ChiefsPlanet Mobile
Page 101 of 884
« First < 5191979899100101 102103104105111151201601 > Last »
Lenny "The Cool" Lounge>Investing megathread extravaganza
DaFace 11:23 AM 06-27-2016
A place to talk about investing stuff.
[Reply]
Rain Man 08:00 PM 12-15-2017
Originally Posted by ChiliConCarnage:
Healthy companies will rarely have 8.5% dividends so that stands out right away. Unless it's something cyclical and temporary, for instance, Cal-Maine went crazy high during the avian flu thing that caused egg prices to go up. Anything much above 5ish should draw extra attention. REITs don't pay taxes and have to distribute 90+% of profits so they get big divs. The taxes are passed onto the investors because you have to pay on income instead of cap gains.

SSW has a 218% payout ratio. Just the common shares dividend seems more than income can cover. Looking at the balance sheet, they've been diluting shares which probably has caused the stock to sink.

cvgw looks nice though. Put it on my watchlist.
Yeah, I think SSW paid about 5% when I bought it, but then the stock dropped 40%, which drove the dividend yield up. I haven't heard anything about them cutting it, which would be bad, so I'm hoping that they're expecting the price to go back up. I think it cratered a couple of years ago when that Korean shipping company went belly up, and I figured that would help its price. But I guess we're embracing American steel or whatever.

CVGW has been a very nice stock for me. I find it funny that avocados are that big an industry, but hey, guacamole.
[Reply]
lewdog 06:03 PM 12-18-2017
Originally Posted by scho63:
I bought puts as a hedge. I averaged down and the call premiums had no good value to write against the stock. Not worth it.

I've cut about $800 off my $2,000 loses so far.
Ok bud, I have covered calls down.

Now on to puts.

How did you buy a stock at $19ish and have it currently trading in the $17's but "made" money on it losing value? How do you short a stock you currently own and where does the money you make come from?

What do you mean when you say "I averaged down and the call premiums had no good value?"

Thanks for the help! I owe you a beer!
[Reply]
Buehler445 07:43 PM 12-18-2017
Originally Posted by lewdog:
Ok bud, I have covered calls down.

Now on to puts.

How did you buy a stock at $19ish and have it currently trading in the $17's but "made" money on it losing value? How do you short a stock you currently own and where does the money you make come from?

What do you mean when you say "I averaged down and the call premiums had no good value?"

Thanks for the help! I owe you a beer!
The puts gained value as it went down. It is a separate trade from the stock.
[Reply]
petegz28 07:58 PM 12-18-2017
Originally Posted by lewdog:
Ok bud, I have covered calls down.

Now on to puts.

How did you buy a stock at $19ish and have it currently trading in the $17's but "made" money on it losing value? How do you short a stock you currently own and where does the money you make come from?

What do you mean when you say "I averaged down and the call premiums had no good value?"

Thanks for the help! I owe you a beer!
A) You short a stock you own by selling it
B) If you want to short a stock you own without selling it then you buy puts that total more shares than you own. So if you own 500 shares and you want to short 500 shares then you need to buy 10 puts.
C) You buy a stock at 19 and then buy puts. Depending on the Puts you buy and how fast they gain in value, you could offset your 2 point loss and make more than 2 points on the Puts. That's tough going though.

There are 2 ways to use Puts effectively...

A) As a hedge on your current investment
B) To buy stock you want at a cheaper price than today's value

Warren Buffet does this a lot. If he wants to buy a stock that's at $50 but he says, I will pay $47 then he will write a ton of $47 Puts. If the stock comes down he gets it at his $47 but it may be lower by then. He doesn't care cause he thinks $47 is a price he will eventually profit from. If the stock doesn't go down or continues to go up, he pockets the premium and ladders up.

The 3rd and most unsuccessful way to make money on Puts is the same, most unsuccessful way to make money on Calls. Buy them outright and hope you're right about time and direction.

