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[MVP]

MVP, are you still buying and selling today?

Correct me if I'm wrong but those funds are still unsettled before you can sell again.

Not for me, I have like 5 accounts with Fidelity lol...I'm not trading this account though, I like the way the TPX play is working out, I'll let it develop.

Did you make any put moves on FB when it came out?

Nah I never play IPOs, though a ton of people made a killing on it. I dropped $500 on an FB call option a couple weeks ago, I think it was $21 strike, expired Sept. 27th, while it was in the $18s...made over 1000% percent on it after it made its comeback, called the reversal almost to the tee. You can even check my StockTwits posts back in early Sept 5th when I was screaming about it.

 

[Davedough]

Not for me, I have like 5 accounts with Fidelity lol...I'm not trading this account though, I like the way the TPX play is working out, I'll let it develop.



Nah I never play IPOs, though a ton of people made a killing on it. I dropped $500 on an FB call option a couple weeks ago, I think it was $21 strike, expired Sept. 27th, while it was in the $18s...made over 1000% percent on it after it made its comeback, called the reversal almost to the tee. You can even check my StockTwits posts back in early Sept 5th when I was screaming about it.

What kind of gains did that net you?

 

[Ovid]

Subscribed.

 

[UltraMagnanimous]

I've made 12% in one month playing weseed.com.

I feel like Gordon Gecko.

 

[MVP]

Trying to figure this out.

So a "Put" is an option to sell. So you bought the option at a certain sell price. So if the stock actually does worse, the value of your sell option goes up since it still means the stocks can be sold at that price? I feel like I'm missing something.

Yes...going back to the orange analogy, the put option lets me sell it at a certain price. So if the orange is now worth $5, I can buy a $4 put option for like .10, and at expiration, I can buy it at market price and I can sell it at $4.

Right now that the orange is $5, the contract is almost worthless, because who would want a contract entitling them to buy something for $5 to then sell it at $4?

If I have an inkling that this orange is rotten on the inside though, I can buy the contract, and when it turns out it is rotten, the orange will be worth like $1, making my .10 contract to sell at $4 now technically worth $3.00 face value. from .10 to $3.00 is a 3000% increase.

The orange could also just hover around $3.75 and $4.25 and time decay could eat away at the time premium of my option, and the closer we get to expiration, the less and less it's worth, even if it hovers around $4.

 

[ggnoobIGN]

Traded in GOOG, TPX, ONXX, and RIG today. Made money in them all. Good day.

 

[MVP]

What kind of gains did that net you?

over $4k, had I held it a few more days, would've netted close to $10k, but I try not to let what could've been bother me. Facebook went on a bezerk rally.

 

[The Elite]

Yes...going back to the orange analogy, the put option lets me sell it at a certain price. So if the orange is now worth $5, I can buy a $4 put option for like .10, and at expiration, I can buy it at market price and I can sell it at $4.

Right now that the orange is $5, the contract is almost worthless, because who would want a contract entitling them to buy something for $5 to then sell it at $4?

If I have an inkling that this orange is rotten on the inside though, I can buy the contract, and when it turns out it is rotten, the orange will be worth like $1, making my .10 contract to sell at $4 now technically worth $3.00 face value. from .10 to $3.00 is a 3000% increase.

The orange could also just hover around $3.75 and $4.25 and time decay could eat away at the time premium of my option, and the closer we get to expiration, the less and less it's worth, even if it hovers around $4.

Thanks. It scares me that I'm starting to make sense of this.

 

[Sanky Panky]

We all have our personal demons, and those come out if you trade.

My degree in trading has cost me a little bit over $55,000 (plus gains) in 4 years, and most of it was lost in a single trade. Every trade lost should be a lesson up to a point, but if you don't identify the core problem, you'll keep making the same mistake.

I've been doing currencies (focusing on the EURUSD). My broker at that time accepted opposite position, so I could both buy and sell at the same time. It gave me a thuarped sense of "hedging". The crisis in Greece was in its infancy, and the thing was ready to break through 1.4000. Using fundamentals (pointless for short-term), I sold. Account was at $72,000 (had made $22,000 in only a few weeks).

