Price doesn’t have far to go to make this option more valuable. For my part, I’ll plan not to exercise, but turn around and sell the option back before expiration. Thanks Dan!
dlh –If you find that you are missing the entry points, try another strike price or expiration month. When Dan suggests buying the April 170 calls, you get a bunch of folks jumping in. Instead, I went for the April 155 calls, yes they are more expensive, but also have a higher delta.
dlh- I’m in a time zone an hour earlier than Dan, so I’m almost NEVER up before the market opens in the morning (that would be 0530 my local time). When I got up and saw the email this morning the price for the April 170 Strike was already up beyond Dan’s limits, so I entered a DAY LIMIT ORDER for $5.40 and let it go. Sure enough, about an hour later, while I was watching this great video, it filled. I’m trading very small amounts of stuff here, learning as I go, and if it had not filled at all today that would have been OK, there will be other opportunities, indeed, there HAVE been other opportunities!.
Keep the faith.
The e-mail that Dan posted at 6:32am Pacific time came into my e-mail account at 10:30am Pacific time — way past the buy price limit. Why are some of us getting the e-mails in a timely fashion, others not? Are the e-mail notices sent out in staggered batches? Any other explanations?
Joellen…I just checked my e-mail and it landed at 10:28 am pacific time..
James Wright says:
Not sure what might be going on, I looked at the message header info, Dan sent at 6:30:41 am PST and it dropped into my GMail account at 6:43:52 am PST. It sat there for 7 more minutes till Outlook finally retrieved it. I had it set to get email every 15 minutes, but have changed it to 5 minutes to get them quicker. The AMZN idea was at 9:47:38 am PST got to my GMail account at 9:47:40 am PST and didn’t get to my Outlook till 10:08:18 am PST, simply because of Outlook settings.
John says:
Not exactly, Dan, don’t forget us loosers still holding Fidelity accounts. I put an OCO order on both the July and April at 11:12 AM EST when I saw your alert, since buying pressure had already put the prices just outside your limits, but the July triggered about an hour later…
Problem was didn’t get email until 11am. Where there’s smoke there fire. Too many reports of late emails for you not to check out your end of this. Worked out Wed., so that good.
MIchael — Now is the time to buy GS. Look at weekly chart, tested and bounced of support. Look at daily chart — higher low from dec 2010, broke thru 50dma, and higher high jan 14 from nov 5,2010. I see support at 161.25 Hope this helps.
I LIKE the really good tutorial parts of these videos. Especially the tech analysis, it’s giving me more confidence to try a few small options trades of my own with other stocks I’ve owned a while and am familiar with. Thanks Dan!
Since I can’t watch the video at work, the email gives me the basic trade and the opportunity to get in if I want. If I feel I need more detail from the video before taking the trade I can wait. Either way, the decision if and when to participate is fully mine.
Gary had mentioned that the trade was sent out this morning, prior to the video e mail. i think the same format was used for our trade with AMZN. For whatever reason, i did not recieve the first e mail notifying me of the trade idea. I only recieved the video explanation. I checked spam and junk folder to see if accidentally got caught in there; but it was not there.
No biggie as i have recieved all other e mails/ videos just fine. Probably just a gremlin in my system.
After watching the video’s and taking these trading ideas, I finally have an idea of what I’m doing. For years I was trying to figure out how options work on my own. Thanks for the help and explanation.
I’m curious why you chose the out-of-the-money April 170 call versus the in-the-money April 165 call? I know with some of your other trading ideas we used the in-the-money calls, and would like to know how you decide which way to go.
Gary- email is working, but if your system would support it, a text alert to our cell phone would be a more timely alert for those of us working… perhaps there’s a way to incorporate text alerts into the member’s settings page. Thanks again for all the great work you do!
I second the text alert suggestion. My cell can receive a text sent to a specific email address, so how about a way to enter a second email address for alerts? Thank you! I
t was luck that I saw the GS email just after it arrived 🙂
Is the second e-mail on the account option a possibility? The building I spend most of my day in has no cell service and no access to my normal e-mail. If I could add a .mil e-mail address I would receive the alerts in an actionable time frame.
Received E-Mail, Very good. Than Received Video. Worked out perfectly, honestly thinking about it, I do not see a better way. I am new at this, actually have not placed a trade yet, I know I know, and let me tell ya you get cold over here on the side lines all by yourself, bbbbrrrrr. I do how ever follow and continue to educate myself, I am thinking mid month, still need a trading plan, thats turning out to be the hardest part, well after being really por (can’t afford both O’s) so jumping in is all that much harder, bla bla, yup. Anywho Dannybabanny thanx sooo much for the insight, Karl.
