Post deleted by Mat Sklansky

[thehun69]

Hey base,

1) It's nice to see another TA person here, I'm now thinking of starting a TA thread to help people who want to learn.

2)I would really have to disagree on your pick and don't think that that was the best investment to make. Now granted the spread is fairly cheap, but you can't look at it from that point of view. Options, because of their very particular nature of time limits, decay and expiration, unlike say stocks, you can't be thinking in terms of cheap. You have to be thinking in terms of the probability of turning profitable.

Looking at my chart, I've eliminated all of the indicators and will go based on naked price action here so that it is nice and simple. I've established three key support/resistance lines based on congestion and candlestick formations.

Where PEP is now, it will be mired between 65.50 and 64.25 in that congestion area for a bit, and if it could push higher than 65, then the next stop up would be 75. For your position to be profitable you would have to see this stock climb all the way up to 68.28 (67.50+.78, for those following that want to know how I got to that price) at that point, we are talking about reaching new highs. To me that is going to be highly unlikely to get to that point. Just take a look at the action at all of the points that I've outlined.

I have to go, but I'll be back tonight for a more deeper analysis, but this is a start....

Ok , this sucks..I'm new at this posting links and pictures into forums...I pressed the print screen and was looking for the paste feature...how do you paste a picture? Please let me know, then my analysis will make more sense once I am able to do that.

THE HUN.

[mrbaseball]

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For your position to be profitable you would have to see this stock climb all the way up to 68.28

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It doesn't need that much of a move. As long as it doesn't go down hard time decay is on my side. If it breaks the trendline on a close I puke it. It's at the bottom a a 4 year trend channel and if that stays in tact I have no downside. Of course all trendlines and channels eventually come to an end. It's a short term play. Hopefully no more than 2 to 4 weeks. If it starts making a move towards 75 I'll have plenty of opportunity to get out nicely. Unless of course it goes there in a day [img]/images/graemlins/smile.gif[/img] I can't imagine what would make pepsi rally 10 points in a day? But if it did I'm long volatility too.

But if the trendline breaks I'll have to be nimble and try and lose as little as possible.

[KDuff]

Thanks for breaking down a calendar spread.

This stuff is not intuitive to me and I have a few questions:

If you're selling the Aug 67.5 calls and buying the Oct 67.5 calls, then you're betting that PEP will move >= 67.5 after the third week of August? With respect to timing, this is the opposite of the hypothetical AAPL calendar spread you discussed earlier, right?

A debit spread is when you pay for the spread, right? Example: (cost of long contract) - (revenue from short contract) < 0. Is a credit spread is when the short side pays for the long side?

[mrbaseball]

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If you're selling the Aug 67.5 calls and buying the Oct 67.5 calls, then you're betting that PEP will move >= 67.5 after the third week of August?

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Basically yes. Although there is nothing saying you have to hold it that long. I'll typically take some early profits (if I get them) on half of the position and let the other half ride longer if it stills looks good. But yeah with this spread the best profit area is at or very close to the strike price. And yes a debit spread means you have to pay for it.

[thehun69]

Baseball or Mods,

How do you post pics?

Thanks,

THE HUN

[mrbaseball]

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How do you post pics?


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You have to use a websight I think? I use photobucket and then link it from there.

[NajdorfDefense]

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I have seen that apple is up 40%+ in the last 60 days. They are on the news all the time with the I-phone coming out. My friends who sell Cell-phones say that the technology they show on the adds will be tough to live up too. What are the chances that when this comes out it is a dissapointment and the stocks drops 10-20% or more. The stock is at 122 should I be looking at 120, 125, or 130 puts or higher or lower if I believe the above to be true. Any thoughts or opinions?

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Look at the delta.

Figure out if you want to be 30% odds, 10% odds, or 50% odds of being right according to today's market vol.

Buy that option. Perhaps do a spread if you think it will fall to 100 but not 80 you could buy 125 sell 85, etc.

[Paluka]

I think it is strange that you guys are trying to find a good options strategy based on the fact that you think a stock is going to go to a particular price or range of prices. If you are genuinely convinced that the stock is mispriced and you have a better idea than the rest of the world on where the stock is going, it should not prove difficult to develop a profitable strategy. Knowing where the stock is going should be the hard part. This thread is like asking the best way to run from 2nd to 3rd base given that you have already hit a home run.

[thehun69]

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Knowing WHEN the stock is going should be the hard part.

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For stock investing, picking a direction is easy, relatively speaking. With options, there is the added complication of time decay. It is not enough to say, I think Apple will tank. You have to spot on the money, or close to it as to WHEN it will tank because you could buy a put straight out, and be wrong by one day, I've seen it happen, and your position just collapses. By creating some spreads around this presumption that Apple will fall, it provides some ability to manage the risk and still bring a profitable return.

THE HUN.

[mrbaseball]

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Knowing where the stock is going should be the hard part

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It is because you never know. Nobody does. That's why you have to try and devise some sort of good risk/reward strategy that works if you are correct and doesn't sting so bad if you aren't. There is no way to know without doubt where a stock or commodity might go but there are higher and lower percentage plays. Once you figure you have found one of the higher percentage chances the next step is figure out a way to take advantage of it with a decent strategy. Different strategies have different risks and rewards and you have to determine which one is best for your own personal risk parameters.