protect your capital, charts are terrible, we are at support levels in all charts, if we break it's going to be panic selling, Ag, Minners, Oil companies all brok down today. Retail, banks, housing all up on short covering. The Fed is sitting picking its nose while Rome burns. Emotion is taking control of the market, have government talking about emergency economic stimulus does not inspire confidence. If MER misses tommorrow the banks will give up all their gains, if jobless claim raise tommorrow housing and retail will do the same. Ag/gold/bonds all are due for a major fall. consumer staples are also breaking down. Major pharma getting hit by bad news.
IMO tommorrow is going to be bad. Fed will be forced to cut Friday morning.
didn't say you were right, I said you were overthinking things. It's a matter of timeframes and prespective and shorthand in my writing. the trade depends on alot of things. It's like driving a car. when you are first learning to drive you have to think things thru and concentrate on the brake, the gas, the wheel, turn signals when to use them when not too. etc
Trading is the same. When you first start trading you analayse everything in minute detail, but after you do it for awhile, the possibilities jump out at you, risk is there but you learn to qunatifiy risk rapidily in a fluid market, to limit the risk with things like beta, equal trading lots, timeframes, price movements, underlying stock characteristics. And after doing it for a while you can pick plays that all things being equal carry the same amount of risk in the timeframe you choice to use with the amount you choose to deploy on the stock you have choose to trade.
Of course you are partly right all things being equal no two things can be equal in risk. However there are times that they can approach the same level of risk. those are the things I look for on a day to day, hour to hour basis and what allows me to exploit those movements with a somewhat successful record. My ultimate risk is contained irt money at risk by using the same amount of money on each trade, my risk of premium contraction is limited because I use ITM options thereby allow my options to move tic by tick to the underlying stock in most circumstances, the prmuim risk is further contained by the using short timeframe therby not "renting" the option form the option writer for long lengeths of time. My unknown risk is also capped by the timeframe limit.
Now before you begin I understand that the risk is still there and two different stocks have different risks. But all that being as it may, a $1.00 movement in the underlying option of a %$100.00 stock is easir to achieve than $1.00 movement in a $25.00 stock. When you take out the premium which is not at risk inshort term trades because you will recieve the premium back when you sell the option on the same day.
Just analyzing, OCD and all that. It makes a person want to be able to explain something to someone else when they know that they are right. Being right is what caused me to want to explain it so much. It's like a teacher "really wanting" someone to see the light irt a subject. OCD, it's a curse...
"I don't agree that risk/rewards is a known fixed quanity."
--> Me either
"The shorter the time frame of the trade the less risk from unknown sources that can effect the trade...So while it may appear that the FEB calls are less risky than the Jan calls the reverse is true for unknown risks."
--> Actually they each have separate aspects to them that are MORE & LESS risky than the other one. One of them will be more risky though.
--> Regardless of weather you think longer or shorter term is "more" risky though you can't compare 2 options that are both trading at the same price if they are in different months because there is too much of a difference in risk (regardless of "which one" you think is "the most" risky). The mere fact that one "is" more risky than the other makes them not comparable "IMO"... Take any two stocks and find options for ea one that are trading at the same price; One of them will always be a riskier option than the other even with identical premiums.
Again: "Obviously" if you're comparing 2 trades that have "different" risks, the riskier one will have the potential to be the most rewarding (or losing) of the 2...
Sounds like a good game plan for tomorrow. We'll see if GE sets the table. I can tell you one thing, I won't be going long tomorrow.
If the FED does nothing, what do you think about just buying puts on RTH? The XLB has been hammered lately, but I think that might work as well.
kept my GME SHLD puts, added some LEH puts. But kept my DRI calls. bought some MSFt for my IRA.
I'm trying something different. On those companies that I think have been crushed and think they could explode to the upside if/when the FEd gets it I am buying 3-4month options like DRI. the rest I'm buying shortterm FEB puts. that's my hedge when I hold overnight. That being said still have most in cash.
Ge reports tommorrow. If they guide down, all of the large cap international will get taken out to the woodshed, DE UTX, FLR, FWLT, CAT, IR, etc all major shorts for a daytrade.
Retailers held up well because of the hope the FED will cut rates tommorrow/ stimulus package talk etc IMO. If they don't watch Retailers give up all their gains including GME. Banks where the same way after JPM they held up well for a day then MER brought things back to realitiy,
IBM news might give you an oppurtunity to short the tech sector again.
It's going to be interesting.
ouch stx missed top line good thing i traded in and out of it the day of ibm's announcement, amat missed , amd not so bad,i still like the qid i have been doing great with that did any1 look at it
I really don't think individual stocks fundementals matter at the moment. the entire market is trading together. true there are some bright spots but the selling is taking everything down regardless of good news or not. GMe is a prime example. great numbers yet down 205-25% from highs.
short hand gets you every time. next time I will try to be a little claerer. Me bad.
time difference is not a factor because you know the time of the trade going into the trade one day. So risk is the same for thatr particular time frame. It's all a matter of prespectivie. And I know what you are saying and agree but you think long term. Different thinking places different risks/rewards. I don't agree that risk/rewards is a known fixed quanity.
Look at the hedge funds and their quant funds. They had risk "priced in" but that was only risk thet they knew about. the only way to limit unknown risk is to shorten time frame. The shorter the time frame of the trade the less risk from unknown sources that can effect the trade.
So while it may appear that the FEB calls are less risky than the Jan calls the reverse is true for unknown risks.
"but that is not what the discussion was about."
--> Here's what the discussion was about (i.e. what you said in the post I 1st replied to):
"puts seem to expensive. that's the trouble with small stocks and options. To get an opition to go up a $1.00 on a 12.00 stock is 10 times harder than to get 120.00 stock to go up $1.00 but the return is the same."
You don't take time, volatility, sector trends, etc into account. You simply refer to a $1 gain on a $12 vs. $120 stock... You never said the MON options were a different month either so apparently the problem was that you weren't clear about the months being different.
BTW, that is a "completely" different aspect and for the time/risk difference alone I would never agree that you can really compare getting the same $1 return because the risk aspect is "entirely" different. "Obviously" if you're comparing 2 trades that have "dramatically different" risks the riskier one will also be the most rewarding (potentially)...