Mastery Series CD Library. He is also co-
developer of the breakthrough options volatility software Volcone
Analyzer Pro, which tells you if an option is
“cheap” or “expensive” (ultimately empowering
you to
determine which options to buy, when to buy them, and
when to sell them for safe, maximum gains).
Disclaimer
U.S. Government Required Disclaimer - Options trading has large potential
rewards, but also large potential risk. You must be aware of the risks
and be willing to accept them in order to invest in the options markets.
Don't trade with money you can't afford to lose. This website is neither
a solicitation nor an offer to Buy/Sell options. No representation is
being made that any account will or is likely to achieve profits or losses
similar to those discussed on this website. The past performance of any
trading system or methodology is not necessarily indicative of future
results.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS.
UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT
ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS
MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN
MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS
IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE
BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT
WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
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