Hi Barry: Some how I got out Friday and was a little ahead for the
last two weeks, my long term puts are not worth much at this time,
but between now and Jan a lot can happen. I may add to them if
I see her start a down trend, or if she gets on up to 65.
I may buy some short term July puts if the reduce the premium,
a lot of that has to do with if other put holders are tired of
holding them. The premium does change from time to time with
supply/demand on the option side..so it's not always like they
track the price. Being I'v played these so much I guess I got a
little feel for them, during the day I keep up ( sort of in my mind
how many got sold at what price ) the key here is getting in under
what you sence most of the put players paid..if I see a big block
of puts go for $3 and I mess around and get in at 2-1/2 I got an
edge on getting out if she don't fall like I want her to.
Been times I'v doubled up..just to stay below the big majority
in price..in cases like that she has fooled me and when she does
tick the other way, I can slip out the side door as I call it,
and generally get by skiming an 1/8 or 1/4 or so that covers,
my commission and sometimes leaves a little..only once last week
did I chicken out and take an 1/8 loss on a few.
Here is how that happended , I put them up for sale..and only half
sold at a small profit but the day was getting late..so I had to
click on market for the balance..that was more to avoid a second
commission the next day, as it turend out it was good I moved
them, as I bought the back cheaper the next day.
Thats anther thing I try to stay close to the money..or just in it
but need some volume , playing options were there is no volume you
have no liquid, just like with a stock that has no volume.
Each one plays different, as you are really playing something like
a poker game amoung the other option players, with the dealer or
"bookie" taking a cut out of the pot..the smaller that pot the more
percentage he is going to want, so if there is not much open interest
you better have a sure hand. Were there is a lot of IO you can often
bluff enough to stay ahead. All the time you are going in and out
you are hoping to see the big Kahuna hit..as you never know when it
will..so you are watching the ask/bid size of the stock, looking
for big blocks that tick her down, and not up..if you see them you
quicky rase your ask, ( I forgot..as soon as I make a buy they go
back up for sale..with about a 1/2 point spread at least these
short term ones do..and I toggle the sale price watching the trend,
it's tough ! ) Most of the july 60s are now out over 3, so if I
come in under that I may be OK for a quick exit on any dip
even if she goes up..you are in about half the time and out about
half so there is a 50 50 chance of being in when she does
a good fall, but playing as close as I do you may be out too..
I'm about wore out on this run, can't remember it being so close
before..sure has give me a lot of pratice but I get afraid at times
when I see I'm not with the curve..and that has happened to me,
and I got into other stocks and plays and just got to much going
to stay on top of every thing. Stort term trading requires you
to be on top of every thing your working and I failed there with
Atel..some times I think the short term stuff is not worth it,
for one I don't have enough money to risk to lay down very big
bets.( two ) with options if you bet to heavy you hurt your own
hand..it's like at the dog track..( you got a good long shot..and
you know it, but a big bet will kill the odds on the odds board )
You wait for the last min to lay the bet never taken you eye off
the odds board, even then it may fall a lot if some other regulars
had the same trick in mind ) ..your always working the odds , not
just picking winners and losers. With the options you get a feel,
and the odds vary with were you get in anmong the crowd..you
want to have a lower cost than most of the players, IF YOU buy
to many...( you reduce the percentage size of that pool you are under PER contract ) I'm I making sence ? Like if I think there is 200
contrats out..and I'm in the lower 50..with 10 contrats..that puts
me about 4 to 1 lower or with 4 to 1 odds over the pack of at
getting out the door ...if I up that to 20 contracts now I'm
no longe 4 to 1 but more like 2 to 1, so when I do have to double
up I don't hang around long I exit fast with very small margin, and
then "hope" to enter at a lower price than I exited..this last
month I played the 55s for about a week then had to move to the 60s
as I could not get back in the 55s enough cheaper, and she was
moving away from them to much. You get more bang for the buck on
your play if your just out of the money and she goes your way, but
you take more risk of not being able to get out if she moves aginst you, normally right on or just in is the best play ( but you need one
that has some open interest to pull off my escape plan on the dips,
other wise the market marker will just let you toast ) I'v just about
made every mistake you can make, don't let any one every tell you
they started playing options and didn't lose their shirt learning,
it cost <G> Asnend was a good short last year but eat me up as
I did not have my feel for bobbing in and out, and played to far
out of the money on short term options ) and didn't have my eye on
the rest of the players, man we got some pros playing this and they
likly never heard of SI..and they been doing it for years, not
to mention the market maker, and all the little brokers that get
a sort of tip and lay bets too..options is like laying bets, but
your also in a pool..like paramutual betting , up to the point
your strike price and cost have you in the money, your dancing in
a sea of wagers. WOW that was a mouth full hope I didn't twist
it up to bad..
The other end is finding a dog one you think will run like AOL,
hype and all..but is cheap and has not gone to the sky..and you
can get calls on far enough out..that you can use over and over
to short her with, ( cheaper than all the option commissions, and
it avoids that dam big spead..what do I mean well an 1/8 spread
on a 3 option hurts you more than 20/8 on say the 60 dollal stock,
that your playing so it's like walking into a 2-1/2 spread if your
short selling the same stock...man I fight and toggel my rear off
for a 1/16 on optoins..as that represents like a 1-1/4 spread on this
stock, ( on $3 optins ) still I wont short uncovered, one really
bad day and man o man, you could be years getting even, LOOK at
what JBIL did today..you can bet many shorts did not get stoped
out were they had set the stop price..many of them got hit hard,
in cases like JBIL..there are going to be all the guys with pull
ahead of you making an exit before yours get to the table,
the stop loss will handel the odanary run of things but can eat
you alive if a big move comes..to top that off say you omitt
the stop loss at some point if your broker gets worried he can buy
you in and there is nothing you can do about it, as he can say the
borrowed shares were called back, as with AOL..some fund can let
out his shares on margin to be borrowed..but at any time he can
take them out of that pool, and suddenly your broker may have to
come up with them. What if he sells, they are gone..and your
bought in at his sell price, the lender has the upper hand, but
if you got calls that actualy put you ahead on a arb..they will
likly mess with the other guys first.
I never had it happen to me as I'v not got into position to short
the way I would want to. But I talke to some who shorted bre-x
and they thought they were going to make a huge killing when she
fell, but they got bought in half way down, and were told the
shares that they had borrowed were sold, so they got bought in
at that price..they made money but were not happy campers as
she went to the floor..and they were counting their money. before
they called the broker..so in a massive sell off it seems shorters
can lose half the drop or more..( broker has the aces )..and some
of them short too..so in that respect puts are much better in big
sell offs.
Jim
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