Citi Options Become Crowd Favorite

Just came across this news. Quite a significant piece of data for Citi Option.

http://www.nytimes.com/reuters/2010/04/20/business/business-us-citi-options-volume.html?_r=1&dbk

Week of April 19, 2010

Last Friday was something really unexpected. Solid results overshadow by Goldman Sachs' issue. One good thing was my AIG April $31 Put has given me the return of 5%. I opened this almost exactly 1 month ago.

Updates on my status are:
Short positions:AIG April 17 2010 $31 @ $1.7 (Opt expired. I made 5.14% nett. This is good)
AIG May 22 2010 33 Put @ $7.15 (current premium $0.88 - Looking good)
STP June  19 2010 16 Put @ $3.80 (current premium $2.50)
ARAY June 19 2010 7.5 Put @ $1.15 (current premium $1.35. Still at -ve)

Long position:
C Jan 21 2012 5 Call @ $0.65 (now traded at $1.11)
C Jan 21 2012 4 Call @ $0.77 (now traded at $1.57)

NEW TRADE: C Sept 18 2010 3 Put (I opened this position as hedge my long position on C)

Wishing you all a prosperous week.

Articles Posted at EzineArticles

I submitted my Option Basics article to EzineArticles and it has been accepted a few days ago. Check it out at:
http://ezinearticles.com/?Option-Basics&id=4109315

Week of April 5, 2010

The finance stocks are moving up again which works well for my trade. Comparing to my last block about a month ago, there is definite improvement. I just can't wait for the April window to end to close my AIG April Put and use the fund for my next trade.


Updates on my status are:
Short positions:
NEW TRADE: AIG April 17 2010 $31 @ $1.7 (Current premium $0.08)
AIG May 22 2010 33 Put @ $7.15 (current premium $1.55)
STP June  19 2010 16 Put @ $3.80 (current premium $2.10)
NEW TRADE: ARAY June 19 2010 7.5 Put @ $1.15 (current premium $1.85. Bummer)

Long position:
C Jan 21 2012 5 Call @ $0.65 (now traded at $0.90)
C Jan 21 2012 4 Call @ $0.77 (now traded at $1.32)


Overall, I am in blue except for ARAY, a stock I came to know about recently. A lesson learned to do more due diligence next time.

Week of March 8, 2010

WOW... is all I could say for this week. What a run for finance related stocks.

I managed to close one of my positions.

My current stand are:
Short positions:
AIG March 20 2010 30 Put @ $4.45 - Closed at $0.25. (~13% net gain..Hooray)
AIG May 22 2010 33 Put @ $7.15 (currently traded at $4.05)
STP June  19 2010 16 Put @ $3.80 (currently traded at $3.30)

Long position:
C Jan 21 2012 5 Call @ $0.65 (now traded at $0.79)
C Jan 21 2012 4 Call @ $0.77 (now traded at $1.13)


I am glad for the turn around. What I have been waiting for for 2010.


I hope this week would end with positive notes. See you soon..

Week of March 1, 2010

This is my first new post since moving from optiontalks.blogspot.com. I move here simply because I like this name better "optionists.blogspot.com".

Enough said on that. I stop my update for quite a while. Anyway just wanted to share some updates.

Feb 2010 was not a good month for me. I was down 4% mainly due to AIG and STP. Nevertheless, I did roll over the positions.

My current stand are:
Short positions:
AIG March 20 2010 30 Put @ $4.45 (+ve)
AIG May 22 2010 33 Put @ $7.15 (-ve)
STP June  19 2010 16 Put @ $3.80 (-ve)

Long position:
C Jan 21 2012 5 Call @ $0.65 (-ve)

I am trying to increase my position on Citi, which I think have high potential to regain it's business.

Cautiously optimistic on the economy amid still high unemployment rate at close to 10% in the US.

Happy trading folks.

OPTION Basics (3) (CALL and PUT - Sellers' Perspective)

Now, we turn our attention towards “sellers” perspectives.

Call Option

Sell Call: When an investor sells a Call, he is selling the right to Call buyer, or granting the Call buyer the right to buy 100 shares of the underlying stock at the striking price from him, any time prior to the expiration. Another way of putting it is the seller is obligated to sell 100 shares of the underlying stock to the Call buyer at the strike price.

In contrast to the Call buyers, Call sellers collect the premiums.

Example 1:

Mr. A sells “1 AIG Aug 12 Call at $1.50”.

Mr. A is selling the right to the Call buyer, say Mr.B, to purchase 100 shares of AIG at the price of $12/share between the point of transaction till the expiry date from Mr. A.

The call seller, Mr. A would collect the $1.50/share (the premium).

