I closed out 5 positions just after market opened Friday as it was the September expiry. The biggest winner was $LOW, which made 700% return on capital spent. Of course, they don't all turn out like that but I was happy with that win.
GT also made a decent gain with $450 with a $120 spend.
Eldorado Gold's call options are taking some huge interest from the market; there are 93k in open contracts across the October series vs 7.5k in interest for the puts.
The volume going through Tuesday's session was all call options - no puts traded at all. With 79k outstanding on the $4 strike alone, I thought it a good bet to also get on, so I bought 10 contracts @ 0.20.
63k calls traded through the $6 October calls on $GFI Monday. About 10k in open interest across the entire expiration, so this is a pretty large bet someone is making. I bought 10 contracts at 0.17...turns out that price is pretty bad as the stock sold off from the open. I probably could have bought in lower if I'd paid attention to the pre-open....
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.
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.
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.
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.
Massive volumes went through the $8 puts in the weeks leading up to Lending Clubs dismissal.
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.
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%
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
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.
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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