Dan, thank you for spotting this. I bot mine @ 4.85 and sold them for 5.90. It was a quick 20% profit. I didn’t intend to be a short term trade but I am novice on options and these GS options are more expensive than I feel comortable to sleep with. I am more comfortable with holding the call options for C and still hold them. I did my DIS trades completely following your instructions on buy and sell. And the DIS one was a good trade to me as well! I look forward to getting more used to option trading and having the gut to hold expensive ones like this GS. Thank you very much for your mentorship. -Xinsi
YES!!! Really helpful, the trade certainly but learning where stops go on calls: leverage works both ways. So close your eyes and stick a 40% stop. So much better when they go up, thank you!
Please excuse my ignorance, but I’m the guy Dan is spoon feeding here. July 170’s have spiked to $9.98, so they are again beyond the range, but I’m just trying to understand the strategy. Finally a simple trade, but I don’t understand the risk payback on this one. Price is up to $168.43 right now. Break even on one contact is $179.98 + ($10 commission/100 sh) = 180.08. As this is right at the top of the price chanel, why buy? Shouldn’t one at least be thinking of taking profits as the stock price reaches top of the chanell? Why am I buying?
It’s a risk that the chart will behave and it will even reach $180. by July. Given the relative price stability, seems like a low probability that GS will punch through the top of the channel to blue sky and profits on the trade. Won’t any increase in price be counteracted by the decreased time value? Thanks for any help. S
Spencer –pardon me, however you seemed confused. You are mixing the action of stocks and options. Simply put, if the stock price goes up, the option price goes up too. A simple example: GS is at $168 and the July 170s are at $10 (round numbers). If GS goes up by $5, the option may go up by $3, so now your option is worth $13 (a 30% profit). I suggest reviewing Dan’s educational videos until you have a thorough understanding of what your are doing. PS –This particular trade in GS is relatively low risk and high probability.
Spencer, SamG is correct in part but there is an element of truth to the issue you raise. If the stock moves up over the next few weeks you will likely experience appreciation in your position…Currently the delta is about .51 which would mean that for every dollar the stock moves up the option moves 51 cents. Delta continues to change with volitility and as you get nearer to expiration. As you move toward expiration the time value premium you have paid will lose value. So if GS were to just trade in a box and you were to hold the position until expiration with stock below 180…then your option would expire worthless because you are buying 100% time value on this trade. This is not to say you should not consider the trade but the play here is for a move up in near term and then exit the trade before too much time value erodes away.
Great video, as usual. As background, I have a medium amount of experience and training in options. But as it relates to any of your trades, if we enter on day one and over time we get out and back in, maybe several times, can we assume that if you still have the trade on the table that the expectations of target stock price are about the same. In other words, on the SWN trade the initial expectation of the stock price before expiration was, as I recall, $45. Since you have made no changes to this trade I am assuming that you still feel that way. I ask because I have been in and out of this trade twice (made a little each time) and the current price of the option is again below the original target. I say to myself, why not try it again. Or am I missing something ? This question has applicability to and and all open trades, as I see it.
DAN and others, this was posted as a day limit order- meaning that if it didn’t fill today, but drops back to the range/limit DAN mentioned, we still shouldn’t buy since it was a DLO?
Great video Dan. I can remember when I was teaching the kids to fish how difficult it was to keep reminding myself that I had to show them how to put the bait on the hook, so I know how frustrating this must be for you at times. Please hang in there — you yourself said yesterday that you were (close to being) the greatest, and there’s a whole bunch of us who are willing to buy into that. Thanks for the help.
Incidentally, I also had to go outside your limits in order to get filled. Trade finally went on at (approx.) 2030 GMT.
If I have a day job, which I do, and don’t want to auto trade, it seems like I won’t get in on many of these trades. That presents a problem. I’m not sure I like this set-up.
Richrun, If you really want to make sure you get in while working, what is wrong with Autotrade?
I got to the email late (on me, due to day job, not OMM), put in a Limit order, and was eventually filled at Dan’s limit. It looks like others got in at better prices, so I may end up Autotrading.
@richrun- I have a day job too. And if I don’t want my employer to know I’m on OMM watching Dan’s trading videos, reading his updates by email or placing trades as a result of either, I do it on my phone. Personally, I love this set-up!