Buyers of options lose money 90% of the time. You got the guys who talk a lot on CNBC and what not about calendar spreads, credit spreads, condors, this, that and the other thing. And by the time you factor in the Bid\Ask along with commissions, you are making really dick on most of them.
[Reply]
petegz28 07:59 PM 12-18-2017
Originally Posted by Buehler445:
The puts gained value as it went down. It is a separate trade from the stock.
Yeah but net-net you probably lost money or broke even at best. If the stock was at $19 and went to $17, assuming you bout $19 Puts, the option is worth $2 at expiration. So you broke even, even if you made a profit on the specific option trade.
[Reply]
petegz28 08:07 PM 12-18-2017
Options for speculation is tough sledding and I don't know anyone who consistently makes money at it unless they are very well capitalized. And those that do, profit by writing naked. They may use a spread to have something of a built in stop loss but that's about it.

If you're good at spotting points of volatility then you can make some good money on straddles and strangles if you want to buy. I have made money on those but if the market goes flat you lose big time. You also have to be quick to sell your losing position.

You're better off trading futures if you want to make money with leverage. Options buying is a fools game most of the time. Everything is against you. You have to be right about the time and the direction.

The only caveat I would say to that is, if you wanted to buy at or in the money calls, several months out in lieu of buying the stock itself.

If you don't understand the concepts of Beta, Delta, Theta and Vega then you're best off not buying options.
[Reply]
lewdog 08:13 PM 12-18-2017
Originally Posted by petegz28:
A) You short a stock you own by selling it
B) If you want to short a stock you own without selling it then you buy puts that total more shares than you own. So if you own 500 shares and you want to short 500 shares then you need to buy 10 puts.
C) You buy a stock at 19 and then buy puts. Depending on the Puts you buy and how fast they gain in value, you could offset your 2 point loss and make more than 2 points on the Puts. That's tough going though.

There are 2 ways to use Puts effectively...

A) As a hedge on your current investment
B) To buy stock you want at a cheaper price than today's value

Warren Buffet does this a lot. If he wants to buy a stock that's at $50 but he says, I will pay $47 then he will write a ton of $47 Puts. If the stock comes down he gets it at his $47 but it may be lower by then. He doesn't care cause he thinks $47 is a price he will eventually profit from. If the stock doesn't go down or continues to go up, he pockets the premium and ladders up.

The 3rd and most unsuccessful way to make money on Puts is the same, most unsuccessful way to make money on Calls. Buy them outright and hope you're right about time and direction.

Buyers of options lose money 90% of the time. You got the guys who talk a lot on CNBC and what not about calendar spreads, credit spreads, condors, this, that and the other thing. And by the time you factor in the Bid\Ask along with commissions, you are making really dick on most of them.
This is great. Makes total sense reading this. Thank you so much.

I think Buffet's choice to sell a put on a stock you want to purchase anyway could be greatly used without having a ton of risk. Lowers your net cost of the shares as well if the purchase goes through from what I can tell? The rest of the options you mention seem pretty risky. Was reading about short selling where you in a sense borrow shares and later have to buy them back. Read some horror stories on investors losing their shirts on that!

Thanks Pete.
[Reply]
lewdog 08:22 PM 12-18-2017
So let's say I'd consider buying 100 shares of GE but only if it hit $15/share (currently $17.76). Instead of just writing a limit order for GE at $15 GTC, I could write a "Sell a put" option for that price, set to expire at some time in the future (is my terminology correct?). Where do you find the premiums offered for such an option?
[Reply]
petegz28 08:28 PM 12-18-2017
Originally Posted by lewdog:
This is great. Makes total sense reading this. Thank you so much.

I think Buffet's choice to sell a put on a stock you want to purchase anyway could be greatly used without having a ton of risk. Lowers your net cost of the shares as well if the purchase goes through from what I can tell? The rest of the options you mention seem pretty risky. Was reading about short selling where you in a sense borrow shares and later have to buy them back. Read some horror stories on investors losing their shirts on that!

