Hi Jim,
No I do not sell covered calls. The reason for not doing so is that I am a 24 year old student and do not have much cash in my account. In case of an assignment I will loose a large portion of my account. I do not have an IRA because I live in the Netherlands. My objective is to look for prices that could be seen an priced incorrect with respect to the current situation. Ideally, I look for binary outcomes I try to either break-even or make a large profit.
One recent example, a firm announced its earnings. Instead of buying options prior to the release I purchased them after the release. I would not profit from the gains in the after- and pre-market. But I bought a large quantity of call options near the spott price when the volatility was already back to its normal level. I also bought some amount of put options (one-third of the amount of calls), to break-even from a decline of the stock price. The bet is binary. Either it pays off very large or I loose a small amount of money relatively to the money invested. What I do has a high degree of speculation. However, the upside is much larger than my downside. Ofcourse, it could happen that it fails. But in the end I try to maximize my expected value instead of maximize a certain trade. That would also be impossible because I do not posses information about the future. Something I should learn is not to overtrade. A big mistake of mine. I have been able to do well, but I could have done much better if I would stop trading for the sake of trading. It sounds stupid, but I sometimes trade when it does not make sense.
About the Alibaba trade. I am not going to do it. Another reason for the large quantity of options could be that is was a result of its recent earnings release and the stock moved-up a lot. I am sorry, your explanation seems very sound. But my lack of knowledge on this matter, makes it not possible to understand it fully.
In two weeks a firm will announce some news. I am writing some software to make certain computations. In this particular case, I either break-even, loose a small amount or make a large profit. I will update you on it prior to this announcement with an explanation of the trade.
Indeed if anyone has some ideas to share, that would be great especially if it involves purchasing options instead of buying them. |