The email alert ahead of the market open is very helpful. I live in Singapore and I can put in the orders and go to sleep. The orders (did both Apr and Jul) were both filled and up by 20% and 10%+ respectively.
I’ve traded options for 1 year and up by 300% using exactly what Dan’s teaching (I don’t usually put in a stop loss). I am so glad that I’ve found OMM. The strategy works perfectly for me.
is there something special that I have to do to receive email updates? i have yet to receive a single email, yet I receive smm emails and omm password updates.
I wasn’t able to get into this trade yesterday and today am wondering if I even want to. Stock down $2.45 and April $170’s are $4.80. Is this a bargin? Would an experienced option trade please give me some advice?
GS – the thesis for the trade remains intact unless it breaks support. I too missed the fill & I am now going to review the video to define support, define my risk. This is a long dated call, Dan said April or June depending on if you have autotrading… that was so the stock could wiggle, we have lots of time.
Todays price action may be a gift or a time bomb, but I’m with Dan, I think it’s a gift and will manage my risk accordingly, after all- Dan could be wrong. No risk / No reward…
Irish eyes- I just took the July 170 trade with a fill of 8.88
I did not use autotrade & filled just fine.
Now I will place a 25 to 30% stop on my partial position.
I believe GS is sitting on support RHRN, & is ready to move higher
Irish eyes- I have no set formula for stops, but I’d like to show you my trade to point out the power of leverage.
I bought 11 calls @ July 170- that equals 1100 shares, which at 165.50 per share would mean I control 182,000.00 dollars worth of stock!! A 3% stop would be about 5000.00 on the common. Or 177,000
So- for about 10,000 in options I control 182,000.00 worth of common. With a 25% stop, I could lose 2500.00, which would equal about a 1.5 % stop on the common.
Hope this helps! Stay within your comfort zone, don’t lose your dough, MANAGE RISK
Irish eyes- Its kinda frowned upon to say how much you’ve made or traded, etc…. This prevents ego’s & boasting.
I am doing neither, the market us way smarter than me! Just trying to make a point. = )
Irish_Eyes says:
Yes, it helps and I’m managing risk by trading small until I get more experience.
Xinsi Lin says:
wade edwards, very good comment. it helps me to see the big picture. thanks!
Billy Brooks says:
I was unable to buy thr GS options in my scottrade account but found that my new account with Trade Monster hade bought the options via the Autotrade. Thanks Dan.
I just entered the the trade at $4.77 for the april 170’s today. I believe we will have a blowoff buying spree top then fall back to spx 1284 before resuming the uptrend. My opinion only as always trade within your comfort zone and buying levels and listen to Dan.
Dan, love the idea of just buying 1 contract and lettin’ her ride! I’m new to options, so that’s what I’ve been doing. I think of the ups and downs like a day at the amusement park. So far the method of receiving the trade via email followed by the video works for me.
Why does Dan put this trade as a day limit order,if the option price gets away can’t we just wait til it pulls back to our price range? Also is it better to sell this option before expiration or exercise it?
Valentin,
Not DAN but let me say that this is not a limit sell @ 9.40. It is buy to open and pay no more than 9.40. When the alert was sent the last trade was @ 8.80.
GatorD
I use to be a customer of DEEP IN THE MONEY CALLS at the street.com. Cramer says to NEVER buy out of the money calls or puts. He addresses this in detail in Getting Back to Even. I’m curious to what some of the more experienced option traders on this site think. I have made some money here so far, but I will start to have to take bigger positions to justify the cost of the service. I’m not ready for the bigger positions becasue I am waiting (like alot of others) for a correction. Last the year the January correction came in February and it was nasty.
Cramer’s shows and books are targeted more at fundamental investing for the long term. Dan’s techniques are technical and aimed more for shorter term trading. When Cramer says never buy out of the money options he’s referring to novice investors who don’t have the time or knowledge to follow the market everyday. Luckily for us Dan has this time and knowledge and is willing to share it with us so we can make money along with him.
