Options Bootcamp # 44 – Mail Call-A-Palooza

Published on: May 06 2014 by John Critchley

 

Featuring : John J. Critchley, Jr., Senior Option Specialist at SogoTrade.com

Mail Call:  All mail. All day

  • Question from David Medley - I have listened to about half of the 40+ episodes. I do not recall hearing anything about how to get started professionally. I am a 38 year old software developer looking to change industries. The positions that seem to be open to me are commission-only and require a significant cash “Capital Contribution”. I am actually OK with this. Some positions have hefty training and/or desk fees, which seems a bit scammy to me. Either way, it’s not something I want to go into blind…If you have covered this, I would love to read or listen to it. Thanks!
  • Question from Jay – Hi Mark, Options Bootcamp is a phenomenal program.  I have learned so much it’s unbelievable. I do still have one question, and it stems from the fact that I am not a convert from the equity world. I am new to the investing world, but I could never wrap my head around equity trading because it seemed too haphazard.  It was not until I learned about the flexibility of options that I really thought that I had found something worth sinking my teeth in.  So, with that being said. How do you pick your underlying stocks?  Is there a set of criteria you screen for among the all of the optionable underlyings, or is it better to really start learning about a few select stocks and then just applying a specific strategy towards the stock situation as you see it?  So far I have just been using SPY as a starting ground but would like to move towards specific positions to play on the higher fluctuations in vol, inverse skew events, earnings reports and such. Thanks again for all of your work, and please send a high five to Dan, he is my favorite drill instructor.
  • Question from Ted Schwartz – Hi, I am working my way through the Options Boot Camp, learning lots of good stuff.  I was wondering what kind of options strategies exist to hedge my 401K mutual funds gains?  Would it be practical to use protective puts on some indexes, etc. to offset my risk of fund losses? Thanks!
  • Comment forwarded from Dan Passarelli – I am really glad that you participated in the options Bootcamp podcast and that I was fortunate enough to find it. Please convey my gratitude to Mark, (who has no idea who I am) when you get a chance.
  • Question from David M – Hey, listening to your show has really helped me grow in my options knowledge. Two questions: (1) Do you have a platform you recommend?  (e.g., Tradestation, etc.) – (2) I am currently with Tradeking.  I did some long calls last year and lost some money.  I realized I needed to learn more.  So I stopped and started reading.  Now I am ready to start trading spreads and selling premium, but Trade King won’t clear me for that level of options trading, because I have not been trading live.  Is it time to find another broker, or do I need to trade according to their rules until they clear me for more advanced options? Thanks!
  • Question from Mark Radcliffe – Hello Mark, John and Dan. Thanks for providing your excellent options boot camp program it has done a lot to get me started with trading options. I split my investing between long term buy and hold for retirement, short term stock trading for side income and am now adding options. My question is about selling calls to simulate a dividend on buy and hold stocks in my retirement account. The recommendation is to sell front month or even weekly ITM calls to collect the time decay. The problem I see is that these near term options are extremely cheap. E.g. SBUX is currently trading around $72 next week’s 73 strikes ask is $0.26. Does this not mean that if that if I wrote a single call and it expired worthless I would make $26? (assuming no changes). Once you take away the cost of the trade itself you might make pennies or even go backwards on these trades unless you have many lots of that stock in your account. Am I reading this correctly? If so do you think that in order for call writing to really generate any real income you would need to hold several 100 shares of any one stock in your account? Thanks!
  • Question from Darren – Hi, do you guys have option alert services?
  • Comment from Martin – Thank you that you share this precious information on your site for free. A great job. Well done. Martin from Germany.
  • Question from Tom A Bomb – First, huge fan. Second, question about the wheel-o-fun trade: Recently assigned on a short call in a collar position. Monday morning, I was long my protective put (a far-OTM leap), and decided to sell a weekly put that positioned me long about 25 delta. Now, I am wondering how all this will affect my margin SMA. From the margin perspective – is this a put spread, or is this a naked short put? After I put this on, I realized the margin was a bit fuzzy. Since I just rolled out of a covered call, I am obviously cash-secured, but I want to work this out before I find my foot in a bear trap. Thanks guys!  Nice hats!
  • Question from Jas Sol – How can you tell if implied volatility is cheap or expensive for a option? I assumed, from listening to the show, that a higher volatility means, the time component of the option price is more expensive compared to an option with a lower implied volatility. But comparing the Dec 27 ATM calls for Pandora (P) and Apple (AAPL) that does not seem to be the case. For example, P has an implied volatility of 113.6% and a time value of $2.57. And AAPL has an implied volatility of 23.8% and a time value of $10.84. Since P has a much higher implied volatility, why is the time value lower compared to AAPL?  I assume the answer lies in the Greek’s Vega, because P has a Vega of .02 and AAPL has a Vega of .48. But I am not sure. So is Vega how you can tell if an option is cheap or expensive? I love the show! Please keep up the good work. Thanks!
  • Question from John B – Where do I submit options questions and the tweets that you guys read on your podcast?  If this is the place to submit questions, here is my question: I recently stopped trading PCLN *(Priceline) Options because the spread ranges from $2.00 – $4.00.  Is this to deter traders and why would the Market Makers keep the spread so high.

 

Itunes http://itunes.apple.com/us/podcast/options-boot-camp/id514144367

Stitcher: http://stitcher.com/listen.php?sid=971812

 

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