Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Announcing the Great Phil’s World Book Project!

Thanks to Jared and Options Sage we are now about to embark on a grand and experimental adventure aimed at writing the best options guide ever!

Sage has written a great guidebook already and our idea is to take this to a whole new level by adding specific trades that we make throughout the year as example and incorporating ideas and advice and true stories from our members who, as any comment reader knows, are some of the sharpest traders you’re likely to come across.

We want to make something that is engaging, exciting and (if we have any room left) useful – much like I kind of hope this column is on at least a once-in-a-while basis! 

This is a very exciting project and is likely to be the first of many and we are looking for your advice on how to make everything as useful as possible.  Let’s keep in mind this is book 1 and will be more of an overview so we’re looking to make sure we cover the basic strategies but feel free to make ANY (don’t hold back) comments and suggestions under the appropriate chapter in the new  education section.  If you read a chapter and have an experience you would like to share – feel free to leave a "confessional" which we will feel free to include in the book!

We will do our best to give proper credit to everyone involved and hopefully we will all be able to point our friends to a best seller list and say – "Yeah, we wrote that!

You guys will be there for all the editing and rewriting as we move this book through the process and I want to make is a nice communal effort as I know that many of you have a lot to say and a lot of really great advice for new investors.

Needless to say that the book is (until published) for members only, especially the new one.  We will be allowing non-members to purchase the version you have access to now and we will be setting up a regular educational component where OptionsSage will be dispensing weekly advice and we will try to select a trade to make that highlights a trading strategy each Monday and follow it throughout the week.

We have also added a tab called "Intraday", where you can view all the portfolo moves as well as a section for "Links" and the soon to be available "Book Club" where we can all help each other by sharing our own favorites.

Zman's

Last but certainly not least, we now have a tab for Zman, which will take you right to the Energy Brain section of our site!

I want to thank all the original members for being here as we got the site launched, it’s been a wild couple of months and it’s going to be an entire crazy year – we have big plans and I am very, very happy with the group we have assembled so far.  If it’s going to be a rocky year in the markets, we’re going to need all the best and brightest to get through it and, if the market’s take off, we’ll be able to party together like it’s 1999, hopefully without the subsequent crash and 3 year hangover!

By the way, we’re going to be letting another group of new people in on the first – this month went well as limiting new entrants gave us a pretty smooth transition and I think it’s also been better for the new people, who have an easier time getting their questions answered as they get oriented.  We are still doing the referral program but I’m a lot less worried now than I was about the integration process.  If you do have someone in mind, we can let them skip the wait list as long as it’s not too many people in one period.

Looking forward to a great 2007!

- Phil

PS – in a shameless attempt to increase our web status we need help with two things:

Thing one (and this is useful to you) subscribe to Email delivery through Feedburner.  This builds our relationship with them, and lets you know when a new post goes up (albeit only on the free site so this one won’t even be there).  It doesn’t give you comments but it sure beats checking on the weekend to figure out when they heck I’m ever going to post the wrap-up!  Thanks for your help on this.

Thing two (purely to help me) is to see if we can get our free site( http://www.philstockworld.com/ ) linked to as many other web sites as possible.  This improves our Technorati ranking which is the key to all sorts of good things in life on the web!  So, whenever, you get a chance, try to drop our name on other sites you vist, hopefully it will catch on!  We are still several million readers behind TheStreet.com and it’s time we turned that around!

Oops, Thing 2.5 – if you are a Digg member, please give us a dig when you like the article, this is great free advertising plus Digg is a totally cool site in its own right!

Thanks! 

- Phil


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    Click here to see some testimonials from our members!


  1. Wow, I just spend the last hour reviewing the different chapters of the Option book under Educational. Talk about a big help. Now I am starting understand how you can minimize your cost basis buy selling the calls, etc. Great job guys. . I’m impressed and really glad I am a member.