With all due respect Joseph…I am not so sure your assessment of out of the money options is correct….and I would be shocked if Cramer would characterize his motives for never buying out of the money options in the same way that you have. Deep in the money options are bought and sold extensively and I would be willing to bet that this activity is not predominantly from the novice investor… I would actually argue that shorter term holds of positions…a few days to a month… are better with deep in the money near term options with high delta because you get near 1 for 1 move in price with the stock….out of the money options are pure time value and if the stock does not move quickly or substantially beyond the time value premium you paid then you risk losing that time value premium. GS at 170 today would equate to about 100 dollar gain per contract. 1 month from now a move to 170 will be about even and as time marches toward the July expiration it is going to be hard to make money on this trade without a good move of GS above the 170 level….if you get all the way to July then GS has to be at 179 and change just to break even.
I didn’t mean to imply that only novice investors are trading deep in the money calls. They are a very useful investment and I’m sure many professionals trade them. I don’t think they are used as short term investments very often though because in the short term a high delta hurts you more if the stock moves against you. I’m not a professional trader so maybe I’m wrong.
I’m a big fan of Cramer’s and you’re right about the 1 for 1 delta. That’s exactly why Cramer recommends using deep in the money calls as an alternative to stocks on long term investments. He has also said on his show that most out of the money options expire worthless and that the option market moves fast, so if you don’t have the time to follow them close you shouldn’t trade them.
Just throwing in my take. Jim is trying to give people who lost the bulk of their retirement savings a method to “Get Back to Even”. Deep in the money calls are just a way of trying to participate in a stock(s) when you don’t have enough capital, which after the crash is a common malady.
Price doesn’t have far to go to make this option more valuable. For my part, I’ll plan not to exercise, but turn around and sell the option back before expiration. Thanks Dan!
once again, price has risen beyond LIMIT within minutes of getting the email notification.
dlh –If you find that you are missing the entry points, try another strike price or expiration month. When Dan suggests buying the April 170 calls, you get a bunch of folks jumping in. Instead, I went for the April 155 calls, yes they are more expensive, but also have a higher delta.
dlh- I’m in a time zone an hour earlier than Dan, so I’m almost NEVER up before the market opens in the morning (that would be 0530 my local time). When I got up and saw the email this morning the price for the April 170 Strike was already up beyond Dan’s limits, so I entered a DAY LIMIT ORDER for $5.40 and let it go. Sure enough, about an hour later, while I was watching this great video, it filled. I’m trading very small amounts of stuff here, learning as I go, and if it had not filled at all today that would have been OK, there will be other opportunities, indeed, there HAVE been other opportunities!.
Keep the faith.
Frozen–Was that $5.40 a typo? If not, I hope you backed up the truck!
These were the april 170’s 5.40 was the high limit, some lucky souls got it for 4.80!
dlh — everyone got much better fills than the limit. So I don’t know what your problem was/is.
I think the reason is not everyone is getting the emails in a timely fashion. Some get it immidiatly (today at 9:30et?) and some much later if at all…
The e-mail that Dan posted at 6:32am Pacific time came into my e-mail account at 10:30am Pacific time — way past the buy price limit. Why are some of us getting the e-mails in a timely fashion, others not? Are the e-mail notices sent out in staggered batches? Any other explanations?
Joellen…I just checked my e-mail and it landed at 10:28 am pacific time..
Not sure what might be going on, I looked at the message header info, Dan sent at 6:30:41 am PST and it dropped into my GMail account at 6:43:52 am PST. It sat there for 7 more minutes till Outlook finally retrieved it. I had it set to get email every 15 minutes, but have changed it to 5 minutes to get them quicker. The AMZN idea was at 9:47:38 am PST got to my GMail account at 9:47:40 am PST and didn’t get to my Outlook till 10:08:18 am PST, simply because of Outlook settings.
Not exactly, Dan, don’t forget us loosers still holding Fidelity accounts. I put an OCO order on both the July and April at 11:12 AM EST when I saw your alert, since buying pressure had already put the prices just outside your limits, but the July triggered about an hour later…
Problem was didn’t get email until 11am. Where there’s smoke there fire. Too many reports of late emails for you not to check out your end of this. Worked out Wed., so that good.
Dan, love your sense of humor, lookin forward to see this one play out.
Email worked great!
Dan
Are we not way over due for a market correction. Should we not sit on the sidelines in cash and wait for this particular trade when it goes on sale?
MIchael — Now is the time to buy GS. Look at weekly chart, tested and bounced of support. Look at daily chart — higher low from dec 2010, broke thru 50dma, and higher high jan 14 from nov 5,2010. I see support at 161.25 Hope this helps.
Sure, Michael. If you’re more comfortable sitting on the sidelines, that’s what you should do. Trade within your level of comfort.
