For those interested in loading up on GDX, GLD or SLV the correction has started. I'm looking for the decline to fall back to support which will probably be a higher low than last time. When it begins it's bounce there will be a lot of out of the money put writing happening in the OPC camp.
On a side note I was checking out option premiums on SRS the ultra short real estate ETF. They're very high. Housing is screwed as we know but commercial is just beginning to fall off the cliff. Retailers and anchor tenants are closing up shop. Big problems to come in my opinion...This smells like opportunity to me.
"Adjusted for Inflation, Dow's Gains Are Puny" WSJ
10 minutes ago
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9 comments:
Are you gonna buy the SRS options?
Selling options: play on rising gasoline
http://is.gd/kK4j
T-CR
Hey Smart - if I did anything I'd probably sell options. Today's massive drop was an eye opener. Sorry I didn't get back to you on your other post. It really makes me think I just haven't had the time...
T-CR - thanks for the link
Smart - should read it really makes me think and I haven't had the time
Hey Joe,
That's why i will only trade IWM, SPY, QQQQs, DIA, so i can do spreads with only $1 between strikes... so your margin is only $100 - you can scale up with multiple contracts... it is true that if the market moves towards your option and you do nothing you can lose the maximum amount which would be $1 minus the credit you collected... however, there are several management techniques that can mitigate most if not all the risk... you can 'roll out' by closing out your position and repositioning to the next month and choose strikes that will clear the loss and allow you to breakeven or make some without losing the total cash at risk... you can 'leg out' by repurchasing the short call and leaving the long call in place if the market has strong momentum and you may collect enough on the long to offset the short...
whatever the situation, the worst thing is to just sit there and do nothing when you have a 2-3 good management strategies... I think the risk is better than what i did on my first covered call trade when i bought NTRI (Nutrisystems) at 48.87 and about two weeks later the CEO made a 'pre earnings' statement declaring they would miss their estimates.. NTRI fell almost 50% in one day... not much you can do about that... i'd rather take the chance on losing some of my credit spread risk and keeping most of my cash in my account and earning about double the return...
I also believe that buying bear call spreads (where you sell short call above current price and purchase a long call above your short is safer than doing the opposite (Bull Put Spread) as it normally takes more 'energy' for the market to move up but can fall and cover much more territory in a shorter period of time...
btw, I use Interactive Brokers who charge $1 per option and if you are right and it expires worthless then you have no additional commissions... hope this helps, jake
Jake,
Thanks for the reply,all good points. I am getting closer to taking the plunge with spreads.
Joe
No problem PC, any time you could. I should just warn you that ERX may give us trouble again as its chart is not as defined as DIG or XLE. The previous low on ERX was $27 but now is $21.75, while DIG and XLE had similar lows. I exited all my ERX puts unfortunately with some loss as I cannot take the stress (I sold puts heavily at the wrong time). Instead I switched to non-leveraged ones and even buying options. In this environment, I think it is worth to pay for time. The other point I have is that I still think SPY puts are not very strong hedges specially with the time decay. I don't know what is better though. It seems you have to play quite a bit to win in this market.
Regarding SRS, I have good experience with it and with URE. As a rule of thumb whenever URE meets its low it is about time for a pullback on SRS, and whenever SRS meets its lows, it is time for URE to pull back. This up and down movement causes both of these stocks to decay like crazy. So, the time decay will act against your favor if you sell SRS puts. With all the hell that happened last week to the market SRS should have skyrocketed, but now with one rally it is just back very close to its lows. The other problem is that there bid and ask are too far.
Hello OPC, sold some Mar. and June 30 puts on GDX this AM, 1.45 & 4.30 each, respectively. I feel good about this, and would be happy to collect premium or own shares at those prices. You might remember I "was inspired" to sell some Feb. 30 puts on ERX by reading your site, and I'm proud owner of some shares now. ERX is getting to where further declines in the RIENG.X should not affect ERX so drastically point-wise. I did not sell any covered calls, because it seemed to me that if the price surged and I wished to sell the stock, I'd have to buy back the calls at a loss. Calls sold at a high enough strike had hardly any premium... hope I thought that all through correctly!
Duke - I hope ERX works out for you. Sorry to lead you into that one although it could still work out. One bear rally and it goes through the roof...
I like the GDX trade although this market is so nasty I was looking at the 25's. Looks like we're gettting a little pop today. Good luck
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