Thanks Pete.
Short selling stock can make you money just like buying stock. I have nothing against short selling. The rule is "Bulls make money and Bears make money but Sheep get slaughters". In a down market or if you know of a stock that is going to tank, short it, by all means.

But doing it via options is a pain because time is against you. If you just short it outright you only have to worry about a margin call but should be out long before then.

But yes, when you short a stock you are literally borrowing it from someone with the agreement to give it back at some point in the future. A lot of people had made a lot of money shorting stocks. Some do it exclusively.

Buffet does lower his cost if his options get exercised. Figure he writes 1000 Puts at a strike of $47 on a stock that is trading at $50. Say he gets $1 a contract. So if the stock drops below $47 and he has to buy, he has the gross profit of $1 a share to cushion any loss. So really he doesn't even take a loss until the stock hits $46. Anything between $46-$47 he actually walks away ahead even though the stock is below the strike price he wrote against.

A lot of big stock buyers use this strategy but it's just as effective for the little guy. As long as you are willing to live with the stock below where you bought it. Buffet is a long term player so if he gets stuck with a stock at $44 that he paid $47 for, it doesn't bother him.
[Reply]
petegz28 08:31 PM 12-18-2017
Originally Posted by lewdog:
So let's say I'd consider buying 100 shares of GE but only if it hit $15/share (currently $17.76). Instead of just writing a limit order for GE at $15 GTC, I could write a "Sell a put" option for that price, set to expire at some time in the future (is my terminology correct?). Where do you find the premiums offered for such an option?
You don't write a "sell a put". You simply write a put.

Write = sell to open
Buy = buy to open

And what you would be doing technically is selling a naked Put. So you will have to post whatever margin requirements your broker has but yes you got the idea.

No need to sit with a limit order. Sell the put and pocket the premium while you wait to see of the stock comes to you. If it doesn't, you make your premium, rinse and repeat. If it does, you make your premium and get the stock at $15.

You find the premiums just buy looking at the options table on the stock. So if GE is at $17 and you want it at $15 you would sell a January $15 put to open.

However, this all sounds better than it is.

A) The premium you'll get will be next to nothing after commission on only 1 contract
B) a stock like GE is not volatile so the options won't be worth much

The more volatile a stock is the higher the option premiums are

Think of writing options as being "The House". You make your money little by little but consistently.
[Reply]
lewdog 09:04 PM 12-18-2017
Last question (for tonight) but now I am confused on the terminology and what they mean. Did a screenshot of my scenario on GE when looking up the option chain on TD Ameritrade.

If I wanted to sell a put on GE at $15, would I select the "buy" or "sell" option on this chart (what's the difference?)? What do the bid and ask prices represent in this?


[Reply]
petegz28 11:00 PM 12-18-2017
Originally Posted by lewdog:
Last question (for tonight) but now I am confused on the terminology and what they mean. Did a screenshot of my scenario on GE when looking up the option chain on TD Ameritrade.

If I wanted to sell a put on GE at $15, would I select the "buy" or "sell" option on this chart (what's the difference?)? What do the bid and ask prices represent in this?

Okay, let's start here...

Bid = the price you will sell at or, the price the market maker will buy from you...

Ask= the price you will buy at or, the price at which the market maker will sell to you...

When you buy a stock, option, futures contract, etc., you generally buy at the Ask..

When you sell, you sell at the Bid...

So in your example you would "Sell" or "Sell to Open" at .09 which is the Bid.

So, you will be paid 9$ for each contract you sell. Each contract is 100 shares so basically, .09 a share.

To close the position you would Buy or Buy to Cover. Or simply let the option expire worthless if it is out of the money at expiration.

But think about it...you're going to get $9 - Commission...on an option that is 80+ days out....not worth it


Like I said, people love to talk about Options. How great they are, how much money you can make, etc., etc. Especially the dolts on Fast Money on CNBC. But they always talk in gross terms, never in net terms.

