Doctor Jack's Stock Medicine

[Jack Haddad]

Hov

Shorted 1 block at 26.20 on an intraday gap up.

[Jack Haddad]

Hov

Shorted 1 block at 26.20 on an intraday gap up.

Covered at 25.64

[Jack Haddad]

Tol

Shorted 1 block at 25.55

[Jack Haddad]

Aapl

Shorted 1 block at 72.64... I understand that I advised against shorting this one yesterday. However, the daily has gotten ahead of itself.

[Jack Haddad]

Nem

Bought 5 blocks at 50.86 to 50.90, and wrote 500 Sep 50 calls for 1.55/contract.

Bought back 500 Sep 50.00 calls at .30/contract, and wrote 500 October 47.50 calls at 2.80/contract.

[Jack Haddad]

Nem

Added 1 block at 48.15

[Jack Haddad]

Nem

Added 1 block at 48.15

Sold at 48.35

[Jack Haddad]

Tso

Bought 4 blocks at 62.06 and wrote 400 Sep 60 calls at 2.75/contract.

Bought back the Sep calls at 1.40/contract, and wrote the Oct 60 for 3.60/contract.

[Jack Haddad]

Intc

INTC is poised to go to 25 by xmas. For those considering options to tie less equity and have more leverage, here is a strategic play: Sell to open (short) Jan 2007 call 20.00 and buy to open Jan 2007 call 22.50. The ratio should be 1 to 3. For every call you short, buy three. this trade require minimizal capital outlay because you get pretty much all the money you needed from selling call $20 to buy call $22.50. If INTC is below $20 when jan options expire, you only lose the commission, but if it goes to $22.50, you'd make lots of money.

[DSteckler]

INTC is poised to go to 25 by xmas. For those considering options to tie less equity and have more leverage, here is a strategic play: Sell to open (short) Jan 2007 call 20.00 and buy to open Jan 2007 call 22.50. The ratio should be 1 to 3. For every call you short, buy three. this trade require minimizal capital outlay because you get pretty much all the money you needed from selling call $20 to buy call $22.50. If INTC is below $20 when jan options expire, you only lose the commission, but if it goes to $22.50, you'd make lots of money.

I don't see how'd you make money. You sell 1 call for $1.15 and buy 3 at $.45 ($1.35 total). That gives you a debit of 20 cents.

[lemonjello]

Those pesky numbers

I think what Jack wanted to say is if it goes above 23.75 you start making money. Between 20 and including 22.5 you actually lose money since the 20 call will be in the money and the 22.5 calls will not. E.g., if you sell 1 20 call and buy 3 22.5 calls you could lose 22.5-20 * 1000 = 2500 at 22.5 plus your intial debit plus commissions.

If it closes below 20 you lose your initial debit plus commissions.

But, if it goes over 22.5 you begin to get a free ride on 2 non-offset options. The one 22.5 and the 20 offset. The 2 "free (.20)" 22.5 options start making money for the position after the stock price exceeds the loss on the 20 call at 22.5; 2.5/2 +22.5 = 23.75 plus initial debit plus commissions. So if INTC goes to 25 you make 25-23.75 *2 less commissions and initial debit or approx $2500 per the example.

If the stock market tanks in between now and Jan, INTC won't be immune and you could have a long wait until the position comes back into the money while you are kicking yourself for not waiting for the bottom where you could have done the same thing and made a lot more money.

Of course, you will need to check the numbers yourself since I've already had a drink or two at this point and, as noted in my thread disclaimer, Lemonjello is not your mother .

I don't see how'd you make money. You sell 1 call for $1.15 and buy 3 at $.45 ($1.35 total). That gives you a debit of 20 cents.

[Jack Haddad]

I don't see how'd you make money. You sell 1 call for $1.15 and buy 3 at $.45 ($1.35 total). That gives you a debit of 20 cents.

you can think of it as subtracting the 1.35 from 1.15 as a debit to subject you for a loss. The way this play makes money is that during an upside, the intrinsic value of the call being shorted will decay in value faster than the calls being bought-- thus, the derivative value of the call bought increases in value much faster than the short calls.

[Jack Haddad]

you can think of it as subtracting the 1.35 from 1.15 as a debit to subject you for a loss. The way this play makes money is that during an upside, the intrinsic value of the call being shorted will decay in value faster than the calls being bought-- thus, the derivative value of the call bought increases in value much faster than the short calls.

I mean to type, "you cannot think of it"

[DSteckler]

I mean to type, "you cannot think of it"

But that isn't what you wrote. You specifically said:

<< If INTC is below $20 when jan options expire, you only lose the commission, but if it goes to $22.50, you'd make lots of money. >>

You were referrng to expiration day in January. In fact, if INTC closed at 22.50 on expiration, your 22.50 calls would expire worthless and your 20 calls would cost you an additional $2.50, for a total loss of $2.70/contract.

[Lyehopper]

But that isn't what you wrote. You specifically said:

<< If INTC is below $20 when jan options expire, you only lose the commission, but if it goes to $22.50, you'd make lots of money. >>

You were referrng to expiration day in January. In fact, if INTC closed at 22.50 on expiration, your 22.50 calls would expire worthless and your 20 calls would cost you an additional $2.50, for a total loss of $2.70/contract.

I love it when "professionals" quarrel.... Hey Dave! stop being so darned mean today! First Peanuts, now Dr Jack!.... Can't you see he's sleepy already? SsSsSsSsssss.