Modify what I wrote at 1:15pm about the President pumping up assets. He was then giving a speech about the Crimea and sounded more like a bellicose clone of John McCain. Can you believe that? So now prices have backed off on Himax and most everything else. But my gold miners GDX is doing well. The President even called an election by the people of Crimea an action against International Law (an International crime? OH horrors) What about the people of Kiev who toppled the elected government of Ukraine and then tried to put their president in jail? The spirit of Les Miz lives on.
Like I implied, selling the 2016 calls would be risky if you hold them more than 3 or 4 months. The June 2014 19 calls have practically no risk.
I also notice that in the Yahoo "top stories" at the top right corner of my screen, it says "US household wealth above $80 Trillion." That means an average of $800,000 per household (wealth)...that is not the mean. The average is raised up higher and higher by the rise in the assets of the wealthy. They love it now: a President and Fed Reserve which pump up assets and a Congress which will not confiscate their assets(so far).
of course, all the above is written regarding the June options. Some use the January 2015 options or even the 2016's.....works the same just longer term. But there is far less risk using the June 2014's because the Himax earnings are unlikely to rise too significantly before then.
I will say it all over again: selling large volumes of puts and calls has become extremely popular and is also used by the large hedgies and market makers and regular investors. They sell 1000's of far out-of-the-money puts and calls and protect their positions by it and collect the premiums on June 20 close. So it is just a positioning that is a great hedge as long as Himax does not go above 19 & 24 by June 20. In a bull market it is more profitable to write the far ootm calls and in a bear market, selling the far ootm puts works great. Many people with multi-million dollar trading accounts say they are making $100,000's on trading this way (eg. 2000 June 2014 Himax 19 calls written as noted earlier collecting $150,000).....all with practically no risk. Large investors like these people value nearly riskless trading. They remember 1987, 2002, 2009. Black-Scholes guarantees that they can operate like an insurance company....ala Warren Buffett with all his insurance companies collecting premiums. But hey, we longs are different. We like the risk and live on it every day.
I will say it all over again: selling large volumes of puts and calls has become extremely popular and is also used by the large hedgies and market makers and regular investors. They sell 1000's of far out-of-the-money puts and calls and protect their positions by it and collect the premiums on June 20 close. So it is just a positioning that is a great hedge as long as Himax does not go above 19 & 24 by June 20. In a bull market it is more profitable to write the far ootm calls and in a bear market, selling the far ootm puts works great. Many people with multi-million dollar trading accounts say they are making $100,000's on trading this way.....all with practically no risk. Large investors like these people value nearly riskless trading. They remember 1987, 2002, 2009. Black-Scholes guarantees that they can operate like an insurance company....ala Warren Buffett with all his insurance companies collecting premiums. But hey, we longs are different. We like the risk and live on it every day.
no, I don't know....but would think it would be either the bull spread you are mentioning, or a covered call position, or just plain selling calls and being the insurance company premium collector.
Glad to hear the new definition of Market Makers, that it includes the bigger picture and "Agents." It used to be in the old days that the predominant Agents were the Mutual Funds. I used to read "Morning Star' because it would detail the millions of shares sold in a particular stock by a mutual fund. The Funds would tell us to hold onto their mutual fund shares even while they were selling the stock shares. Most of us on here like to hear about the institutions buying the shares, not dumping them. BTW, I believe, the most common current options strategies involve buying the in-the-money calls and selling the out-of-the-money calls(to cover), if you want to collect premiums. Selling the 12's is not a good money position.
I have said this before: I just don't believe this conspiracy theory regarding Market Makers. They are charged with keeping neutrality in the stock. I showed in the discussion last Friday, options expiration, that yes, they and many others had an interest in keeping the 14 calls out-of-the -money because it was the nearest call and the time premium was disappearing. Selling calls is very popular today and heavily used by Himax's larger shareholders and the mm's. It gives them some protection so that they can hold onto their share inventory. If you believe the conspiracy theory regarding mm's that they will drop the share price over $2 w/i 3 weeks, you should call the CBOE and file a complaint. Then call your US Senator and demand a Senate hearing regarding the conspiracy of Market Makers just like the Senate is doing today in the hearing on the accusation of conspiracy of Swiss Banks against the USA.
