Basic Covered Call Strategy
An option buddy of mine recently provided this strategy for me to do in the long term, for passive income.
All option traders know what is covered calls. You own a particular stock, you then sell calls against this stock that you own, at a strike price that you are happy to sell your stock
For example, Disney stock (DIS)is at $95 right.
so if I have 100 stocks of DIS at $95 now (option traders will always sell puts to get a stock instead of outright purchase)
I will be able to sell covered calls, for example at $105 strike price.
There would be no margin required by my brokers, since I own the stock. If the Call get exercised (meaning DIS price goes above $105), I would be happy that my stocks get sold for $105.
If the call does not get exercised (DIS stays below $105 by expiry date), then I would keep the premium from the sales of the call.
My favourite is to sell options that are 45 days to expiry, and to close them at a profit then when it is around 30 days to expiry. If it touches my strike price, then I leave it to get exercised.
_________________________________________
Synthetic Covered Calls
Instead of owning DIS at $95 outright and selling covered calls, another more efficient way is to BUY a very long term Call, the furthest dated call that you can find, for DIS At-The-Money Call.
For example, right now the furthest is 20th Jan 2017, $95 Strike price (ATM Call) for $13.20
Buying it is a synthetic way of owning 100 stocks of DIS at $95, till the date of 20th Jan 2017.
Then following covered call strategy, I will sell short term calls AGAINST my bought call.
The calls I sold would be short term, probably same as my covered call strategy, of 45days and renewing (closing old one and opening new 45days) it every 2 weeks.
I would be selling calls that is 1-2 strike prices away from ATM price.
So in essential, it is buying a long term call, and selling short term calls against it.
If DIS price moves up, your Long term Call would be appreciating in value as well. You may lose a bit on your short term calls, but you would be closing it and opening a new call when you renew, and would generate a net profits.
If DIS price moves down, you are still gaining more on time decay on the short term calls, than the losses from your long term call.
Its just like what the banks are doing, borrowing money short-term from deposits and lending it out long term.....
Let me know if you have done this, I shall be trying this strategy soon on DIS when I freed up some capital =)
Friday, December 26, 2014
Tuesday, December 16, 2014
Review of Dough.com - Meet the Traders
www.dough.com
A few months ago, I was reading plenty of options websites and blogs, and got introduced by a fellow option trader to www.dough.com.
I find it exceptionally helpful for newbies to start on dough.com, to watch all the videos and understand the basics of options- puts and calls.
https://www.dough.com/#about
dough.com is a portal by an American brokerage, TD Ameritrade (Or their more public brand, ThinkOrSwim), to introduce option trading.
One of the key feature about dough is that there is a team of option traders, with varying risk appetite and experience, blasting out their daily trades for all to follow.
Although you can only follow their exact trades if you have an American account with the brokerage, the platform does broadcast all the traders' trades immediately.
You can see different traders with their different strategies.
This link is the direct link to the traders' pages
https://beta.dough.com/demo#/followPage
There are 15 traders, and you can watch all their videos, introducing themselves, their experiences in finances and their current day jobs. You can watch their videos at this link here
https://www.dough.com/#traders
For those who are more expeienced, please do give feedbacks on those strategies
Scott-
Co-founder of ThinkOrSwim
Age 50, with over 20 years of trading experience
Trading Level - Expert, with account size classified as Large
He likes to sell ATM (at the money) calls of technology stocks and SPY (S&P ETF) with only 1 week to expiration.
My guess is that he is exploiting the rapid time decay, the steepest decline in value of the options for ATM occurs at the last week of options.
The profits can be staggering, as I have seen him sold $2 - $4 options that rear him good profits in a week.
Unfortunately, because the calls are so ATM, the losses can be huge too.
TP- (The Math Guy)
A mathematical guy, he looks at odds. a lot.
Age 49, with over 20 years of trading experience
Trading Level - Expert, with account size classified as Large
He looks at odds, and like to sell options with high IVs (due to time sensitive events) and high daily time decay. When the IV drops and the price of the options come down, he would close the trade to lock in profits and cut away the market risks.
Very systematic and technical.
Kristi (The Boss)
She runs tastytrade.com and dough.com, a career woman.
Age 45, with 10 years of trading experience
Trading Level - Intermediate with Account Size Medium
She looks at options that are relatively cheap (especially when you compared to the options that Scott trades) and easier for newbie to trade. Unfortunately, some of her choice trades are in relatively illiquid stocks, hence you may not be able to follow at her same price. Also, it is relatively difficult to close the trade at your prefer prices later due to illiquidity.
