Open Position Summary

Down -13 in unrealized profit for the September option series. I closed out the remaining August trades Friday and posted a gain of $1,470 but only due to $BID's runaway profit on the call options.

TradeOpenDaysP&L
DB Long Put11-Aug-16845
LOW Long Put11-Aug-168-3
FIT Long Call11-Aug-168-80
GT Long Call18-Aug-16160
NUAN Long Put18-Aug-161-35

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The Most Important Option Greek

Call and Put Delta vs Changes in the Underlying Price

The Delta of an option does more than approximate the price move compared to the underlying; it also describes your directional bias, serves as a proxy position for the underlying instrument and estimates the probability that the option will expire in-the-money.

Delta isn't static though; it changes constantly with other pricing factors and it's important to know what they are.

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July 15th Trading Summary

12 positions in total and ended up with a small profit of $47. I closed out WLL way too early and missed out on an extra $315 in profits. However, I covered by VIAV assignment with some calls that made back the loss on the premium from the bought calls, so was happy with that result.

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June 17th Trading Summary

What started out well for 2 out 4 of these trades ended up all being losers. CYH almost tripled in value and ANF over double the initial investment early on. However, both of those positions took turns for the worse and I closed out all 4 positions at a loss of $335.

My trade management and exit strategies definitely need some consideration. So far, I've simply been betting on a move and waiting until expiration. Some of these trades really start out well but I hang on too long and exit them at a loss.

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16% Return for May Expiration

In total I made $169 in profits using around $1,000 in risk capital for the trades closed out on the May expiration.

I took positions in 12 stocks for 14 trades in total, as I made two adjustment trades in MRO and ETE. VALE was the biggest winner with a gain of $360 and the biggest loser was EMC, losing $160.

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$LC CEO Dumped

$LC Stock Tanks 35%

Massive volumes went through the $8 puts in the weeks leading up to Lending Clubs dismissal.

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Make Time Decay work for you

Time Decay Graph - shows the erosion of value accelerates past the 30 days mark

As options approach their expiration date, their value can erode quickly. If you're long out of the money options then this effect can be quite dramatic; you can lose money even when the market moves in the right direction.

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HRB Move an Inside Job?

HRB Stock tanked on Wednesday the 27th after the company reported a disappointing tax season. Outlook remains bleak for the stock and their next report is due out in June.

However, it appears someone knew of the pending downward move in the stock.

Option scanning tools showed that the $23 put option had significant volume trade the day before the stock plummeted. 19k options traded through one strike, which saw the puts outnumber the calls traded by 5 to 1. The next day, HRB drops 13.56%.

The Puts rose 386%

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Using the Delta to Hedge Options

Delta measures the theoretical change to the value of an option as the underlying changes. This means the option's value is tied to the underlying by the amount of "delta" the option theoretically has. Traders can then offset the risk of the opiton by trading an appropriate amount of shares in the underlying security

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Pricing Options with the Binomial Model

The Binomial Model is the model of choice for American styled options - that is, those options where you can exercise any time up until the expiration date. Even though Black and Scholes was the original option pricing model, the Binomial Model is probably more widely used than B&S.

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Option Pricing

There's lots of programs out there that will charge you a monthly fee for a calculator that prices up option contracts. Not here!

I've put together a little something in Microsoft Excel that just does this, plus prices up all of the Option Greeks.

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Option Combinations

Browse our comprehensive dictionary of option combination strategies. Learn how option combinations give you the ultimate flexibility with your investment decisions.

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Option Scanner Logo

 

Scan thousands of stocks and ETFs for profitable option opportunities in minutes. Option Scanner Pro will tell you where the huge option volume action is taking place.

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