I LIKE the really good tutorial parts of these videos. Especially the tech analysis, it’s giving me more confidence to try a few small options trades of my own with other stocks I’ve owned a while and am familiar with. Thanks Dan!
Since I can’t watch the video at work, the email gives me the basic trade and the opportunity to get in if I want. If I feel I need more detail from the video before taking the trade I can wait. Either way, the decision if and when to participate is fully mine.
Gary and Dan,
Gary had mentioned that the trade was sent out this morning, prior to the video e mail. i think the same format was used for our trade with AMZN. For whatever reason, i did not recieve the first e mail notifying me of the trade idea. I only recieved the video explanation. I checked spam and junk folder to see if accidentally got caught in there; but it was not there.
No biggie as i have recieved all other e mails/ videos just fine. Probably just a gremlin in my system.
Thanks so much for OMM..
Sincerely,
Doug
After watching the video’s and taking these trading ideas, I finally have an idea of what I’m doing. For years I was trying to figure out how options work on my own. Thanks for the help and explanation.
I got a couple at 9.4 when GS was at 167.50. My plan was to buy more if it goes down.
Dan,
I’m curious why you chose the out-of-the-money April 170 call versus the in-the-money April 165 call? I know with some of your other trading ideas we used the in-the-money calls, and would like to know how you decide which way to go.
Thanks for all you do for us.
Gary- email is working, but if your system would support it, a text alert to our cell phone would be a more timely alert for those of us working… perhaps there’s a way to incorporate text alerts into the member’s settings page. Thanks again for all the great work you do!
I second the text alert suggestion. My cell can receive a text sent to a specific email address, so how about a way to enter a second email address for alerts? Thank you! I
t was luck that I saw the GS email just after it arrived 🙂
We will not be texting. It’s amazingly easy to set up your emails to send you SMS texts. We’re not going to accommodate this request. Sorry.
Dan
Is the second e-mail on the account option a possibility? The building I spend most of my day in has no cell service and no access to my normal e-mail. If I could add a .mil e-mail address I would receive the alerts in an actionable time frame.
Thanks.
Received E-Mail, Very good. Than Received Video. Worked out perfectly, honestly thinking about it, I do not see a better way. I am new at this, actually have not placed a trade yet, I know I know, and let me tell ya you get cold over here on the side lines all by yourself, bbbbrrrrr. I do how ever follow and continue to educate myself, I am thinking mid month, still need a trading plan, thats turning out to be the hardest part, well after being really por (can’t afford both O’s) so jumping in is all that much harder, bla bla, yup. Anywho Dannybabanny thanx sooo much for the insight, Karl.
Dan, thank you for spotting this. I bot mine @ 4.85 and sold them for 5.90. It was a quick 20% profit. I didn’t intend to be a short term trade but I am novice on options and these GS options are more expensive than I feel comortable to sleep with. I am more comfortable with holding the call options for C and still hold them. I did my DIS trades completely following your instructions on buy and sell. And the DIS one was a good trade to me as well! I look forward to getting more used to option trading and having the gut to hold expensive ones like this GS. Thank you very much for your mentorship. -Xinsi
YES!!! Really helpful, the trade certainly but learning where stops go on calls: leverage works both ways. So close your eyes and stick a 40% stop. So much better when they go up, thank you!
Please excuse my ignorance, but I’m the guy Dan is spoon feeding here. July 170’s have spiked to $9.98, so they are again beyond the range, but I’m just trying to understand the strategy. Finally a simple trade, but I don’t understand the risk payback on this one. Price is up to $168.43 right now. Break even on one contact is $179.98 + ($10 commission/100 sh) = 180.08. As this is right at the top of the price chanel, why buy? Shouldn’t one at least be thinking of taking profits as the stock price reaches top of the chanell? Why am I buying?
It’s a risk that the chart will behave and it will even reach $180. by July. Given the relative price stability, seems like a low probability that GS will punch through the top of the channel to blue sky and profits on the trade. Won’t any increase in price be counteracted by the decreased time value? Thanks for any help. S
Spencer –pardon me, however you seemed confused. You are mixing the action of stocks and options. Simply put, if the stock price goes up, the option price goes up too. A simple example: GS is at $168 and the July 170s are at $10 (round numbers). If GS goes up by $5, the option may go up by $3, so now your option is worth $13 (a 30% profit). I suggest reviewing Dan’s educational videos until you have a thorough understanding of what your are doing. PS –This particular trade in GS is relatively low risk and high probability.