    John


  2. This book looks like it is the best thing ever. Can’t wait to get deep into it when I have some time. Will be happy to contribute if I can and give you some feedback.
    Phil, a comment I made on the other post disapeared. I was wondering how you ended-up making 114% on the LVS puts. I followed this trade, as I played it as well, and I thought you bought the puts at $3.30 and sold them at $4.50. Did I miss something? Did you have some from earlier at a lower cost?

    Thanks.


  3. Ooooopssss, sorry, forget what I just posted. I just realized I posted the initial comment on the free site.


  4. Ok, I read your answer to my question on the free site, and I don’t really get it. You bought the $105 puts at $3.30 on Thursday (was an amazing entry), sold 1/2 the same day at $4.50 and then sold the rest on Friday at $4.50 again. It seems to me that this is a 36% gain, not 114%.
    Now, you are saying that you applied the first sale to your basis. But it does not really reduce your basis, does it? What do you mean by “we track capital at risk”? Does it mean that after you sold the first 1/2 you consider that the profits from that 1/2 reduce the cost of the other 1/2? Or of the total initial position? But, once you close the trade, do you then calculate the return only on the second 1/2 which had a reduced basis?
    So when you say that you made 114%, it does not mean that for $100 invested you made $114, right? What does it mean exactly?
    Sorry if you explained this before, I only joined the members site last week and I am still trying to figure out your tracking system.
    I am sure you don’t make 100% per week, or even per month, as you would not be wasting your time with us :) But then, what do the numbers that you post really mean?

    Thanks.


  5. Phil, I an very impressed with you accomplishments on this site. I just don’t see how you do it, but this site is becoming what I had hoped for when you first talked about going private.

    Even though I am down to maybe one trade, I am going to keep my subscription up for a while, just hate to let it go.

    If, when, you come up with a high probability successful trade, let me in on it. I need a blow out to get back in the game.

    I wish you great success.


  6. Digger, good to see your post. Hang in there. I have some wiggle room, but I know where you are coming from, I am more and more waiting for those high-probability trades, I need to boost my confidence and my bottom line after this past week.


  7. optrader, good observation. That is confusing.


  8. Thanks size. I really am a sore loser when I feel I have been shafted. I am sure the market is manipulated and I want my money back, plus some!


  9. What do you guys think about some ICE 135 Puts if it climbs back close to 140 next week?

    Hope everyone is having a good weekend.

    John


  10. I have good news, and bad news. The bad news first. After spending the afternoon studying various option strategies and enjoying an undetermined number of adult beverages, my dear wife suggested that I may be drunk and that maybe I should retire to my chambers.

    Now for the good news, I am drunk, and have managed to smuggle one more drink into the bedroom.

    Good night all!


  11. Digger,

    You are too funny. Thanks for the laugh. About Phil’s tracking system, I am glad I am not the only one finding it confusing. But I don’t know if I should trust a drunk.


  12. That was great digger. Thanks for the laugh.

    Phil et. al., you guys are officially insane, and I finally feel like I am in good company. The book is awesome and it clarified some of the concepts and terminology I’ve been trying to figure out over the past couple of months. (I finally understand what buying out your caller means!)

    The only thing I’d like to see added if you guys can manage is a general section about taxes. I know you can sell the underlying stocks and buy them back within 30 days and it does something-or-another as a tax break, and if you hold it for more than a year it’s 15% versus the whatever-percentage it is if it’s less than that, but I don’t know the details and I’m sure some of the other people that are newer aren’t completely getting it either.

    Thanks for all of your hard work! I’m certainly impressed with the effort and the results.


  13. Also, this is just a thought – what about making the links and the FAQ pages backed by a wiki-like engine? I’m thinking some of us that have been around for a bit that see the same basic questions popping up over and over can answer them as people ask them. This may include questions like “what’s a good volatility calculator online that’s free?” or “what does DD mean?” or “why is it the older I get the less I’m able to see my own feet?”

    Then again you may want to complete reserve this right for you admin types, but it is a community and if we can alleviate any of the burden you’re already bearing I’m sure some of us wouldn’t mind stepping up to do so.


  14. Kwan,

    That’s a good idea, and I’ll look into it. Thanks!