Usual mistake people make is averaging down. The position started going against me, so all I saw was potential higher profits once it went my way. This only led to the position getting bigger and bigger (higher loss per pip), and having to hedge with bigger and bigger buy trades. A single pip was worth $300 at one point.

Another mistake is guessing what the top/bottom is in a price swing. Just because you think that it has gone up enough, or a certain level has been a resistance at one point, doesn't mean shit. You may think who is stupid enough to buy past a certain price, but the market has no reason of being (it does, but that is manipulated so don't fight it).

Yet another mistake is setting a hard price target (unless your system calls for it). In my mind, I knew the Euro was going to 1.38 (of course eventually it went to 1.200), and I was set to make a cool $30,000 on the position. At one point I was down to $8,000 from $72,000 (no margin call due to the buy and sell trades open), so I started micromanaging the trade using the 1 minute chart. Closing the buy position when it was going down, opening the buy position when it was going up. I got back up to $45,000 and felt on top of the world. I knew for sure it would keep going down. NOPE, the market doesn't give a shit. A mistake in the way I set up a limit order, and overnight I woke up to having $18,000 only.

Finally, my own personal demon is I don't like to be wrong. Pride gets hurt, and you feel like the market personally knows what you margin call level is, and it's only acting that way to fuck you personally (except the market doesn't give a damn). I can win 5 trades in a row, but if I hold on to the loser because "I KNOW" that I will be right in the end, I get rammed. For the longest time my seldom sporadic losses always ended in margin calls, wiping out any profits accumulated and then some. That one trade could have ended up with me having $68,000 or more (at worst $45,000), and not $8,000.

Anyone can read about this all, but we all discover our own personal demons when we trade. No book or post will ever bring you face to face with that.

 

[ggnoobIGN]

We all have our personal demons, and those come out if you trade.

My degree in trading has cost me a little bit over $55,000 (plus gains) in 4 years, and most of it was lost in a single trade. Every trade lost should be a lesson up to a point, but if you don't identify the core problem, you'll keep making the same mistake.

I've been doing currencies (focusing on the EURUSD). My broker at that time accepted opposite position, so I could both buy and sell at the same time. It gave me a thuarped sense of "hedging". The crisis in Greece was in its infancy, and the thing was ready to break through 1.4000. Using fundamentals (pointless for short-term), I sold. Account was at $72,000 (had made $22,000 in only a few weeks).

Usual mistake people make is averaging down. The position started going against me, so all I saw was potential higher profits once it went my way. This only led to the position getting bigger and bigger (higher loss per pip), and having to hedge with bigger and bigger buy trades. A single pip was worth $300 at one point.

Another mistake is guessing what the top/bottom is in a price swing. Just because you think that it has gone up enough, or a certain level has been a resistance at one point, doesn't mean shit. You may think who is stupid enough to buy past a certain price, but the market has no reason of being (it does, but that is manipulated so don't fight it).

Yet another mistake is setting a hard price target (unless your system calls for it). In my mind, I knew the Euro was going to 1.38 (of course eventually it went to 1.200), and I was set to make a cool $30,000 on the position. At one point I was down to $8,000 from $72,000 (no margin call due to the buy and sell trades open), so I started micromanaging the trade using the 1 minute chart. Closing the buy position when it was going down, opening the buy position when it was going up. I got back up to $45,000 and felt on top of the world. I knew for sure it would keep going down. NOPE, the market doesn't give a shit. A mistake in the way I set up a limit order, and overnight I woke up to having $18,000 only.

Finally, my own personal demon is I don't like to be wrong. Pride gets hurt, and you feel like the market personally knows what you margin call level is, and it's only acting that way to fuck you personally (except the market doesn't give a damn). I can win 5 trades in a row, but if I hold on to the loser because "I KNOW" that I will be right in the end, I get rammed. For the longest time my seldom sporadic losses always ended in margin calls, wiping out any profits accumulated and then some. That one trade could have ended up with me having $68,000 or more (at worst $45,000), and not $8,000.