Thank you Sam for the reply, I will indeed go watch more videos.
Spencer, SamG is correct in part but there is an element of truth to the issue you raise. If the stock moves up over the next few weeks you will likely experience appreciation in your position…Currently the delta is about .51 which would mean that for every dollar the stock moves up the option moves 51 cents. Delta continues to change with volitility and as you get nearer to expiration. As you move toward expiration the time value premium you have paid will lose value. So if GS were to just trade in a box and you were to hold the position until expiration with stock below 180…then your option would expire worthless because you are buying 100% time value on this trade. This is not to say you should not consider the trade but the play here is for a move up in near term and then exit the trade before too much time value erodes away.
Has anyone consider doing a February put spread similar to the one we did for Amazon? Net credit is around $205/contract.
Dan:
Great video, as usual. As background, I have a medium amount of experience and training in options. But as it relates to any of your trades, if we enter on day one and over time we get out and back in, maybe several times, can we assume that if you still have the trade on the table that the expectations of target stock price are about the same. In other words, on the SWN trade the initial expectation of the stock price before expiration was, as I recall, $45. Since you have made no changes to this trade I am assuming that you still feel that way. I ask because I have been in and out of this trade twice (made a little each time) and the current price of the option is again below the original target. I say to myself, why not try it again. Or am I missing something ? This question has applicability to and and all open trades, as I see it.
hogfan113
DAN and others, this was posted as a day limit order- meaning that if it didn’t fill today, but drops back to the range/limit DAN mentioned, we still shouldn’t buy since it was a DLO?
Thanks!
Great video Dan. I can remember when I was teaching the kids to fish how difficult it was to keep reminding myself that I had to show them how to put the bait on the hook, so I know how frustrating this must be for you at times. Please hang in there — you yourself said yesterday that you were (close to being) the greatest, and there’s a whole bunch of us who are willing to buy into that. Thanks for the help.
Incidentally, I also had to go outside your limits in order to get filled. Trade finally went on at (approx.) 2030 GMT.
If I have a day job, which I do, and don’t want to auto trade, it seems like I won’t get in on many of these trades. That presents a problem. I’m not sure I like this set-up.
Richrun, If you really want to make sure you get in while working, what is wrong with Autotrade?
I got to the email late (on me, due to day job, not OMM), put in a Limit order, and was eventually filled at Dan’s limit. It looks like others got in at better prices, so I may end up Autotrading.
@richrun- I have a day job too. And if I don’t want my employer to know I’m on OMM watching Dan’s trading videos, reading his updates by email or placing trades as a result of either, I do it on my phone. Personally, I love this set-up!
The email alert ahead of the market open is very helpful. I live in Singapore and I can put in the orders and go to sleep. The orders (did both Apr and Jul) were both filled and up by 20% and 10%+ respectively.
I’ve traded options for 1 year and up by 300% using exactly what Dan’s teaching (I don’t usually put in a stop loss). I am so glad that I’ve found OMM. The strategy works perfectly for me.
Could? someone please explain autotrading
@shopguy: please view Dan’s Options for Newbies video. He explains all about it.
is there something special that I have to do to receive email updates? i have yet to receive a single email, yet I receive smm emails and omm password updates.
I wasn’t able to get into this trade yesterday and today am wondering if I even want to. Stock down $2.45 and April $170’s are $4.80. Is this a bargin? Would an experienced option trade please give me some advice?
GS – the thesis for the trade remains intact unless it breaks support. I too missed the fill & I am now going to review the video to define support, define my risk. This is a long dated call, Dan said April or June depending on if you have autotrading… that was so the stock could wiggle, we have lots of time.
Todays price action may be a gift or a time bomb, but I’m with Dan, I think it’s a gift and will manage my risk accordingly, after all- Dan could be wrong. No risk / No reward…
Manage your risk!
Thanks for helping me again, Wade. I took the trade. No stop mentioned and I’d sure like one. Is
there a formula?
Irish eyes- I just took the July 170 trade with a fill of 8.88
I did not use autotrade & filled just fine.
Now I will place a 25 to 30% stop on my partial position.
I believe GS is sitting on support RHRN, & is ready to move higher
Thank you again, sir.
Irish eyes- I have no set formula for stops, but I’d like to show you my trade to point out the power of leverage.