  15. 114% – we do a lot of complicated things with the goal of reducing our basis and returns are figured off the reduced basis. On the LVS we took the first half off the table at $4.50 the same day as it was only a mo trade and apply that first $1.20 to the $3.30 basis from the first half leaving us with $2.10 open on the trade.

    In this example, since it closed so quick we could say the capital at risk was constant but the system is really mainly applied to long-term trades where we constantly reduce the basis over time. It’s not a perfect system but it also works both ways like the new Apple $85s which I added $2.50 to the cost of to refelect the loss from the original rolled positions.

    For the way I trade, I like to always know where the investment stands as I am constantly deciding whether or not to put more money in or take it off the table. I don’t really care what I started with as I often put in $1K, double it, double it again, half it , double it , half it, half it, double it and then take it off the talbe. At each stage I need to make a decision based on the actual amount I have at that moment and how far ahead or behind I am on that money at that moment.

    This is also critical in assessing the damage when you double down, we had extensive conversations about that last weekend so I won’t repeat it but it’s no different than dollar cost averaging any position. Sometimes (most times actually) when I sell half a position I will simply log that trade and leave the rest but with volatile stocks like Google, Applle, LVS, I am specifically taking a position larger than I really want with the intent of cutting it back to give myself a buffer I can live with.

    As to the 100% – again, discussed to death and one day I will gather up all these conversations but read my trading strategy as I enter short-term position in tenths and I rarely go over 50% of full in any uncovered postion, making 100% on my short portfolio is not an earth shattering return for me – but I sleep well at night!

    The long-term positions are the bread and butter trades, the short positions are supposed to be for fun but it often concerns me that people allocated too much capital to them as they are very high risk.

    ==============================================

    Digger, not the way I’d like you to try to make a comeback! Pernaps you should wait for a nice spread play where we can end up with a very low amount at risk (like the AAPL Feb $100s where we bought it for $3.70 and sold the Jans for $3.60 leaving just a dime on the table. At one point that was up to $2 and, had I not been an idiot, I would have taken it off the table but we all got Apple fever and blew some nice profits.

    The trick is, don’t look to get it all back on one trade. Spread your risk and try to take 20% 5 times.

    ==============================================

    ICE – it seems very strange to me that all the brokerages and exchanges are thriving if the market is going down… No one reminded me to get OXPS last week! They are really lagging.

    ===============================================

    Taxes, I don’t think I want to be giving tax advice! Get a good accountant is my best advice, if you are actively trading you need to send your accountant your monthly statements because expecting him to deal with it all at once at the end of the year is crazy.

    I like the Wiki idea but is that something you can just add to your site? I’m a big Wikipedia fan and would love to harness that concept! Let me know if you know how that works.


  16. You are Amazing, Phil. just browsed thru some chapters…. wow. I will read them all.
    This is excellent. I should try to be here (i wish) more often on the site , otherwise I dont know
    what I would be missing.

    Again,thanks for Zman’s link/tab.

    Thanks


  17. Yes, the Zman’s analysis of oil/natural gas is really in-depth. . Whoever recommended the CBOE site, thanks. I went there and registered since it will let you do virtual trades like someone recommended.

    Phil,

    I take it you are still holding the July 22.5 EXPE Calls? I wasn’t able to sell the February Calls but getting that added to my account in terms of selling calls.

    The behaviour of CROX on Friday afternoon still intrigues me. No action all day, and then the last hour huge buy volume came in. 1.5 million shares traded the whole day and of those, 1 million shares traded the last hour. . Big boys playing games or what?


  18. Bull or Bear on OXPS? Chart looking kinda ugly but pretty solid support at 22 bucks.. Are you thinking it might get a pop next week with Earnings coming out next Wednesday or will go lower?

    John


  19. Thanks Ramana – I’d like it if you were here more often too, you’re a great contributor!

    ==============================================

    EXPE – at this point, getting a quarter for the $22.50s would be prudent but no less as earnings are 2/15 (the day before expiration). Always be aware that when I buy a long call I take a long, uncovered entry (ie. no more than 30% the first week) as I am ready willing and able to DD if it dips 40% or more (assuming my original reasons to buy are still valid) but, as this is an earnings play I am likely to keep a light entry. It is also possible to sell the current $20s for $1.20 against our $1.10 entry but you risk kicking in an extra dollar for your caller if earnings are great (no more than you stand to lose if they are terrible if you are philosophical about it).

