Author Topic: Stocks  (Read 161457 times)

Offline yuneeq

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Re: Stocks
« Reply #2595 on: September 25, 2017, 11:19:05 PM »
You have a good trade here with ALK, it is a buy here ,if it takes 78 next target is 83, ill use 70.70 as a stop, ill buy the $75 options.

I appreciate the advice, but I don't know what you mean by a "stop".
Any recommendations on how to learn the basics?
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Offline Grouch

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Re: Stocks
« Reply #2596 on: September 25, 2017, 11:27:24 PM »
I'm looking to start buying call options (actually already bought ALK 70 calls for January).
What tools can I use to help calculate my return?

For example- I want to quickly calculate what my profit will be if I buy $3 options at $75 vs $6 options at $70, and the stock rises to $85?

Is someone is bullish, is it better to buy the call options that are above or below the current stock price? Does it just depend on how bullish the investor is?

Any general advice or guides for basic call option buying strategies?
Answer to your question : OptionsHouse (by eTrade) has a great analysis of potential P&L.

Offline ludmila

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Re: Stocks
« Reply #2597 on: September 26, 2017, 12:48:50 AM »
I appreciate the advice, but I don't know what you mean by a "stop".
Any recommendations on how to learn the basics?
By stop I meant stop loss, I do not trade options much, I trade stocks, forex and futures,ALK is currently oversold after a sell off and at the point of rallying, at least in the short term, there is support at 70-71 ,if the price goes under this support it can go much lower, ill get out of the position in case this happens to limit the loss.
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Offline Boruch999

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Re: Stocks
« Reply #2598 on: September 26, 2017, 06:51:01 AM »
I'm looking to start buying call options (actually already bought ALK 70 calls for January).
What tools can I use to help calculate my return?

For example- I want to quickly calculate what my profit will be if I buy $3 options at $75 vs $6 options at $70, and the stock rises to $85?

Is someone is bullish, is it better to buy the call options that are above or below the current stock price? Does it just depend on how bullish the investor is?

Any general advice or guides for basic call option buying strategies?

Profit at expiration is as follows:

With the stock at $85 -  the $75 Call is worth $10 a share. Subtract $3, your cost and you profited $7 x 100 ( a contract is for 100 shares) = $700 - commisions.

                                      the $70 Call is worth $15 a share. Subtract $6, your profit is is $900 per contract - commisions.

Your breakeven point for the $75 Call is $78 (not taking commisions in to account.) You will begin losing money below $78 with a max loss(stock at or below $70) of $300 per contract + commisions.

Your breakeven point for the $70 Call is $76. Max loss (stock at $70 or bellow) is $600 + commisions.


Generally speaking, you'd need to be more bullish to by a call above the current stock price as it currently has no intrinsic value, know as OTM - Out of the Money. If the stock does not advance to your strike price, you loose all of your investment.  If you buy an ITM call (In the Money) the stock needs to fall for you to lose your entire investment.



Offline hachover

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Re: Stocks
« Reply #2599 on: September 26, 2017, 08:07:34 AM »
Profit at expiration is as follows:

With the stock at $85 -  the $75 Call is worth $10 a share. Subtract $3, your cost and you profited $7 x 100 ( a contract is for 100 shares) = $700 - commisions.

                                      the $70 Call is worth $15 a share. Subtract $6, your profit is is $900 per contract - commisions.

Your breakeven point for the $75 Call is $78 (not taking commisions in to account.) You will begin losing money below $78 with a max loss(stock at or below $70) of $300 per contract + commisions.

Your breakeven point for the $70 Call is $76. Max loss (stock at $70 or bellow) is $600 + commisions.


Generally speaking, you'd need to be more bullish to by a call above the current stock price as it currently has no intrinsic value, know as OTM - Out of the Money. If the stock does not advance to your strike price, you loose all of your investment.  If you buy an ITM call (In the Money) the stock needs to fall for you to lose your entire investment.

When you say buy i assume you mean buy to open. If so, why would you buy an ITM option? If the stock goes up the option will go up by the same amount (or less, if there was significant time value in its price). Why not buy the stock itself? Are you thinking for dowside protection, leverage, or some other reason?
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Offline Boruch999

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Re: Stocks
« Reply #2600 on: September 26, 2017, 08:32:39 AM »
When you say buy i assume you mean buy to open. If so, why would you buy an ITM option? If the stock goes up the option will go up by the same amount (or less, if there was significant time value in its price). Why not buy the stock itself? Are you thinking for dowside protection, leverage, or some other reason?

I was answering yuneeqs Qs.  I rarely buy calls and when I do it to close or as part on a complex position.  But the two reasons you mentioned seem rational to me.  If you are short the funds to buy the stock out right ( that's related to leverage which you mentioned,) or downside protection which can otherwised be achieved with a stoploss.  Stoplosses can fail on a gap down or in a steep crash.

Offline Sport

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Re: Stocks
« Reply #2601 on: September 26, 2017, 09:15:18 AM »
90 support held, EFX up $15 in 10 days .
Let's see what happens today, if they remove the halt on trading.

Offline ludmila

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Re: Stocks
« Reply #2602 on: September 26, 2017, 10:15:38 AM »
Profit at expiration is as follows:

With the stock at $85 -  the $75 Call is worth $10 a share. Subtract $3, your cost and you profited $7 x 100 ( a contract is for 100 shares) = $700 - commisions.

                                      the $70 Call is worth $15 a share. Subtract $6, your profit is is $900 per contract - commisions.

Your breakeven point for the $75 Call is $78 (not taking commisions in to account.) You will begin losing money below $78 with a max loss(stock at or below $70) of $300 per contract + commisions.