Suppose at the end of the expiration, AIG stock was traded at $10/share, the option would expire worthless and the Call seller, Mr.A, would earn the full premium.

So a Call seller is bearish on the stock. He will earn the full premium if the shares expire below the strike price.

Uncovered Calls/Covered Calls

When you sell a call but you do not own 100 shares of the underlying stock, this option is call “naked option”; “uncovered option” or “uncovered call”. This type of trade is extremely risky as the share price could have unlimited up side.

Given the earlier example:

Mr. A sells “1 AIG Aug 12 Call at $1.50”.

Suppose the share of AIG has gone up to $30/share. The buyer exercises the option. Mr. A needs to buy 100 shares of AIG from the market at $30/share and sell them to the Call buyer at $12/share.

Thus for Call seller, it is always good to own 100 shares of the underlying stock.

So when you own the 100 share of the underlying stock and when you sell the Call, you are covering your position. Such trade is called “Covered Calls”
Put Option

Sell Put: When you sell a Put, you are granting the Put buyer to sell you 100 shares of the underlying stock at the strike price. Should the Put is exercised, you are obligated to buy 100 shares from the Put buyer. 

Put sellers collect premium.

Example 2:

Mr. A sells “1 AIG Aug 12 Put at $1.50”.

Mr. A is granting the Put buyer to sell him 100 shares of AIG at $12/share.

Suppose at the end of the expiration, AIG stock has risen to $15/share. The option would expire worthless and Mr.A would collect the full premium.

Thus, Put seller is bullish on the stock. He hopes that the share price would close above the strike price, thus the option would expires worthless so that he could collect the premium.

OPTION Basics (2) (CALL and PUT)

There are essentially two types of options:

1. Call Option

2. Put Option

For each of the Call/Put, there will be buyer and seller. Let us look into each of the scenario. We will go through “buyer” perspective for both Call and Put before touching on “seller” perspective.

Call Option

Buy Call: When an investor buys a Call, he is buying the right to purchase the underlying stock (100 shares) at the specified fixed price (strike price) by the specified date (expiration) in the future. To re-iterate the examples given.

Example 1:

Mr. A buys “1 AIG Aug 12 Call at $1.50”.

Mr. A is buying the right to purchase 100 shares of AIG at the price of $12/share between the point of transaction till the expiry date.

Mr. A pays $1.50/share (the premium) to attain this right.

So a Call buyer would profit if the share price goes up. A Call buyer is bullish on the stock.

Suppose at the end of the expiration, AIG stock has risen to $17/share, the buyer would close the transaction and make $5 gain ($17-$12) on the stock, “EXCLUDING” transaction fees and premium paid.

Put Option

Buy Put: When an investor is buying a Put, he is buying the right to “sell” the underlying stock (100 shares) at the specified fixed price (strike price) by the specified date (expiration) in the future.

Example 2:

Mr. A buys “1 AIG Aug 12 Put at $1.50”.

Mr. A is buying the right to Sell 100 shares of AIG at the price of $12/share between the point of transaction till the expiry date.

Contrary of buyer of Call, the buyer of Put is bearish of the stock. A Put buyer would profit if the share price drop.

Suppose at the end of the expiration, AIG stock has dropped to $9/share, the buyer would close the transaction and make $3 gain ($12-$9) on the stock, “EXCLUDING” transaction fees and premium paid.

On my next post, I will touch on sellers' perspective for both CALL and PUT.

OPTION Basics (1) (What is an Option?)

One of my plans is to use this blog to share what I know and learn on option trading, other than creating a place to welcome anyone to share their experiences and success stories and even set backs.

So...What is an Option?

An option is a contract that provides the buyer/seller with the right to buy or sell the underlying stock (100 shares) at the specified fixed price (strike price) by the specified date (expiration) in the future.

A unit of an Option is called a contract. A contract consists of 100 shares of the underlying stock.

Strike price refers to the price which the buyer/seller agree to transact on irrespective of the actual price of the stock in the future.

E.g.

Mr. A buys “1 AIG Aug 12 Call at $1.50”.

1 – number of contract (100shares/contract)

AIG – the underlying stock

Aug – Option expiring month (Option expires on the 3rd Friday of each month)

12 – is the strike price

Call – Call option

$1.50 is the premium Mr. A pays for this contract. This $ is stated as per share basis.

So $1.50 X 100 shares => Mr. A is paying $150 of premium (excluding transaction fees)

In essence, Mr. A is buying the right to purchase 100 shares of AIG at the price of $12/share between the point of transaction till the expiry date.

Mr. A pays $1.50/share (the premium) to attain this right.

Welcome!!!!

Hi, Welcome to my blog. I am the blogger of "optiontalks.blogspot.com". I kind of like the name optionists better thus I am moving to this name.