I like her, because, she possess the stability and cautious trading mentaility of a woman.
Which I sorely lack. I've been looking at her trades for a long time and although her trade earn less than the higher risk-return, she is willing to hold stocks or positions if her option turn against her.
Not recommended though, for those who just want to trade options and refuses to hold positions.
And for higher risk types, do see her trades to be more calm....
Robyn (Full time trader for the past 5 years)
She is the latest to join dough.com
Age 51, with 10 years of trading experience
Trading Level - Advanced with Account Size Large
I would confess that I followed her in the beginning because she is woman, and I really respect woman traders for all the good attributes they have for trading.
She does earning plays a lot, and typically has many trades that ends in 1 or 2 days, taking profit and risk of the table.
Unfortunately, most of her trades are done at the last hour of the market, which is like 4am in Singapore time. I can only read and check her trades in the day.
And she trade the most of all the traders that I am keeping track of.
Tony (The Entrepreneur)
a loud-mouthed businessman, also advising Katie (another dough trader)
Age 46, with 10 years of trading experience
Trading Level - Expert with Account Size Large
I used to read his trades a lot, because they are so entertaining. He would explain a lot on his calls, and make many funny comments on how his trades go wrong, or profit..
Unfortunately, in an irony way, I have started to ignore his trades as I find him to be too close to my characters- risk-takers and taking trading as a game. (I am trying to see trading as a career, not a game)
Nonetheless, he is an experienced trader, but do take note, like Scott, his trades are on expensive options as well.
Tom
The leader of the traders, founded ThinkOrSwim, dough.com and tastytrade.com
Age 56, with 30 years of trading experience
Trading Level - Expert with Account Size Large
Tom is the only guy in dough.com that you cannot follow publicly. You need to subscribe to follow Tom, as he is the most experienced and most senior of them all.
For those who watched the last segment of the videos in dough.com (or tastytrade.com), he is the host who interviewed many of the top traders in America. To subscribe, it costs about $29.90 for every 30 days. Since I am reading all the trades to understand more, I have not paid money to subscribe, so I cannot comment on his trades.... but....
Tom's Team!
Tom has a research team, who also place trades on dough.com for us to follow.
Since it is Tom's team, I expect the workings of the team to be similar to what Tom himself may trade. (though on the other hand, he can just let his team experiment and learn from mistakes)
In any cases, I have read through Tom's team's trades for the past few months, generally a mix of medium risks to low risks, but as it is a team of different men, I have yet to see a significant pattern. It is on my list of traders, simply because it is Tom's.
There you go, the few traders on dough.com that I have been reading their trades for the past few months.
Actually there are many other traders, such as Mel, Katie, Alex, Woody, David, Case, Jeff...
but within these few months, I decided to follow and read the trades of the traders above, just to observe first.
For those who are interested, please let me know what are your observations and understanding.
Share in comments please!
A few months ago, I was reading plenty of options websites and blogs, and got introduced by a fellow option trader to www.dough.com.
I find it exceptionally helpful for newbies to start on dough.com, to watch all the videos and understand the basics of options- puts and calls.
https://www.dough.com/#about
dough.com is a portal by an American brokerage, TD Ameritrade (Or their more public brand, ThinkOrSwim), to introduce option trading.
One of the key feature about dough is that there is a team of option traders, with varying risk appetite and experience, blasting out their daily trades for all to follow.
Although you can only follow their exact trades if you have an American account with the brokerage, the platform does broadcast all the traders' trades immediately.
You can see different traders with their different strategies.
This link is the direct link to the traders' pages
https://beta.dough.com/demo#/followPage
There are 15 traders, and you can watch all their videos, introducing themselves, their experiences in finances and their current day jobs. You can watch their videos at this link here
https://www.dough.com/#traders
For those who are more expeienced, please do give feedbacks on those strategies
Scott-
Co-founder of ThinkOrSwim
Age 50, with over 20 years of trading experience
Trading Level - Expert, with account size classified as Large
He likes to sell ATM (at the money) calls of technology stocks and SPY (S&P ETF) with only 1 week to expiration.
My guess is that he is exploiting the rapid time decay, the steepest decline in value of the options for ATM occurs at the last week of options.
The profits can be staggering, as I have seen him sold $2 - $4 options that rear him good profits in a week.
Unfortunately, because the calls are so ATM, the losses can be huge too.
TP- (The Math Guy)
A mathematical guy, he looks at odds. a lot.