If I were you, and you want to get started in options I would stick with either covered call writing or straddles\strangles.

A strangle is when you buy a Call and a Put at the same strike price. What you want is for the stock to move hard in one direction or the other. You're going to lose on one and make money on the other. The goal is to have the winner cover the loss of the loser and then some. But you have to be picky when you buy those.

A straddle is the same but and wider strike prices. So if a stock is at $50 you might buy a $52 Call and a $48 Put thus "straddling" the current price. It's cheaper than a strangle but I think harder to make money.

People fall in love with the fact they can pay a little money for an option contract and potentially make huge money. And you can. Very few are consistently good at it. Most lose a ton more than they win.

Use Options wisely. Buy a stock. If it goes up and you want to lock in some profit, write a Call. If you think the stock will tank cause the market is going down and don't want to sell, buy a Put. You have to recover the price of a Put though if the stock doesn't go down.

Always remember this...

When Buying an option you have to be right, right now. And depending on how out of the money the option is, you have to be right about 3 things..

1. The timing
2. The direction
3. The amount of the movement

So the inverse is true for writing..

You really need to get some books on Options to understand how they work. How time eats at the value of an option...
How volatility effects price...
What Delta is...

But please, if you do anything heed this little tidbit...

If you want to buy an option, buy several months out and close to the current price. Don't try to buy an option 5 points out of the money that expires in 3 weeks....

As a buyer, time is your enemy so you have to buy time...literally

If you want to Write options, write current month options. The closer an option gets to expiration, the faster the time value (Theta) comes out of the option. So use that to your advantage....
[Reply]
Discuss Thrower 11:10 PM 12-18-2017
Remember an option on an equity is the right but not obligation to exercise the option at that agreed upon strike price.

The value of an option depends on the market price of the underlying during the life of the option (Euro options can only be exercised at the contract expiry date, American can be exercised anytime).

Now, if you're buying an option you're buying that right but not obligation to exercise that contract and acquire the underlying security at the strike price.

Say it's Thursday and you have a call expiring on Friday. This call strike price is $110. If GE ends the day of trading above $110, then your option has value (ignoring commissions, of course) to either exercise the option and buy the stock at the strike price or just sell the option to another party. If it's trading below $110, then you $110 strike price option is worthless.

Basically, you are coming out ahead of a trader who thought GE would not exceed $110 a share on Friday.

If you have purchased a put with a $90 strike with the same expiry and underlying equity, then it's kind of the reverse. If GE closes above $90, your put has no value and presents no profit. If GE closes under $90, it has value and can be sold for a profit (or exercised). You are coming out ahead based on a Trader who thought GE would not go below $90 a share.

The value to you depends on this in generalized math: Strike Price - Stock Price = profit if you have purchased a call and Stock - Strike = profit if you have purchased a put

BUT if you're selling an option (you are writing an option) the dynamic is reversed. If you sell a $110 GE call and GE trades at $110 or more in the market, you have to pay the costs to fulfill the contract and provide GE stock to the option buyer and sell it to the option buyer at $110 even thought the stock is trading for potentially $150 in the market.

Writing a naked put at $90 and GE goes lower than $90, then you incur unlimited loss potential from fulfilling that contract.

Your only upside in writing a naked put is if the underlying stock doesn't fall below the strike price and your profit is capped at the premium you receive for selling that put.
[Reply]
Nightfyre 11:29 PM 12-18-2017
Writing a put does not create unlimited loss potential. Writing a call does.
[Reply]
Discuss Thrower 11:38 PM 12-18-2017
Originally Posted by Nightfyre:
Writing a put does not create unlimited loss potential. Writing a call does.
https://www.optionseducation.org/str...naked_put.html
[Reply]
Page 101 of 884
« First < 5191979899100101 102103104105111151201601 > Last »
Up