6 Responses to Responsibilities of an Options Educator

  1. Steve B 01/26/2011 at 10:19 AM #

    Hi Mark,
    If I may be of some encouragement, don’t beat yourself up too much. I have read your blogs and articles long enough to know that risk is something you focus very heavily on and you are always sure to say that just because something works once, doesn’t mean it will work the next time. You can’t control what people choose to take with them.
    I too cringed when I read “I had smooth ride during previous two months owning AAPL spreads, so I thought same will happen in January. Anyway lesson learned: Indexes only from now on.
    ” Not to pass judgment, but from the outside looking in, the trader had no desire to find out why January wasn’t as smooth. What caused it, how he could have avoided it etc… Like you had said, it appears the trader was looking for a new way to print money and the market is no place for that.
    On a side note, what is your opinion of AAPL for an iron condor? It seems to me that it is one of those stocks that is always in the news, one press release away from major moves in either direction so maybe not the best iron condor candidate? Or am I way off?
    Thanks in advance!

  2. Mark Wolfinger 01/26/2011 at 10:36 AM #

    Steve B,
    He is a rookie who is moving too quickly. He has to slow down and paper trade. Thanks for the encouragement.
    You know Steve, your thoughts are on the money. However, with higher risk comes higher reward. AAPL is an actively traded stock and that should translate into decent fills.
    But, not for me. It’s a very personal decision.
    Regards

  3. bsn 01/29/2011 at 11:37 AM #

    bsn
    Well I sincerely enjoyed studying it. This information procured by you is very useful for correct planning.
    I’m still learning from you, but I’m trying to reach my goals. I definitely liked reading all that is written on your blog.Keep the tips coming. I enjoyed it!

    • Mark D Wolfinger 01/29/2011 at 12:10 PM #

      Thanks,

      If you do your part – study, practice, risk management, you should be able to achieve those goals.

      Regards

  4. John M 02/01/2011 at 12:14 PM #

    I love your book and your blog. I am a rookie trader and have been making a lot of foolish mistakes. The last of which was to lose a few hundred dollars in dividend payments on my March SPY IC. Can you please explain how/why this happened? Thanks, JOHN

  5. Mark D Wolfinger 02/01/2011 at 12:24 PM #

    John M,

    SPY does something very inconvenient for option traders. It goes ex-dividend on the 3rd Friday of the month. If any trader is short call options that are in the money by any reasonable amount (2 points for sure; perhaps 1 point) can expect to be assigned an exercise notice ONE DAY PRIOR to expiration.

    When that happens, you become short SPY shares as of the opening on that 3rd Friday. Being short the shares, you owe the dividend. In reality it should not matter. If you pay the dividend, then the SPY shares are trading lower by the amount of the dividend. Translation: Your loss from paying dividends is covered by your gain in the price of SPY shares.

    Nevertheless, many traders – obviously you are one of them – prefer not to pay that dividend. To avoid that, you must cover any ITM short call options no later than Thursday, one day prior to ‘expiration Friday.’

    Just in case you are not certain of what to do:To avoid the dividend, buy back those short calls and simultaneously, or immediately thereafter, sell something else to replace the calls just bought. I assume that would give you the position that you want to be owning for the next expiration cycle.