I'm going to take $1,405.35 and turn it into $100,000 using stock options.
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chicko1983
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well I have a finance degree and should actually use it at some stage. I am subscribing to this thread and will try and pay off the cost of that degree.
(I also did an engineering degree and so have been only using engineering degree since I graduated 6.5 years ago).
(I also did an engineering degree and so have been only using engineering degree since I graduated 6.5 years ago).
chrisisawesome
Member
Apple and Google are such incredible stocks to own; they are technically "cheap" despite their supposed high stock price. People need to realize that the stock price is only part of the equation; its a percentage game. Who cares if you own 100 shares of a 7$ stock or 1 share of a 700$ stock - if it goes up 10%, you're making the same amount.
Its just damn difficult to day-trade stocks as volatile as Goog and APPL...its more a long-term play. I'd buy as many Calls as I could of apple, especially at these levels; around 15x P/E ratio = CHEAP
Its just damn difficult to day-trade stocks as volatile as Goog and APPL...its more a long-term play. I'd buy as many Calls as I could of apple, especially at these levels; around 15x P/E ratio = CHEAP
PastorOfMuppets
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Options are very versatile as instruments though. You can perform various combinations on stocks that aren't volatile and make a tiny bit of money off of them.
Take a stock like Microsoft, MSFT.
Over the last 10 years, it has traded at a low of $22 and a high of $32. The two exceptions were in 2008 when it hit $35 and like every other stock during the crash, took a big hit to $15. Other than those two instances, MSFT has a very low volatility. Options traders can take advantage of this by writing spreads to exploit the little movement that MSFT has and take in small premiums in the short run.
PastorOfMuppets
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Big part of it is being a single man with no obligations. I traded options in college at the height of the boom. My two big money makers were Potash Corporation of Saskatchewan (aptly named POT on the exchanges) and Agrium (AGU). Most of my activity would just mainly consist of buying and writing options on these two stocks every month.
arglebargle
Member
eh, i say go for it. you may learn something and its fake money anyway.
this is only sorta true. if the market knows as much as you (or the option writer) do about the volatility of msft, then that volatility will be priced into the options. in other words, if msft has low historical volatility, the price of an option will be low, and the occasional payout will overwhelm or equal the collected premia.
i am not an efficient markets acolyte necessarily, but its a bit trickier than just knowing the historical trading range. to consistently make money you would have to know more about msft's future volatility than whatever is priced into the market.
PastorOfMuppets
Banned
Oh for sure, I was just using MSFT as an example.
This is actually somewhat related but a lot of finance guys also end up being really good poker players. I found this out myself when I started playing semi-seriously. There's a lot of crossover between the two things.
arglebargle
Member
yeah i know. its why i am embarrassed at how bad a poker player i am and why i have considered learning the game.
interesting you bring up potash corp. thats a favorite of business school professors because the potash industry is basically a cartel.
firehawk12
Subete no aware
Hah! Poker and options do seem more related than not, especially since oker is basically math and chance in action.
PastorOfMuppets
Banned
If you learn, consider starting with something that isn't Hold'Em like Pot Limit Omaha or Hi-Lo Split. I'm a regular PLO and PLO Hi-Lo player on Stars.
firehawk12 said:
Yeah, certain variants of poker resemble options. Stud Hilo and PLO Hilo are very similar because they offer ways of hedging if your happen to have the second best hand.
Yep, but the option being "in the money", and me making money are two different things. My option doesn't technically have to be in the money for me to profit, I just need to sell it for higher than I bought it.
I could sell the option while the stock is at $29.75 and make money, even though the option isn't "in the money", because someone else will buy it at a higher premium than I paid for it, and they think the stock will continue to go even lower.
I don't know about Apple. Tech is fickle and it's at an all time high. I can see a lot more down than upside for Apple.
ChanDangle
Member
If your trading on a continuous basis how do taxes factor in? Would it end up looking like a book or something?
Holy shit. Wtf :O
RumblingRosco
Member
I'd probably just pay H&R block at that point.
criesofthepast
Member
Teach me your ways.
firehawk12
Subete no aware
Oh here's a random question - are stock options like shorting stocks, in terms of their speculative nature and the potential for return? What makes one different from the other?