Anyone can read about this all, but we all discover our own personal demons when we trade. No book or post will ever bring you face to face with that.

Great post. The worst part is, anyone getting into trading will hear this over and over again...and make the same mistakes anyways. Adding to losers is the worst thing ever. I wish I would never do it.

 

[MVP]

Anyone can read about this all, but we all discover our own personal demons when we trade. No book or post will ever bring you face to face with that.

Bingo, this is why I don't advocate paper trading (unless you're completely new), real money brings out the real emotions. Anyone can "let their winners ride" and drop their losers like it's nothing when it's not real money.

Averaging down is the mistake I made on that fateful day where I lost $30k in a day on NFLX. I mean how in the world could NFLX keep going down after already getting clobbered like 3 straight days, right? I mean it's freakin' Netflix, due for a bounce anytime now, right?

No.

That's where I learned about that saying "The market can stay irrational longer than you can stay solvent."

 

[Darias]

$10,700.26 At the bell today.

+ $700.26

If I could do that every day, I'd quit my day job.

 

[Rapstah]

Closed the day in the sim with some Burberry stock, hoping for that to blow up tomorrow. I have no clue what I'm doing.

 

[Vulcano's assistant]

Don't forget to donate $10 to the Gaf-Inn when you are rich.

 

[Ashhong]

Pretty awesome, will follow

 

[Shao Kahn Brewing a Stew]

Don't forget to donate $10 to the Gaf-Inn when you are rich.

LOL YES!! <3

 

[Panzon]

Man I'm loving this thread. Anything that had to do with stocks was so alien to me but today I've actually grasped the concept. Would love to play the simulator in the other thread but work won't let me

Edit: btw MVP good luck!

 

[MetatronM]

Yes...going back to the orange analogy, the put option lets me sell it at a certain price. So if the orange is now worth $5, I can buy a $4 put option for like .10, and at expiration, I can buy it at market price and I can sell it at $4.

Right now that the orange is $5, the contract is almost worthless, because who would want a contract entitling them to buy something for $5 to then sell it at $4?

If I have an inkling that this orange is rotten on the inside though, I can buy the contract, and when it turns out it is rotten, the orange will be worth like $1, making my .10 contract to sell at $4 now technically worth $3.00 face value. from .10 to $3.00 is a 3000% increase.

The orange could also just hover around $3.75 and $4.25 and time decay could eat away at the time premium of my option, and the closer we get to expiration, the less and less it's worth, even if it hovers around $4.

Here's what I don't understand about this. With a put option you have the right to sell at the higher price if everything goes according to plan, but who is going to buy at that price? Why would they buy your shares at the inflated price you're able to sell at rather than buying other shares at market value?

Basically, what's the guarantee that you actually are able to sell at the price your put option entitles you to?

 

[RoyalFool]

Always wondered why no one ever made an RPG out of the trading world. Seemed like a natural fit.

I'd be up for coding that (huge fan of the '-story' games on iOS) - but I suspect we'd need a good pixel artist and somebody who knows stocks well enough to design the simulation side of things.

 

[UraMallas]

$10,700.26 At the bell today.

+ $700.26

If I could do that every day, I'd quit my day job.

$9,994.30

- $5.70

I probably shouldn't quit my day job.

APPLE $1.67(0.12 %)
NINTENDO $6.00(0.37 %)
GOOGLE $0.76(0.05 %)
SMITH & WESSON $3.08(0.52 %)
WAL-MART -$1.05(-0.10 %)
MCDONALD'S -$2.75(-0.27 %)
MICROSOFT -$1.51 (-0.10 %)
AMAZON.COM -$3.00 (-0.29 %)

 

[Filth]

Real question: when you play the market and lose a lot of money who gains from that? Aka who gets your lost money?

 

[helloresolven]

Here's what I don't understand about this. With a put option you have the right to sell at the higher price if everything goes according to plan, but who is going to buy at that price? Why would they buy your shares at the inflated price you're able to sell at rather than buying other shares at market value?