    My logic on this play is that they are off in earnings for 2006 but trending back up, they airlines are reporting big numbers and someone must be booking those flights and how are all these people (22% more this year) finding Macau? EXPE is headquarted in Washington State, as close as mainland US gets to China, home to BA, MSFT and SBUX, all eastern-looking companies so I don’t think they can help being focused on China for growth!

    They went from a huge Q4 last year to a lousy Q1 and Q2 as oil rose to $75 but had positive surprises of 33% and 13% in the last 2 Qs. They just finished a 10% buyback and, as shocking as this may seem, I don’t think it’s taken into account in their earnings estimates…

    EXPE is a roll-up company and they are tough to hold but conceptually they are putting together a great global organization, which is why I went for the relative safety of the July’s – to give me a second shot at earnings.. If they crash, my dd move here would be to buy leaps and sell the very volatile front-month contracts.

    Last, but not least, Expedia is part of the CSD an ETF that holds nothing but spin-off divisions of other companies. CSD is new and popular and EXPE is 5% of their basket. This is an ETF I like so much I almost bought some – that’s a huge endorsement from me!

    As you can see, I’m in analyst mode today as I intend to review our holdings so forgive me if I have little time to chat until later!

    ============================================

    CROX is one of those Cramer roller coaster stocks I stay away from. I would pay good money for a stock graph that had up down and nuetral signals of every Cramer mention (with the size of the arrow relative to the time and “certainty” of the reccommendation). If we had that, we could quantify the Cramer effect on these wild stocks and make some spectacular plays (ie. when he turns sour on someone else in the shoe sector you can be pretty sure he’ll be telling people to “ring the register” on CROX in the near future).

    If someone out there is a statistics geek who’s good at notating charts, doesn’t mind watching Mad Money in slow motion every night, reads Cramer’s daily alerts and wants to open up a hugely popular web site, let know!


  20. No, you don’t need to apoligize, you gave me more data in that summary then I could find in any Wall Street Journal Online article. Thanks again.

    Oil should be interesting next week. My gut tells me they are going to pump it up to 57 by Wednesday before the inventory numbers with Iran talking about centrifuges, etc.

    I only bought 3 contracts of the EXPE July Calls.. I am starting to learn with this stuff to start out small and accumulate slowly. Got killed last year by trying to go for the homerun like you had mentioned.


  21. By the way, does anyone here trade for a living? I would think it could be pretty financially rewarding, but I don’t plan to quit my day job anytime soon. . .


  22. OXPS – the chart is not good but will break out over $23.50 (or not but I think yes). The on-line brokers are doing great but BAC is giving away trades and causing fear and panic in a sector with 30%+ growth. So I’m bullish becuse I’ve used BAC’s brokerage and all they’re doing is stealing the bottom rung clients who the on-line brokerages are better off without.

    One of my controversial bits of consulting advice I often give clients is “Fire your clients.” it’s amazing when you analyze a business what a disproportionate amount of your time, effort and cost can go into certain clients. This is why I was a big supporter of Ebay last year, they get this concept and they’ve gone through 2 purges which cost them some short-term revenues but has left them in far better shape for future growth.


  23. Wikipedia is run by the free software package MediaWiki. You can grab it at http://www.mediawiki.org/wiki/MediaWiki and there are instructions there about how to set it up on your own space there as well. Jared probably already knows all of this stuff, so I’ll leave it in his fully capable hands. Of course if you hit a sticking point feel free to ask and I’ll tell you whatever I know.