.......Synth_floyd
Banned
All this options stuff seems little different than playing poker in a casino.
Rocket Scientist
Member
You lost $700 in one day?
taku
Member
If I give you $10,000 and you turn that into $150,000 in a month, you can keep half of it. Deal?
If I give you $10,000 and you turn that into $150,000 in a month, you can keep half of it. Deal?
Why would he do that when he can make his own 150,000 into 2,250,000?
By the end of next year, he will be richer than Bill Gates.
From my extremely limited knowledge it seems like everyone in the thread is talking about (even when side-conversations not having to do with options come up) growth strategies. Stuff like "fundamentals don't matter" and talking about P/E as a measurement of something being "cheap". Is value investing not en vogue anymore?
Thanks for this. Someone earlier in the thread talked about how options trading helped liquidity. I didn't really understand what kind of liquidity until this post, where I went "duh!"
Thanks for this. Someone earlier in the thread talked about how options trading helped liquidity. I didn't really understand what kind of liquidity until this post, where I went "duh!"
YES! I want to see some meltdowns in this thread.If I give you $10,000 and you turn that into $150,000 in a month, you can keep half of it. Deal?
CyclopsRock
Member
I agree with MVP that it's very different when it's with real money - for basically the same reason Poker is. You're far more willing to throw away big blinds on crap hands when you know it doesn't matter if you lose, on the off-chance you'll flop something heavy. But, likewise, winning isn't as appealing because it doesn't mean anything. When you're investing on Investopedia, you never have to stop and think about all the cool shit, or all the months of rent you'd not have to worry about, if you didn't hit "trade".
That said, it's a fantastic way of learning the ropes, especially for more complex things like Options. You just have to be aware that the experience is pretty different.
That said, it's a fantastic way of learning the ropes, especially for more complex things like Options. You just have to be aware that the experience is pretty different.
CyclopsRock
Member
I'm torn - I have a few Apple shares (though AAPL is one of those funny ones where 'a few' shares are worth thousands of dollars) so I want it to do well, but I'm always on the lookout for it doing badly in order to get out. But... people have been saying what you said for 5 years now. It's had average annual share price growth of something silly like 66%. It's had about 85% this year. It has a lot of market penetration has occured - but people often forget that their biggest expanding market is China. They still have a lot of growing to do, and I don't think all that's been priced in just yet. It took a bit of a battering on Tuesday and Wednesday but it had a strong day yesterday. I expect it to close slightly down today, but product releases almost always see it go down, ironically. If you look historically, a similar pattern happens every year - commentators are always disappointed, the media spends a week or two talking about its deficiencies, then it sells gangbusters and makes up the loss in the next month or two, then keeps climbing.
I'm hoping it'll keep going up, but I agree it's not a sure thing. I'm ready to pull out if need be. The problem is, the £-$. It's fucked me hard, to the point where I have gains in USD but losses in GBP.
Darren870
Member
Well this thread has inspired me to get back into looking at my finances and shares.
I used to be really into finances, but last track the past few years and just being busy. The numerous accounts I have started to overwhelm me and its been a pain.
First step is to consolidate my $ then I will get back into trading. I stopped keeping on top of it and I can see some losses in my portfolio that I really should ditch.
Good luck OP, this should be an interesting read.
I used to be really into finances, but last track the past few years and just being busy. The numerous accounts I have started to overwhelm me and its been a pain.
First step is to consolidate my $ then I will get back into trading. I stopped keeping on top of it and I can see some losses in my portfolio that I really should ditch.
Good luck OP, this should be an interesting read.
Zaraki_Kenpachi
Member
Wait? Isn't value investing saying the market moves on it a lot? That's sort of exactly what you're doing here. Unless I misunderstand you?
POWERSPHERE
Member
Money is so boring.
Not if you don't have it.
I'm an expert
Formerly worldrevolution. The only reason I am nice to anyone else is to avoid being banned.
Oh man.. I can't wait till people wake up and read this post. The least you could do is add the realities to it so gaf hopefuls don't.. actually n/m let's see the tears.
err wait, the quote changed.