Basically, what's the guarantee that you actually are able to sell at the price your put option entitles you to?

The person who sold (wrote) the option is the one who has to buy at the strike price.

The person who wrote the option makes money from the premium you paid for the option. They are hoping the put option becomes worthless and won't be used.

 

[MetatronM]

The person who sold (wrote) the option is the one who has to buy at the strike price.

The person who wrote the option makes money from the premium you paid for the option. They are hoping the put option becomes worthless and won't be used.

Ah ha. That makes sense to me.

So basically the person who writes the option is hoping the market fucks the guy who bought it, and the person who bought it is hoping the market fucks the guy who wrote it.

 

[helloresolven]

Ah ha. That makes sense to me.

So basically the person who writes the option is hoping the market fucks the guy who bought it, and the person who bought it is hoping the market fucks the guy who wrote it.

Sorta.

However, writing/selling/shorting a put can be used for some trading strategies.

Example: A "Short straddle" is made by writing a put and writing a call on the same asset. It's a highly risky bet that the stock price won't be volatile.

 

[Zaraki_Kenpachi]

Ah ha. That makes sense to me.

So basically the person who writes the option is hoping the market fucks the guy who bought it, and the person who bought it is hoping the market fucks the guy who wrote it.

Well, not "fucks" but yes, you hope to make money, what else is the point? Or at least not lose more money if used for hedging. A lot of times these options are meant to hedge a certain way when changing currencies, but obviously you can do it on almost anything. You're pretty much making a bet, you think price will go one way, the other person is accepting the bet thinking it will go the other way. That's all it is.

 

[ggnoobIGN]

Real question: when you play the market and lose a lot of money who gains from that? Aka who gets your lost money?

Option markets are zero sum. That means you only lose what another person gains. Stock markets aren't zero sum.

 

[MVP]

TPX @ $30.08 after hours, looks like gap down tomorrow, weeeee

 

[firehawk12]

I still don't have the foggiest idea about why options exist how exactly how they work, but I hope it worked out for you today. lol

 

[arglebargle]

Sorta.

However, writing/selling/shorting a put can be used for some trading strategies.

Example: A "Short straddle" is made by writing a put and writing a call on the same asset. It's a highly risky bet that the stock price won't be volatile.

img]http://www.theoptionsguide.com/images/short-straddle.gif[/img]

more broadly, buying options is essentially buying volatility and writing options is being short volatility. without a firm understanding of what drives options prices (volatility) i would caution potential investors against trading them. definitely against writing them. at least with buying them your loss is contained.

volatility.

 

[ggnoobIGN]

I still don't have the foggiest idea about why options exist how exactly how they work, but I hope it worked out for you today. lol

They exist to manage risk, despite being very risky themselves

 

[arglebargle]

I still don't have the foggiest idea about why options exist how exactly how they work, but I hope it worked out for you today. lol

i just typed something out and somehow lost it. the short answer is that there are several reasons options exist:

investors can hedge their potential losses on a position
speculators can gain a lot of leverage (more exposure per dollar they contribute) on a position
traders can trade volatility directly, which is not otherwise easy to do.

 

[firehawk12]

They exist to manage risk, despite being very risky themselves

i just typed something out and somehow lost it. the short answer is that there are several reasons options exist:

investors can hedge their potential losses on a position
speculators can gain a lot of leverage (more exposure per dollar they contribute) on a position
traders can trade volatility directly, which is not otherwise easy to do.

So options are better than trading the stocks themselves because they're able to manage the risk more directly (and presumably "win" much more)?

 

[The Atticus]

can i borrow a dollar
im totally good for it

really

 

[Schattenjäger]

No, unless you choose the exact expiry and strike price as I do, and are playing with enough money to move the ask prices

Yes! Aren't you going to post all that

 

[arglebargle]

So options are better than trading the stocks themselves because they're able to manage the risk more directly (and presumably "win" much more)?

i wouldnt say better. options are very different from stocks. stocks pay dividends, while options dont. stocks have a theoretically infinite maturity while options dont. options allow for much larger payouts if you make the right trades, but are also more likely to be worth 0. despite having the same underlying assets (the operations of a company) their prices can be driven by very different forces.