    Also, I wasn’t really asking for specific advice about taxes, but there was a section in the book (I read it all last night) that did bring up taxes briefly. The problem is that it was touched on so briefly it kind of leaves you wondering ‘and what else do I need to know about this stuff and taxes?’ because it *is* touched on so briefly. Maybe if nothing else a reference can be included so people that do want to know more and currently don’t can have a place to go? This is shaping up to be the best options guide ever after all…


  24. Phil, I like the idea of playing some spreads like the appl spread you mentioned. I will keep my eye out for some potential plays.


  25. Phil, two things— I had the chance to listen to you the other day on mn1.com, it was great putting a voice to all your posts and you did a great job, the interviewer could barely keep up with you!! The second item, as a full time dentist and trying to learn, the book idea is GREAT, the only feedback I can give is the from the novice perspective, however, I am learning a lot from you. Keep it up! Thanks, Greg


  26. I take it it’s not possible to print out the pages from the Option book? I clicked on printer, but it wouldn’t let me. I assume you have it this way intentionally.


  27. kwan, I wrote a little piece on electing “trader” status with the IRS and some related pros and cons last week.

    Since being a CPA, I would go one step further than Phil and purchase the “tax” add-on that most online brokerage Co’s offer. It downloads all your transactions(date, time, order number) and allows different groupings such as long term , short term, short sale, etc. (which, for the cost of $29 at OpEx, will pay for itself if it saves 15 min of a (cheap) accountants time) :cool:

    . Unless you have as much money as Phil :wink: dont pay your accountant to sort and collate data. Let them concentrate on the impt tax savings strategies. :!:


  28. John, .pdf file is encrypted so you are correct about printing, unless you decrypt :wink:


  29. I need a calculator that will tell me the future value of an option at different stock prices and days to expiration. Is that possiable, what is it called, and where can I find one?

    Thanks1


  30. Thanks for the info karmcon! I think this is the sort of thing I was trying to get at above. Is your post in the comments someplace? I vaguely remember seeing something by you but I can’t remember where.


  31. This is why I have a harder time with options versus stocks. . With stocks, I can put a GTC sell-stop order in on a stock in case it falls through support or a buy-stop order if it breaks through resistance. With options, I don’t have a clue what the price would be at those different support or resistance levels. .

    Am I the only guy on this board who is boring and sometimes just buys common stock?? lol. . : )

    John


  32. digger, someone posted this gem last week – http://www.ivolatility.com/calc/?ticker=msft Is this the sort of thing you’re looking for?


  33. Just read the first part of the book and thought I would make a quick comment: I think it would be great to always give the other side of the story, so that people see the disadvantages of each strategy. Apparently you are trying to do it with your advantages/disadvantages recaps, but would great to explain them as well.
    For example, in the MSFT example, it would be good to say that there is a case where it is more benefitial to own the stock than the options: if stock goes to $27 for example, where the loss would be more important. In general , would be good to say that the leverage you get with profits works against you with losses (no free lunch).
    Also, in the section about spread, you could say that profits are limited.

    just my $0.02


  34. Phil,

    The options book from above, download part 1 ends on section 3.4 Spread Trading Overview page 9. Is that correct? download part 2 starts on Section 4. It feels like there is a page or 2 missing. Is this correct?

    Great read, thanks !!!


  35. In part 2 of the book, in the “short put” section, you could mention that brokerages usually let you use this strategy with less requirement that the “short call” because in this situation risk is limited (as stocks can only go to zero).
    As you mentioned the brokerages requirements in this part of the book (in the “short call”), maybe you should also mention that it affects your marging buying power. Maybe this is even worth a chapter in the book: how margin is affected by all different strategies.


  36. In part 3 of the book, when you make the analogy with buying insurance for the house, you are asking if we would buy insurance and answer “of course”. I would say it depends on the price of the insurance (premium, like an option), risk factor, potential of appreciation/profit for the house, market conditions etc…Maybe I am splitting hairs here, but it is not always such an easy decision to make. If it was, all stock owners would sell covered calls.