Options expiration yesterday was a good example of Typical Action. By 2:30pm we could easily see that the battle to make the Himax 14 Feb calls expire worthless would win the day. There was similar action in the S&P's 100&500 options. I used to trade the OEX 100 especially in the last 90 minutes of expiration because that was when the option time premium vanished and you could double your money real quick by trading for the market close in those 90 mins. The OEX failed at 810 just like Himax failed at 13.8-14. So the options could then concentrate on Put positions for the close. There would be no melt up, so look out for a melt down. The buyers nearly disappeared. The House had to take back a lot of shares and so it hedged to protect for the downside by 4pm. The OEX 810 put was at $145 (ask) for a good bit of the last 90 minutes. Then the selling took hold and it closed at 807.33, so the 810 puts expired at $267/contract. That was a nice quick profit. You saw the same thing with those HIMX 14 Feb puts. The OEX is much better for trading in the last hour of expiration because it is a purely all cash transaction. Stock options involve the stock shares. So this is what I saw on options expiration day yesterday. Monday, new positions will be taken.
(finishing the above) All this can create a lot of backing and forthing on expiration day. I have seen both melt ups and melt downs on expiration day. I think the index options are more subject to such melt ups and downs. But lately the big players are so hedged and protected that nothing much happens on the day. You would think that if Himax springs way above $14 tomorrow, all those call writers would be closing out their positions early. Then that would put the House short on Himax and so they would buy hedges or outright buy the stock. All this creates movements like the ebbing and waxing of the tides. Hard to say what the positions will be by the end of the day.
First of all, we need to understand what the Market Makers typically do. I have seen them operating and it goes something like this. If you and others are selling 100,000 shares of Himax at 10am tomorrow am and there are few offers to buy during the 10am hour, the MM is required to buy them himself pretty much near the bid/ask price at that time. If that increases his own long positions to an unreasonable level he is not comfortable with, he will then buy 1,000 put contracts to hedge the 100,000 sh. he just bought from you and others. Each option contract covers 100 shares. So it is always a 100 to one ratio and that is why the option price is multiplied by 100 to get the value of the contract. The published value is determined by the Black-Scholes mathematical model. That is why there is such an advantage for writing (selling) options. The Black-Scholes model determines that you will get a guaranteed price for what you write (sell). The options MM will be required to pay you what the Black-Scholes dictates. This shows why options selling has become so popular. Of course, when the "House" is thus forced to be net the opposite of your position, the House will automatically then create his own hedge position to protect himself. So here you see then what is involved in so many of those 14s expiring after the close tomorrow. All this hedging and expiration will just be a lot of noise tomorrow. That's why investors are urged to just ignore it. Monday any maladjustments in the pricing in the stock will be corrected. So that is the simple explanation. Now what about those 10,000+ $14 Feb.contracts you asked about? Those who have written those contracts will want them to expire worthless and Himax below $14. Otherwise they will be liable for a big financial transaction by Monday and their position will be a deteriorating position all day. So they will try to keep Himax below 14. If that seems impossible, you would think that they will go ahead and buy back their contracts.
Thanks, Has. Wow, you really gave us a shocking refresher of what happened in December, 2013: Himax from $10-14.71!! But trading tends to go in fits and starts. We first hit $10 on 9/19 and went over $11 by 10/4. Then after 11 weeks of "fits," back down to $8.50 and returning to $10, traders and investors started looking seriously at the upcoming 2014. We saw the result of that. Now I said that I was holding for 2015 results and didn't expect much for 2014 results. However, we all know that traders and investors will start trading on 2015 results way in advance. It looks like today may have been the first day that we started looking hopefully at the coming year 2015.
(now to end the story of Himax) On Tuesday I saw the price basing real nice at 13.30. Then I noticed Google up nearly 10% YTD, Priceline up over 10% ytd, and Netflix up big time. We could have all sold Himax @14.71 and put the money into Google and be up real nice ytd. But I reasoned, Goog is so expensive and I have refused to buy it since its IPO @88 (or was it 80?). I missed that one! But Himax is down 10% ytd. That is a disconnect. So I bought back my core Himax 5k shares position at 13.40. I don't expect too much for 2014, but I really am holding for 2015 and believe that earnings will greatly increase by then. Cheers to all.
