Meet our Readers

Most of the time, I do not post over the weekends.  That gives me an idea, and I have no way of knowing whether readers will want to take part in this project.

If there is sufficient interest, I'm going to devote Saturdays to stories from you, readers of Options for Rookies.

Anything goes, as long as it is options related.  If you have stories to share – perhaps specific trades or why you became interested in trading options – please send them via e-mail: blog (at) mdwoptions (dot) com

DO NOT post submissions as comments.

Send a lesson learned, or something humorous.  Write about a lucky, frightening, or some other interesting trade. Perhaps you want to share your personal story describing how you got involved with trading.  All ideas welcome.  Feel free to mention other bloggers.

I know that I'm taking a risk that no one will respond.

Feel free to include your name and any information that you want published. Or send your story with a note stating you prefer to remain anonymous.

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16 Responses to Meet our Readers

  1. Dmitry 01/17/2011 at 7:13 AM #

    Hi Mark, i have a few questions i hope you can answer.
    1. Isn’t holding a naked long call (as a result of locking in a profit or plain buying outright call) is in general a bad idea? Reason i think so is because of the nature of IV: it mostly falls when the underlying is rising. So you have short theta and a big long vega moving against you.
    And on the opposing holding a naked put seems logical and natural.
    2. Can IV be really considered as a Standard Deviation for a stock price? Same reasons to ask – why would a stock probability to be at a certain price range shrink just because the market moved higher? Why would it widen in case of a fall?
    Thanks in advance and excuse my English.

  2. Mark Wolfinger 01/17/2011 at 9:56 AM #

    Dmitry,
    This is a topic that I have mentioned, but never tried to offer a deeper explanation. I’m going to use this question and answer for tomorrows blog post.
    Thank you.

  3. Lies 01/17/2011 at 11:12 AM #

    Halle Mark Wolfinger,
    I have also a question,
    A option position that a lot of investors recommend is to buy the stocks that you wish to own and to protect this position with a put option. But if i am correct, than is this strategy the same as buying a call option.
    What i don’t understand is why someone prefer the first strategy above buying calls. I see only disadvantages comparing with buying calls (leaps):
    – First you have to pay two commissions (stocks and puts).
    – Second you must have more money in your account.
    – Third, of course you have no dividend, but that has been calculated in de price of the call (he is cheaper).
    So, why would someone buy a stock and insure this position with puts if just buying a call have no disadvantages (maybe, it is even a beter strategy).
    Thanks

  4. Mark Wolfinger 01/17/2011 at 2:34 PM #

    Hello Lies,
    It is exactly the same as buying a call option with the same strike as the put. In my opinion, this is a horrible strategy. However, if you already own the stock and don’t want to take a capital gain by selling, then buying the put is acceptable.
    It’s not that they ‘prefer’ the married put – it’s the result of one of two things. Either they are ignorant and do not understand the difference; or they have a book, seminar, or something else to sell that talks about the put + stock strategy.
    Think of it from publicity point of view: Which sounds more impressive to the options newbie who certainly does not know what equivalent positions are: a) Protect your stock with puts; b) Buy calls
    Why would anyone do this? There is only one reason Lies, and it’s not a bad reason. But it assumes that the investor is not intelligent. If you have $10,000 to invest, you could buy 200 shares plus two puts @ $5,000 each. And that’s the correct position size. But the uninformed call buyer may not buy two calls. He may invest the whole $10,000 and buy 10 calls.
    That’s the only reason. If you have an ignorant client, the advisor could limit the customer to the correct size (200 shares) by buying two married puts. But that’s only for people who would not understand that buying two, and only two, calls is the correct move

  5. Joe 01/17/2011 at 4:28 PM #

    Hi Mark,
    I have been trading option spreads on the RUT and have now began looking into trading options on the ES (S&P emini) or NQ (Nasdaq emini). I would like to know what you think are some of the pros and cons and your overall opinion?
    How I see it so far is that with the eminis I would get better leverage and be able to hedge with the ES emini contract.

