Stocks and Trading Thread - Channeling your inner Mono

[DGuller]

I'm selling an $18 call and you're buying an $18 call. I'm betting it won't go much above 18 and you're betting it will go above 18. Which one of us thinks in that situation it'll go down? Neither.

I don't see how that follows.  If you're selling an $18 call, you don't think that the stock with go much above $18.  So far so good.  Why must you think that it wouldn't fall, though?  If I think that the price would be $14, I'd certainly be willing to sell $18 calls as well, if some people out there want to buy them.

[MadImmortalMan]

I'm selling an $18 call and you're buying an $18 call. I'm betting it won't go much above 18 and you're betting it will go above 18. Which one of us thinks in that situation it'll go down? Neither.

I don't see how that follows.  If you're selling an $18 call, you don't think that the stock with go much above $18.  So far so good.  Why must you think that it wouldn't fall, though?  If I think that the price would be $14, I'd certainly be willing to sell $18 calls as well, if some people out there want to buy them.

Because if it's going to fall that far, I would just sell the stock. I have to hold on to it as long as I have a contract out on it. I don't want it to go down more than the amount of money I get for selling the option contract over the period of time I have it open or I lose money overall. That's the downside risk you mentioned before.

[DGuller]

Do you actually need to own the stock to sell calls on it?  There are other ways to limit your potential losses should the stock price go up while you're short a call.  You can just buy a call for a higher strike price, to cover the possibility of the stock price shooting into stratosphere.

[MadImmortalMan]

I could sell the call naked, yes. That's considered risky. Buying a call at a higher strike could work just as well as a hedge I suppose. Maybe a lot of the guys writing contracts at 17 are the same ones buying the 19 calls? Heh.

You have a mind for risk mitigation. I wonder why...

[Caliga]

My daily update email from Ameritrade made me wince.

[Admiral Yi]

I was a little surprised to find that the 15th largest stock in the S&P 500 is Bershire Hathaway.

[alfred russel]

http://en.wikipedia.org/wiki/Silver_Thursday

The wonder of free and efficient markets. 

Trading silver now seems to me like timing an exit in a bubble.  You're not dealing with fundamentals anymore, you're dealing with what you think other people think about what other people think.

Do precious metals have fundamentals? (aside from what their industrial value would be)

[Admiral Yi]

Just signed up for my employee stock purchase plan.  Monthly (biweekly??) payroll deductions pre-tax, used to purchase Pearson ADRs at a 15% discount of the lower of the market price on July 1 or on December 31.

So I would really appreciate it if y'all would subscribe to the Financial Times and buy a lot of Penguin books.  But do it after July 1.   

Anyone else in a stock purchase plan?

[MadImmortalMan]

My wife has a decent ESPP at Microsoft, and we plan to begin participating in it once Steve Ballmer steps down as CEO.

[Admiral Yi]

My wife has a decent ESPP at Microsoft, and we plan to begin participating in it once Steve Ballmer steps down as CEO.

That makes no sense.  If you think MS is undervalued and underperforming because of its CEO, now's the time to buy.

[MadImmortalMan]

My wife has a decent ESPP at Microsoft, and we plan to begin participating in it once Steve Ballmer steps down as CEO.

That makes no sense.  If you think MS is undervalued and underperforming because of its CEO, now's the time to buy.

Ah, but I don't want to tie up my capital in a dog stock until it's just getting ready to go up. I shall wait put my money in profitable things in the meantime.

[Admiral Yi]

Ah, but I don't want to tie up my capital in a dog stock until it's just getting ready to go up. I shall wait put my money in profitable things in the meantime.

That argument makes a lot more sense from a dashing Captain Day Trader perspective than from a mild-mannered monthly contribution worker ant perspective.

[alfred russel]

We have a plan--MIM, don't you get a 15% discount? That is a guaranteed gain you won't get elsewhere. Also, a lot of plans have an option value built in (you can buy at the lower price of multiple dates).

[Caliga]

Steve Ballmer steps down as CEO.

I told my brother not to buy MSFT till Ballmer left, and he didn't listen.  He wishes now he did, though.

[MadImmortalMan]

My options experiment is nearing the end of the second month. The June calls expire on the 18th (this Sunday). I sold my June AA calls at .54 for a total take of 378 in time premiums. AA is worth..15.40 right now. I bought at just about 17, so I'm down 1200 in value there. I've made a little over 600 in time premiums over the two months while losing 1200 in stock value. I also received a $72 dividend payment on the AA stock on 5/25.


So, I'm down 525 or so. I suppose it could be worse. I could be down the whole 1200 for this shitty month. 

Today's looking up, at least.