Yes, I have had the same experiences with Fidelity & Etrade. Loved the Wild West days of 1986-87 w/Fidelity. Used to have $50k in several mutual funds w/them plus a core holding of XOM. So still have the XOM..never pay attention to their earnings. My DRIP in Xom has an annual return of 17% since then thru thick or thin. In 1987 I was up $50k and then lost all that $50k in October using the mutual funds and the stock index options that Fidelity allowed me to trade willy nilly. I used to weekly trade Fidelity Overseas just to capture the rise in the Yen and the Nikai(sp.?) Well, Fidelity put a stop to all that freedom for us small traders after Oct.87...just as well...we learned new ways to do about the same thing. Disgusted that they still allowed the big money houses and now HFT to keep up their frequent trades. When my wife and I retired, we were able to move our 401k's into Fidelity & Etrade brokerage IRAs. So now since 2012 it is "back to the Wild West days." Last summer on a hunch, I checked Yahoo's one day data on biggest movers and Volume increases. I selected 5 stocks to research based on being in mid single digits w/large volumes traded. Then selected for having real and growing earnings and no debt and a product I could believe in. The result was Himax was the winner. Plus when I saw that Innolux had finished selling for legitimate private interests their original investment in Himax moving the stock down from 8 to 5, I decided to buy a 5k core holding. Later I bought 2K more shares to use for trading monthly. Somebody here has said, "Oh the curse of 14.71," the price on Dec.31. It became a psychological resistance price on a closing basis. So on Jan.31 near the close I saw the 14.71 again and sold it all. With earnings coming up and my holdings being worth over $100k, I decided to take a Himax vacation. On Jan. 1 I had already decided to go contrary to the market sentiment by buying into the Gold Miners ETF, GDX. So the gold miners have made my year so far
I am in just the stock ownership side of these things now. I do frequently change my preferences in which stocks to own however. I used to do option spreads. A big financial advisor I know deals with people who are scared of the market and so he tries to get those people to change their strategy to selling far out of the money puts. Then they use the decay of the premium over time to collect their profits (like an insurance company). Of course, then their brokerage accounts have to be rich enough to handle the case when the shares are "put" to them and they have to buy them at the put price level they chose. I have often thought how the same strategy could be used with out-of the money calls like HIMX March 19 calls. I suppose you would have to watch them carefully to make sure they don't get "called" from you and you have to buy the shares at 19 and then they get sold automatically at 19 to provide the shares. The puts would seem to work better in a bull market. But I wonder if the out of the money calls being sold could be a usable strategy for those who watch the share movements pretty carefully.
another thing: If Prodigy had perceived back then the way to do the full Social Networking thing, they would have done it, and not leave it up to Mark Zuckerburg. The latter has made the money, the former not.
ah yes, covered calls. Reminds me of the early Bulletin Board days on Prodigy in 1992. I used to participate in a group which on a daily basis discussed Covered Calls. They were fanatical about it and I enjoyed the high spirits of their discussions. The board was led by a woman. She was quite a character and a good trader. Some how Yahoo has taken over these functions. R.I.P. the old BB's on Prodigy.
Okay, I didn't mean to give the shorts too much of the credit for the rise of the stock. Like you said, we can think their buying back makes them "an instant long." No. I have just been trying to lump them together with the swing traders, because they both sell the stock at a perceived high and then buy it back at a lower price. One is in the stock as it moves higher and out when it goes lower. The other is out of the stock as it moves higher, and "in", has a commitment to the stock, as it moves lower. So they both participate in the overall money commitment to the stock. It seems like so far most all of the people using the diverse strategies with Himax are equally committed to its long term strength. IMHO
curious irony, callselling is another form of shorting. There's a lot of confusion on this board about who is running Himx's price up and down. Let's not call the various types of tacticians criminals. Keep cool and do your own thing. Yes, we all know the shares have been going up real nice the past year. The shorts(margin) are not slow. They are some of the first to buy back and drive the price higher. They don't sit on their positions watching them deteriorate all the way up. Then there are numerous references to MM's being manipulators. I still haven't been given the current definition of MM. For a hundred years and more it has meant Market Makers at the NYSE. They are supposed to keep order in the trading of an individual stock and should be neutral. Of course, they have to make a living by their trading. So don't blame them. I am not sure of the requirements for MM's on Nasdaq. I think all this is because Himax has attracted such a large chunk of swing traders with a lot of money. They quickly buy(back) low and sell high, over and over again, at least once or twice a week. Just be happy they are involved in the ownership of the stock, because their money is driving the share price up.