  6. Mark Wolfinger 01/17/2011 at 4:37 PM #

    Hey Joe,
    Do you really need better leverage? I am merely asking because increasing position size – especially when a trader is earning good money and wants more – is a very dangerous thing to do. Be careful.
    I have never traded any futures contract and know absolutely nothing about them. However, I believe that trading S&P 500 as the underlying offers a less volatile and thus, somewhat less risky situation than trading RUT.
    If eminis can do that for you and if you increase position size (dollars at risk) very slowly, it seems to be a good idea. But I have nothing solid I can tell you.
    Readers? Anything to add?

  7. Joe 01/18/2011 at 9:04 AM #

    Thanks for your feedback Mark,
    What I like most about the S&P emini is the possibility of being able to adjust with the underlying, even outside of regular market hours. I imagine this could provide a great benefit for hedging ICs, if anyone trades this way i would appreciate any imput.

  8. Mark Wolfinger 01/18/2011 at 9:43 AM #

    Joe,
    Agree that more hours to hedge is a plus, but by the time the eminis open for trading, the big gap has already occurred.

  9. Joe 01/18/2011 at 12:48 PM #

    Your right. However, is it not viable to just short or long the SP when the short strike is hit? Thus enabling the trader to be fully covered at expiration?

  10. Mark Wolfinger 01/18/2011 at 1:13 PM #

    Joe,
    NO.
    I understand that it is tempting to buy stock or futures when your short call moves into the money.
    I understand that it is tempting to short stock or futures when your short put moves into the money.
    Joe – this is such a good topic that I’m going to post my reply tomorrow.
    Regards

  11. Joe 01/18/2011 at 1:34 PM #

    Look forward to it Mark.

  12. rluser 01/19/2011 at 8:54 AM #

    This is an extremely liquid contract.

  13. Al 01/19/2011 at 7:25 PM #

    Hi Mark,
    I have been reading your posts here as well as your comments on Elite trader website.
    I would love to hear your opinion on a strategy that I have started this month of shorting VXX. I plan to short every month around 400 shares of VXX since the VXX is mostly in Contango and has steadily declined since its inception. My portfolio has a value of 600k of income stocks (PGF, PFF, NLY, JHI, PZT, JNK) with little correlation to the S & P 500, so an allocation of around 2% per month for a short position on VXX seems like reasonable.
    I know VXX can climb 100% 150% over the short term (and then fall back..) that’s why I want to spread it out in monthly increments, so I when the VXX climbs I would be shorting as well.
    I would appreciate your opinion if you think that make sense or it’s too risky.
    Thanks, Al

  14. Mark Wolfinger 01/19/2011 at 8:54 PM #

    Al,
    I am not going to try to bluff my way through this.
    I must be one of a handful of investors who had paid almost no attention to VIX options becasue they are so difficult for the average investor to understand (the underlying is not the VIX index).
    From that start, I also chose to ignore VXX and each of the other volatility products. I simply have no idea whether taking a 2% short VXX position is a reasonable play for someone investing in a long stock portfolio.
    I can recommend some bloggers who frequently write about these volatility products. I’m certain you can get some good information from one of them. I hate to disappoint, but I really do not have any useful ideas in this area.
    Bill Luby
    Adam Warner
    Mark Sebastian
    Volatility Futures & Options
    Jared Woodard

  15. Dan 01/20/2011 at 1:09 PM #

    Actually an ES option is less levered than an SPX option. Each ES option is for 1 futures contract, a 50x multiplier vs 100x for SPX options. SPAN margin used for futures options does give a person more rope to hang themselves than Reg-T, but you don’t have to and shouldn’t use all available margin!
    Spreads are quite a bit narrower at least a few months out on the ES options, about 1/3 of the SPX spreads through april. Volume and open interest are lower in ES though.

  16. Mark Wolfinger 01/20/2011 at 2:12 PM #

    Dan,
    Thanks. Never traded ES and I know nothing about them.