  37. Thanks Kwan, I’ll check it out.


  38. Chapter 5 is a great chapter. I especially like the “when should I use a protective stop” part.
    In the spirit of what I have said before, in the example, when you calculate the profit if the stock goes to $15, you could say that if you had not bought the puts the profit would have been $1,500 VS $1,050. I know I am focusing on these issues, but I always like to see both sides of the coin before I make a decision. And the loss of potential profit can make or break a trade.
    Also, small detail but in “Maximum risk” I think you mean “OR $450 for 3 contracts” instead of “OF”.


  39. I think Las Vegas is still booming and healthy. I was out and about the town last night and noticed how crowded everywhere I went.

    The reason I continue to like MGM very much is because of this man.

    http://www.lasvegassun.com/sunbin/stories/consumer/2007/jan/21/566630061.html

    j


  40. Quick question on the AAPL Spread Phil was referencing earlier: Could the scenario be this one?

    Possibility (With the spread)

    On March 17, 2007 AAPL closes OVER 90.00 .

    The March 90 calls we are short will be exercised against us and we would will sell a share @ 90. The option will then no longer exist

    The January call we are long will be exercised, EARLY, in our favor allowing us to buy a share at 85. The option will then no longer exist

    Thus we buy a share for 85 and sell for 90 = PLUS 5.00

    Previously we were out of pocket 10.00 on the spread

    Thus we lose $5.00 ($10.00 cost of spread less the $5.00 we are up on the exercise of both options)

    Am I reading that right? Is that the 5 dollar loss Phil referring to? How can you continue with the January 08 Leaps Calls if they are taking out? I guess I am missing something but still trying to get the hang of this. .


  41. Kwan, I found just what I wanted on my OX brokers site, all the variables already inputted. I ran some against current bid and ask, and it is very close. It’s a new account, I guess I should learn the features.


  42. Ok, after chapter 6, I think you are missing something about the difference between writing covered calls and buying a protective put. In most cases, if an investor does not intend to sell his stock (because of fundies, taxes etc…), he should NOT write covered calls. I am sure you know the reasons, but I think it should be explained.
    Personnaly I don’t like writing covered calls.
    Writng calls against a stock that you are not willing to sell is like selling naked calls. If price goes above the strike, you find yourself in the exact same situation, and it’s not a good one. If you sell covered calls against a stock that you like, a long-term holding with a good cost basis, what are you hoping for? Certainly that the options will expire worthless and that you won’t be called away. Same situation as if you were a naked writer.
    And if the stock rises, of course you can roll the calls, with further-out and higher strikes calls, and keep getting money/credit. But eventually you will have to either sell some stock or pay a substantial debit to buy back the calls. And you end-up fighting the market.
    I don’t know how deep you want to get in this book about all these strategies, but I believe this is a very important issue with covered calls.
    Also, maybe, mentioning the potential risk of the covered writer (lose money if stock drops by more than the call premium) could be a good introduction to the collar chapter, as buying a put in this situation would establish a protective collar.


  43. Option Book – yes that is Sage’s protected product and he is gracefully giving it to all of the members for review and comment as he and I work out an expanded version of the book. It was my idea to put the hive mind to work and see what we can all come up with but none of that free wiki stuff for this – we intend to make a killing so they’ll have to put me on CNBC and I can cause a riot by pulling out my top 10 examples of CNBC market manipulation during a live spot!

    ================================================

    Thanks Docgb but don’t forget you ARE the target audience so your comments are extremely valuable. Hopefully by the time we get into advanced strategies on our second book you will be up to speed to contribute there as well!

    =================================================

    Optrader – that was at least a nickel’s worth! Please make comments in th book section though as we will have a heck of a hard time if we start mashing those comments in with the regulars day’s postings! Thanks.

    ====================================================

    Pages missing – Sage and Jared will check on that!

    ====================================================

    Margin buying power – another excellent suggestion! You’ll be up to a dime in no time! 8-)

    =====================================================

    Insurance – have to think about how complicated we want to make something in an intro book. You can take both sides of anything but are you helping or hindering the learning process by arguing yourself into neutrality?

    ======================================================

    Damn Opt – we’re going to just have to sign you up as an editor! Good stuff!