 

[Zaraki_Kenpachi]

So options are better than trading the stocks themselves because they're able to manage the risk more directly (and presumably "win" much more)?

No, they're just different instruments. Companies use them to hedge currencies if they have sums involving them to protect against extremely unbeneficial movements in exchange rate. They are used by companies to hedge (although usually just with currency options) but if you're not using them to hedge then there's no reduced risk. There's no better, it's just different options depending on what you want out of it.

 

[depths20XX]

Could someone PM me password to the GAF game too? I wanna try this out. Currently know nothing other than what I read in this thread.

 

[arglebargle]

No, they're just different instruments. Companies use them to hedge currencies if they have sums involving them to protect against extremely unbeneficial movements in exchange rate. They are used by companies to hedge (although usually just with currency options) but if you're not using them to hedge then there's no reduced risk. There's no better, it's just different options depending on what you want out of it.

companies may use options on commodities as well. you see this sometimes with airlines hedging fuel costs. in general companies are more likely to use swaps or futures or forwards (which is true of hedging currency risk as well), but options arent that uncommon.

 

[t-ramp]

Could someone PM me password to the GAF game too? I wanna try this out. Currently know nothing other than what I read in this thread.

It has a thread now.

Definitely keeping an eye on this thread too.

 

[Slayer-33]

I love this shit, it's delicious

 

[manhack]

I have a question: Do you ever feel like what you're doing is ultimately a waste?

What I mean is...

Well, I'm a software engineer. The systems I work on will be operational 24/7 for decades to come . Code gets rewritten, written over, taken out, but ultimately, I am contributing something towards society, however small it may be. And yes, eventually, the system will probably be decomissioned, with some of the code recycled or used as a reference for building the successor. I'm making a difference, though, and that gives my life and my work meaning above just a paycheck.

A theater performer provides entertainment to people.
College professors and teachers train future professionals and stimulate individuals' interests and career paths.

If you're just buying stocks and selling them seconds later, you're not really investing or providing resources to companies you want or expect to see grow (or that should grow), you're just, well, playing with money. Have you ever wanted to do something more?

I'm just curious. Because I delve into investing on my own time. And I contribute 18% of my salary to my 401k (the more you get in earlier, the better). I understand the value of long term equity. But I have always felt that day trading is ultimately gaming the system without contributing to it in any meaningful way. It feels dirty to me. Though I've done quite well in stock market games, I just don't feel like i t's something worth pursuing in real life.

As crazy as it sounds, all people who trade stock do supply a service: Liquidity. Imagine if you bought a stock that nobody wanted to buy or sell? With traders in the market, you have the opportunity to buy or sell stock quickly, easily and with (sometimes) limited spreads (difference between bid/ask). Of course market makers provide liquidity, but if there is not a lot of volume in a stock you want or own, then you can be at their mercy.

 

[firehawk12]

i wouldnt say better. options are very different from stocks. stocks pay dividends, while options dont. stocks have a theoretically infinite maturity while options dont. options allow for much larger payouts if you make the right trades, but are also more likely to be worth 0. despite having the same underlying assets (the operations of a company) their prices can be driven by very different forces.

So it's a question of how much risk you're willing to take? I think I understand why people would choose options, just not why options exist in the first place.

No, they're just different instruments. Companies use them to hedge currencies if they have sums involving them to protect against extremely unbeneficial movements in exchange rate. They are used by companies to hedge (although usually just with currency options) but if you're not using them to hedge then there's no reduced risk. There's no better, it's just different options depending on what you want out of it.

Is options trading something that typically happens between trading companies/banks/etc or individuals like the posters here?

 

[mackaveli]

Traded in GOOG, TPX, ONXX, and RIG today. Made money in them all. Good day.

What kind of day trading strategy do you use if you don't mind sharing?