Your breakeven point for the $70 Call is $76. Max loss (stock at $70 or bellow) is $600 + commisions.


Generally speaking, you'd need to be more bullish to by a call above the current stock price as it currently has no intrinsic value, know as OTM - Out of the Money. If the stock does not advance to your strike price, you loose all of your investment.  If you buy an ITM call (In the Money) the stock needs to fall for you to lose your entire investment.
Excellent summary on options.
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Offline hachover

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Re: Stocks
« Reply #2603 on: September 26, 2017, 10:46:19 AM »
I was answering yuneeqs Qs.  I rarely buy calls and when I do it to close or as part on a complex position.  But the two reasons you mentioned seem rational to me.  If you are short the funds to buy the stock out right ( that's related to leverage which you mentioned,) or downside protection which can otherwised be achieved with a stoploss.  Stoplosses can fail on a gap down or in a steep crash.

That is what I wanted to point out - if you want leverage, a more effective method may be to buy on margin, and if you want downside protection there are other ways to obtain it. As you mention, stop loss is not a sure thing, but pairing a put option with your stock buy is a sure thing. Buying a stock on margin + put option might not be more cost effective than buying a call outright (though it can be, e.g. if you're taking a contrarian position), but it can have a better return profile for the cost.

My purpose in commenting is to stimulate some thought and discussion for the self-proclaimed investment novices.

I personally share your view in that I only buy call options as part of a larger strategy, and not merely to take a bullish position on a stock.
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Offline yuneeq

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Re: Stocks
« Reply #2604 on: September 26, 2017, 11:05:20 AM »
Profit at expiration is as follows:

With the stock at $85 -  the $75 Call is worth $10 a share. Subtract $3, your cost and you profited $7 x 100 ( a contract is for 100 shares) = $700 - commisions.

                                      the $70 Call is worth $15 a share. Subtract $6, your profit is is $900 per contract - commisions.

Your breakeven point for the $75 Call is $78 (not taking commisions in to account.) You will begin losing money below $78 with a max loss(stock at or below $70) of $300 per contract + commisions.

Your breakeven point for the $70 Call is $76. Max loss (stock at $70 or bellow) is $600 + commisions.


Generally speaking, you'd need to be more bullish to by a call above the current stock price as it currently has no intrinsic value, know as OTM - Out of the Money. If the stock does not advance to your strike price, you loose all of your investment.  If you buy an ITM call (In the Money) the stock needs to fall for you to lose your entire investment.

Thanks, I actually knew how to do that calculation but you definitely made it in clear and easy to understand. The problem is that when I calculate it, it's tedious and prone to me making mistakes, hence a calculator where I can input the variables to see potential profit or loss at diff price target would be very useful.
« Last Edit: September 26, 2017, 11:32:22 AM by yuneeq »
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Offline ckmk47

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Re: Stocks
« Reply #2605 on: September 26, 2017, 11:14:54 AM »
Thabks, I actually knew how to do that calculation but you definitely made it in clear and easy to understand. The problem is that when I calculate it, it's tedious and prone to me making mistakes, hence a calculator where I can input the variables to see potential profit or loss at diff price target would be very useful.
I do the calculations on an excell spreadsheet. I make a small chart with different end price scenarios before I buy.  Then I can gauge if the premium (commission) and price is right for me.

Offline yuneeq

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Re: Stocks
« Reply #2606 on: September 26, 2017, 11:56:19 AM »
That is what I wanted to point out - if you want leverage, a more effective method may be to buy on margin, and if you want downside protection there are other ways to obtain it. As you mention, stop loss is not a sure thing, but pairing a put option with your stock buy is a sure thing. Buying a stock on margin + put option might not be more cost effective than buying a call outright (though it can be, e.g. if you're taking a contrarian position), but it can have a better return profile for the cost.

My purpose in commenting is to stimulate some thought and discussion for the self-proclaimed investment novices.

I personally share your view in that I only buy call options as part of a larger strategy, and not merely to take a bullish position on a stock.

I have owned ALK stock for a while and have seen it take downswings for no reason many times and it always rebounds. Sometimes I bought more stock but usually I don't have cash on hand. I finally mustered the courage to cash in on the rebounds that I felt were easy for me to predict time and again. My goal is to use leverage to buy options to hold for a few months with a target of about $85. So I bought 3 and 6 month 70 call options at $6.40 and $7.70 each. Using margin I would be paying about 12% interest and only be able to buy less than half the shares that I can buy with options. I don't know how to sell put options either. The truth is I'm very bullish and didn't invest more than I'm willing to lose. Not sure how stupid I sound but that's what I did. After thinking it over, maybe it would've been better to buy on margin because I like to hold for long term and the downside risk for me is basically just the interest until the stock recovers, which is still much less downside risk than losing the entire investment.
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Offline yuneeq

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Re: Stocks
« Reply #2607 on: September 26, 2017, 11:57:02 AM »
I do the calculations on an excell spreadsheet. I make a small chart with different end price scenarios before I buy.  Then I can gauge if the premium (commission) and price is right for me.

Good idea, I will do that.
Wish there was an app though.
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Offline yuneeq

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Re: Stocks
« Reply #2608 on: October 04, 2017, 09:39:36 AM »
You have a good trade here with ALK, it is a buy here ,if it takes 78 next target is 83, ill use 70.70 as a stop, ill buy the $75 options.

So now its at 82. Would you still say to cash out at 83?

Is there the "best" way to cash out if I don't plan on keeping the stock?
Meaning - does it make a difference if I sell the options vs converting the options and selling the stock right away?
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Online ChaimMoskowitz

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Re: Stocks
« Reply #2609 on: October 04, 2017, 09:44:35 AM »
For forex XAU/USD what is the margin requirement? Is it 100%?
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