    ========================================================

    Viva J! I think Vegas is a big hit in general but I think the big boys may be hurt as the people walking around the streets don’t make them money it’s the whales that migrate from the far east. With Macau up 22% in REVENUE, that money had to get sucked out of somewhere… Earnings will be very interesting this Q.

    Pictures were fantastic by the way – thanks!

    ===================================================

    LOL John – now I’m confused! I think what you’re missing is that we can buy out the caller any time it suits us. Of course you must, whether required by your broker or not, keep enough cash on hand to do this.

    When your caller is in the money you have to either buy him out or roll him into the next month, he does not call you away per se because you are not holding any Apple stock so you always need to take him out before expiration or it gets messy.

    That decision is very tricky and depends on what you can afford and how much you are ahead or behind on your leap and how much you can get for the next month’s calls. You are always trading off profits for protection and as Optrader says, there are many sides to the story. So many in fact, that I usually tell people they are best off just trying it with a single contract for a month or two just to get the idea before getting in too deep as the ups and downs of the cycle may not be for you (you need a lot of patience and a strong stomach, it is very normal to lose money during the first 3 months unless you are very lucky).

    ================================================

    Well I got all the way to DOW in my portfolio review – let me know what you guys think of that so far!

    Thanks,

    - Phil


  44. Covered calls – I’m 100% with you on that. One of my main contributions to the book will be color commentary like that as we want to make it more real for people with lots of practical examples.

    I think a tax book on options trading could be a book all by itself and I haven’t actually seen one on the subject – perhaps Karm would like to get a project rolling?!?


  45. Re: missing pages.

    Nope, it’s all there. Section 1 ends on p. 9, Section 2 starts on p. 10.


  46. Hey Phil, this site is really shaping up! More tabs up top- wow! Quick question – how much do you factor in short interest when approaching a trade you like? I was just over bernie schaeffer’s site and some stocks have outrageous short interest ratios.


  47. Thanks to all the contributors! Keep ‘em coming under the appropriate sections and Phil and I will chat about how best to build upon what we’ve got!

    optrader some excellent suggestions…..with regard to the margin, it’s probably worth posting the link below in case anybody missed it (new margin requirements….)

    http://optionetics.com/market/articles/16541

    (confirm the page sequence is correct)


  48. Short interest – I look but unless it’s outrageous one way or the other I don’t worry too much about it. I used to follow Schaeffer but, as sensible as SOIR seems, it has given me very poor performance in practice – sometimes everyone is just short on a company becuase it stinks…

    It’s kind of like looking at a college football game where the spread is 50 points and saying “Oh the heck with that, I’m taking an even bet on the underdog!” Of course what I look for is too many people on the wrong side of someting when they’re wrong, like the US dollar possibly as it will drop slowly if I’m wrong but explode up if I’m right.


  49. Ok, I copied my comments to the appropriate section. Will keep reading when I have more time and let you know if I have other comments. So far GREAT book.


  50. Phil
    Not to prolong this discussions but wouldn’t it be simpler and more clearer
    just to state the dollar amount in a trade. From start to finish. Example AApl
    say you put 1000 dollars to start trade added a few more trades tied to this trade
    whether DD or whatever, then sold let say total 1500 dollars. At that point you could
    tells how much the trade netted say 2000 dollars 500 dollars hundred gain much easier to
    understand Thanks


  51. Thanks Opt! Much appreciated!

    =====================================

    I have been advised that putting in specific postion sizes, dollar amounts etc. crosses into a very grey area of regulations I’d rather not get into! My original intent was to put up a portfolio but it’s been veto’d by people who are paid to keep me out of trouble but I am looking into doing some sort of “Play” portfolio if I can get that approved.

    Even the idea of adding and subtracting is tricky so, in general, I’m trying to talk about some of them once in a while so I can just teach everyone to look for ways to minimize capital at risk by “taking some off the table.”