I don't know what "the market moves on it" means.
Zaraki_Kenpachi
Member
Ya, I got my wires cross. Value investing is just when stocks fluctuate a lot up or down due to good/bad news and so you want to profit off it right? That's sort of what you're doing here, you're not trying to hold a long position, you're just trying to make money in fluctuations.
Edit: I think value trading is just buying when you feel it is underpriced and will go up? I think most people do this, not many people are getting involved options trading and I would argue most people, even if they claim they do it differently, invest more on a gut feeling basis on it's value than any financials they may look at. Sorry, I'm not really familiar with the value trading moniker so I had to edit.
Okay, completely clueless here. Do you have to give any of this profit away as tax? I know forex trading is tax-free but is this different?
The Elite
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I want to know more...
No I think value investing is more about long position, dividends, good fundamentals, etc.
I dunno, it's not really important, I mostly just saw someone say, paraphrased "fundamentals don't matter", and I was like "why not?".
Zaraki_Kenpachi
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Well they are but it depends on what your priorities or goals are as an investor. They do matter and are used for most of retirement funds (at least stock portions) because you want diversified healthy growth that is sustainable over the person's life. Most people when they invest personally though think they can beat that and fail to fully realize the counterbalance to the big payoffs and will choose much riskier options thinking they'll strike it rich. You can see that by people responding to the guy who made $80,000. If you're going to follow stocks daily also, you probably want in on the action more. If you're taking long positions you don't really give a shit about the minor day to day or week to week or month to month fluctuations you see but instead you care about the overall health of the company and it's possibility to grow. It's still heavily used but I think do to most people's egos it's not done much on a personal basis but is definitely done on a professional basis for people's retirements.
I'm an expert
Formerly worldrevolution. The only reason I am nice to anyone else is to avoid being banned.
You work the night shift or something, Timedog?
What exactly are you trying to do? Invest for the long term? A retirement fund? Want more returns on sitting money than savings or bonds? If so just head to a mutual fund or pick some easy securities and there ya go. If you're trying to get rich quick, which I'd define as expecting to double your initial investment in less than a year, even if it's just a dollar, then you're gonna have to pick your game right - much like a casino.
What exactly are you trying to do? Invest for the long term? A retirement fund? Want more returns on sitting money than savings or bonds? If so just head to a mutual fund or pick some easy securities and there ya go. If you're trying to get rich quick, which I'd define as expecting to double your initial investment in less than a year, even if it's just a dollar, then you're gonna have to pick your game right - much like a casino.
For this kind of return, did you have to be very active on the market (ex. Be a day trader)? I'm asking because I want to have an idea of the potential return I can expect (or hope for) by being a casual trader on a weekly basis.
It all depends on how much money you're playing with. Here's an old screenshot from when I used to keep track of my trades through profit.ly (I might make one of these if I survive more trades in this experiment, it makes it easy to follow)
I wasn't really super active, traded a few options a day, sometimes didn't trade at all some days, but you really have to have the starting capital to be able to do this. That's why this thread experiment is hard, $1,400 is peanuts, that's why I tried to hit a homerun on first trade.
I'm an expert
Formerly worldrevolution. The only reason I am nice to anyone else is to avoid being banned.
Haha.. make sure you hedge by learning other, less risky shit as well.
Oh of course. If I ever were to do options I think I'd use them as maybe 10-20% of total investment. More of a "this seems like a particularly good opportunity for whatever reason" rather than having it be the basis of my investing.
It all depends on how much money you're playing with. Here's an old screenshot from when I used to keep track of my trades through profit.ly (I might make one of these if I survive more trades in this experiment, it makes it easy to follow)
I wasn't really super active, traded a few options a day, sometimes didn't trade at all some days, but you really have to have the starting capital to be able to do this. That's why this thread experiment is hard, $1,400 is peanuts, that's why I tried to hit a homerun on first trade.
I see. I too thought that $1,400 or even $10,000 is low to hold a comfortable position. in my opinion, with starting that low, you pretty much have to be very aggressive to quickly maximize your return.
What are your thoughts on penny stocks?
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