 

[mackaveli]

TPX @ $30.08 after hours, looks like gap down tomorrow, weeeee

What do you mean by this?

Also are you making money or losing money on the TPX put as of right now (I know it's still active)?

The strike is $29 so right now its $30.64 so it would have to go below $29 for the option to be in the money right?

 

[ggnoobIGN]

What do you mean by this?

Also are you making money or losing money on the TPX put as of right now (I know it's still active)?

The strike is $29 so right now its $30.64 so it would have to go below $29 for the option to be in the money right?

His option just became more expensive, presumably. He bought the put when the stock was around 32. Now its a lot more likely to finish in the money, so he can sell the option for a profit. I'll answer the other question if I can get on a computer.

 

[arglebargle]

So it's a question of how much risk you're willing to take? I think I understand why people would choose options, just not why options exist in the first place.


Is options trading something that typically happens between trading companies/banks/etc or individuals like the posters here?

risk is definitely part of it. options generally require a lot more activity on teh part of the trader/investor. so if you are just some guy with a 401k, you probably wont trade options, but just buy stocks, or more likely stock index funds and let them appreciate and pay dividends until you retire. if you enjoy math and the rush of trading, then you may like options.

i dont have a good sense for what the relative trading volumes are between individual investors and institutions, but trading options generally requires some level of sophistication that poses a barrier to entry to most individuals. there are a lot of quant shops set up just to trade options, for example, and i wouldnt want to wade in waters where these guys play. black scholes is the formula for how options are priced. its a fairly intimidating formula, but the key component to it is the standard deviation assumption (sigma). options become more valuable when volatility increases (incidentally, this is why many options traders did well during the financial crisis) so to make money over the long term in options you have to have a different volatility assumption or model from what is priced into the market. not easy, and thus options trading is generally the province of specialized shops, hedge funds, prop desks, etc. on the other hand, if you want to use options as a hedge to limit losses against some scenario you can just be a price taker and use them as insurance.

 

[Zaraki_Kenpachi]

companies may use options on commodities as well. you see this sometimes with airlines hedging fuel costs. in general companies are more likely to use swaps or futures or forwards (which is true of hedging currency risk as well), but options arent that uncommon.

True, forgot about that. Most of the classes I had for finance were worried about currency trading.

 

[firehawk12]

risk is definitely part of it. options generally require a lot more activity on teh part of the trader/investor. so if you are just some guy with a 401k, you probably wont trade options, but just buy stocks, or more likely stock index funds and let them appreciate and pay dividends until you retire. if you enjoy math and the rush of trading, then you may like options.

i dont have a good sense for what the relative trading volumes are between individual investors and institutions, but trading options generally requires some level of sophistication that poses a barrier to entry to most individuals. there are a lot of quant shops set up just to trade options, for example, and i wouldnt want to wade in waters where these guys play. black scholes is the formula for how options are priced. its a fairly intimidating formula, but the key component to it is the standard deviation assumption (sigma). options become more valuable when volatility increases (incidentally, this is why many options traders did well during the financial crisis) so to make money over the long term in options you have to have a different volatility assumption or model from what is priced into the market. not easy, and thus options trading is generally the province of specialized shops, hedge funds, prop desks, etc. on the other hand, if you want to use options as a hedge to limit losses against some scenario you can just be a price taker and use them as insurance.

Man... I guess this is why people get finance degrees!

I suppose it sounds counter-intuitive that the best time for an options trader is the worst time for everyone else though. lol

 

[arglebargle]

Man... I guess this is why people get finance degrees!

I suppose it sounds counter-intuitive that the best time for an options trader is the worst time for everyone else though. lol

i love talking finance. i dont love talking about individual securities, but i love financial theory and portfolio construction stuff. i could bore people for hours about it.

 

[firehawk12]

i love talking finance. i dont love talking about individual securities, but i love financial theory and portfolio construction stuff. i could bore people for hours about it.

I can see how it could get really interesting. I was going to start playing that GAF game, but I realize that I probably shouldn't go down that rabbit hole at the moment. lol