  52. Chapter 5 & 6 about greed and fear…was that written for me? I am constantly struggling with this! Looking through my trades last week, I’ve come to one conclusion…I have no discipline whatsoever! I panicked and bought back my caller when market went up on Wednesday only to find out just about everything went down on Thursday. For example, on Wednesday GS goes up +$7 and tanks $7 on Thursday. Kicking myself for not leaving the caller on GS. Phil, thank you for letting us read this book. It is very helpful. I can’t wait for the book to be published so I can get my daughter (the one interning at MER) to learn options.

    j


  53. Great book so far. It cleared up a lot of points I was fuzzy on.

    If I’m thinking straight, and given that the current chances of IMPACT VS ORBIT are generously 50/50,
    wouldn’t Straddles or Strangles be the best current strategy? Sorry if this is a dumb Noob question.


  54. Phil,

    Thanks for the feedback on the AAPL Spread. So when your caller is in the money, is that one of those carrot on the stick things when you tempt him with an amount they will be happy with but where you don’t kill yourself. How do you roll them them into the next month? Meaning, once you “buy to close” for the current month, you are open up and sell another call the following month? Bare with me on this.


  55. Phil,
    Love the APPL Spread trade! Also the WFR Leap trade. These are nice longterm trades I asked about on Friday. I am also looking to get back on ANF. Made a nice 90% on a Jan 07 $70 leap.


  56. John I know that a question for Phil…….nevertheless the answer is yes, rolling from one month to another involves buying to close the current month option and selling to open the next month’s option….if you do it at a higher strike price on the call side you increase profit potential and if you take in a credit overall you can lower cost basis and it doesn’t cost you a dime out of your own pocket!


  57. I’m glad the book is a help, maybe we’ll dedicate 5&6 to you in the new version J!

    ========================================================

    Straddles, strangles – Not right now, what’s killing our portfolio is the fact that nothing is moving much, just up and down but no real direction that breaks a trend. That wipes out puts and calls and the best thing for us to do is sell them, not buy them!

    ==========================================================

    John – depending on your trading platform they may allow rolls but the net effect is the same if you buy out your existing caller and resell to another caller except for possibly the way they end up handling the margins (some brokers won’t clear buying power until the next day if you treat it like 2 transactions).


  58. Phil,The book is really interesting, very clear and explanatory. Good stuff. I am out of town but when I am back home and will read it more thoroughly and will give more constructive comments. By the way, will you touch the leaps in the second book?
    I am not an active contibutor during the day trading as I have a job, but this is a great blog and I am learning a lot.


  59. GS
    BillBigD,
    I took a closer look at GS’s charts this weekend. On the hourly chart, the MAs look like they might take some time to sort things out. There might be some resistance between 214-215. Daily charts are still good, with 10 above 20 above 30, and heading up. I think I’m going to take some quick profits in the morning if GS goes above 214, unless we see unusual strength that pushes it through all the MAs on the hourly chart. I think once all the MAs have flattened out and turned up, on the hourly chart, there’s planty of time to catch this.

    In any case, you probably have already noticed this. I just wanted to flag what I’m looking at since you didn’t pull the trigger on Friday.


  60. FDX
    Looking more interesting day-by-day. Looks like it’s gaining momemtum to try to turn up.

    PTR
    This thing looks like it’s hanging off a cliff. A little more push, this thing can go to 115!


  61. Happytrading
    I remember you mentioning VCLK, are you in? The chart is looking good.


  62. I just watched a show about Daniel Tammet. He is an autistic savant. He can calculate huge sums in his head in seconds and instantaneously recognize prime numbers…similar to the man Dustin Hoffman played in the movie “Rainman”. Maybe if I had a brain like that I might have an edge trading options…you think?

    http://www.optimnem.co.uk/about.php

    j


  63. VCLK
    BillBigD, I own the stock; haven’t played options on this one for a while. I think she can top 27 short-term, especially if GOOG reports well! She jumped recently because AOL made a bid for its rival company. For people who don’t want to take the risk on GOOG, VCLK could be a safer alternative to play GOOG earnings with this week. Feb 25 calls are only 1.1/1.25!

    UTX
    This popped into my radar this late last week. I think we’ll see a new 52-wk very soon. Charts are good earnings are good. Initial pullback from earnings rally is almost done. Ready to go up again. Take a look!