I bought 11 calls @ July 170- that equals 1100 shares, which at 165.50 per share would mean I control 182,000.00 dollars worth of stock!! A 3% stop would be about 5000.00 on the common. Or 177,000
So- for about 10,000 in options I control 182,000.00 worth of common. With a 25% stop, I could lose 2500.00, which would equal about a 1.5 % stop on the common.
Hope this helps! Stay within your comfort zone, don’t lose your dough, MANAGE RISK
Irish eyes- Its kinda frowned upon to say how much you’ve made or traded, etc…. This prevents ego’s & boasting.
I am doing neither, the market us way smarter than me! Just trying to make a point. = )
Yes, it helps and I’m managing risk by trading small until I get more experience.
wade edwards, very good comment. it helps me to see the big picture. thanks!
I was unable to buy thr GS options in my scottrade account but found that my new account with Trade Monster hade bought the options via the Autotrade. Thanks Dan.
I just entered the the trade at $4.77 for the april 170’s today. I believe we will have a blowoff buying spree top then fall back to spx 1284 before resuming the uptrend. My opinion only as always trade within your comfort zone and buying levels and listen to Dan.
Dan, love the idea of just buying 1 contract and lettin’ her ride! I’m new to options, so that’s what I’ve been doing. I think of the ups and downs like a day at the amusement park. So far the method of receiving the trade via email followed by the video works for me.
Why does Dan put this trade as a day limit order,if the option price gets away can’t we just wait til it pulls back to our price range? Also is it better to sell this option before expiration or exercise it?
Hi Dan,
I am working full time and have no chance to listen the video.
I miss understand it…
when I saw the grid:
Limit: $9.40
Last: $8.80
I understand : BUY at ~ $8.80 and place LIMIT order at $9.40(SELL)
for me the previous present as “PAY NO MORE THAN:” is more easy to understand since durring the work I cann’t listen the videos.
Regards
Valentin
Valentin,
Not DAN but let me say that this is not a limit sell @ 9.40. It is buy to open and pay no more than 9.40. When the alert was sent the last trade was @ 8.80.
GatorD
I use to be a customer of DEEP IN THE MONEY CALLS at the street.com. Cramer says to NEVER buy out of the money calls or puts. He addresses this in detail in Getting Back to Even. I’m curious to what some of the more experienced option traders on this site think. I have made some money here so far, but I will start to have to take bigger positions to justify the cost of the service. I’m not ready for the bigger positions becasue I am waiting (like alot of others) for a correction. Last the year the January correction came in February and it was nasty.
Cramer’s shows and books are targeted more at fundamental investing for the long term. Dan’s techniques are technical and aimed more for shorter term trading. When Cramer says never buy out of the money options he’s referring to novice investors who don’t have the time or knowledge to follow the market everyday. Luckily for us Dan has this time and knowledge and is willing to share it with us so we can make money along with him.
With all due respect Joseph…I am not so sure your assessment of out of the money options is correct….and I would be shocked if Cramer would characterize his motives for never buying out of the money options in the same way that you have. Deep in the money options are bought and sold extensively and I would be willing to bet that this activity is not predominantly from the novice investor… I would actually argue that shorter term holds of positions…a few days to a month… are better with deep in the money near term options with high delta because you get near 1 for 1 move in price with the stock….out of the money options are pure time value and if the stock does not move quickly or substantially beyond the time value premium you paid then you risk losing that time value premium. GS at 170 today would equate to about 100 dollar gain per contract. 1 month from now a move to 170 will be about even and as time marches toward the July expiration it is going to be hard to make money on this trade without a good move of GS above the 170 level….if you get all the way to July then GS has to be at 179 and change just to break even.
I didn’t mean to imply that only novice investors are trading deep in the money calls. They are a very useful investment and I’m sure many professionals trade them. I don’t think they are used as short term investments very often though because in the short term a high delta hurts you more if the stock moves against you. I’m not a professional trader so maybe I’m wrong.
I’m a big fan of Cramer’s and you’re right about the 1 for 1 delta. That’s exactly why Cramer recommends using deep in the money calls as an alternative to stocks on long term investments. He has also said on his show that most out of the money options expire worthless and that the option market moves fast, so if you don’t have the time to follow them close you shouldn’t trade them.
Just throwing in my take. Jim is trying to give people who lost the bulk of their retirement savings a method to “Get Back to Even”. Deep in the money calls are just a way of trying to participate in a stock(s) when you don’t have enough capital, which after the crash is a common malady.