Age 49, with over 20 years of trading experience
Trading Level - Expert, with account size classified as Large
He looks at odds, and like to sell options with high IVs (due to time sensitive events) and high daily time decay. When the IV drops and the price of the options come down, he would close the trade to lock in profits and cut away the market risks.
Very systematic and technical.
Kristi (The Boss)
She runs tastytrade.com and dough.com, a career woman.
Age 45, with 10 years of trading experience
Trading Level - Intermediate with Account Size Medium
She looks at options that are relatively cheap (especially when you compared to the options that Scott trades) and easier for newbie to trade. Unfortunately, some of her choice trades are in relatively illiquid stocks, hence you may not be able to follow at her same price. Also, it is relatively difficult to close the trade at your prefer prices later due to illiquidity.
I like her, because, she possess the stability and cautious trading mentaility of a woman.
Which I sorely lack. I've been looking at her trades for a long time and although her trade earn less than the higher risk-return, she is willing to hold stocks or positions if her option turn against her.
Not recommended though, for those who just want to trade options and refuses to hold positions.
And for higher risk types, do see her trades to be more calm....
Robyn (Full time trader for the past 5 years)
She is the latest to join dough.com
Age 51, with 10 years of trading experience
Trading Level - Advanced with Account Size Large
I would confess that I followed her in the beginning because she is woman, and I really respect woman traders for all the good attributes they have for trading.
She does earning plays a lot, and typically has many trades that ends in 1 or 2 days, taking profit and risk of the table.
Unfortunately, most of her trades are done at the last hour of the market, which is like 4am in Singapore time. I can only read and check her trades in the day.
And she trade the most of all the traders that I am keeping track of.
Tony (The Entrepreneur)
a loud-mouthed businessman, also advising Katie (another dough trader)
Age 46, with 10 years of trading experience
Trading Level - Expert with Account Size Large
I used to read his trades a lot, because they are so entertaining. He would explain a lot on his calls, and make many funny comments on how his trades go wrong, or profit..
Unfortunately, in an irony way, I have started to ignore his trades as I find him to be too close to my characters- risk-takers and taking trading as a game. (I am trying to see trading as a career, not a game)
Nonetheless, he is an experienced trader, but do take note, like Scott, his trades are on expensive options as well.
Tom
The leader of the traders, founded ThinkOrSwim, dough.com and tastytrade.com
Age 56, with 30 years of trading experience
Trading Level - Expert with Account Size Large
Tom is the only guy in dough.com that you cannot follow publicly. You need to subscribe to follow Tom, as he is the most experienced and most senior of them all.
For those who watched the last segment of the videos in dough.com (or tastytrade.com), he is the host who interviewed many of the top traders in America. To subscribe, it costs about $29.90 for every 30 days. Since I am reading all the trades to understand more, I have not paid money to subscribe, so I cannot comment on his trades.... but....
Tom's Team!
Tom has a research team, who also place trades on dough.com for us to follow.
Since it is Tom's team, I expect the workings of the team to be similar to what Tom himself may trade. (though on the other hand, he can just let his team experiment and learn from mistakes)
In any cases, I have read through Tom's team's trades for the past few months, generally a mix of medium risks to low risks, but as it is a team of different men, I have yet to see a significant pattern. It is on my list of traders, simply because it is Tom's.
There you go, the few traders on dough.com that I have been reading their trades for the past few months.
Actually there are many other traders, such as Mel, Katie, Alex, Woody, David, Case, Jeff...
but within these few months, I decided to follow and read the trades of the traders above, just to observe first.
For those who are interested, please let me know what are your observations and understanding.
Share in comments please!
Monday, December 1, 2014
Dash giving free $5 for you to spend just for signing up their app!
Get $5 cash now, just by signing on to DASH app.
http://www.dash.com.sg/dash-for-cash.html?uniqueKey=SU5KGRDVJA391X8E
You can just click on the above link, sign up and you can get $5 cash to spend anyway you like it.
In case you have not heard of Dash, it is an app designed by Standard Chartered Bank and Singtel to have an e-Wallet in your phone. Had dinner with friends and want to split the bill? Use Dash. Want to buy a koi bubble tea? Use dash. Transfer a few dollars to a friend immediately? Just use Dash...
Beside this free $5, they are having a series of promotions for Dash.
Big fans of Bubble tea? Every 3 Koi will get u $1 cashback.
Watson shopping? Beside the discounts and sales in watson, there is an additional 10% discount on all watson purchases if you use the Dash app to pay.
This is the good deal that I had been waiting for... there are many daily products that I love to get from watson coz its so much cheaper than in other shops....
Happy Shopping!
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