Q: Counterparty risk on put options?

[vegasrenter]

I have some long-standing Goldman Sachs puts that have moved into the money recently. Still over a year to run on them. 2 Questions:

1. Who is my counter-party?

2. What is the risk that this counterparty can/will default on my put option?

Thanks

[stockstradr]

I don’t have an answer but I do share a painfully-learned lesson on options:

WHEN you look and see your options are substantially in-the-money (net 50% gain, for example) then don’t greedily hang on for MORE gains.

Instead CLOSE YOUR OPTIONS POSITIONS and lock in your profits.

I cannot tell you how many times I had 50% or 70% net paper profits and yet greed had me keep those option positions open, only to see my profit fall away as markets drifted back to center.

This week I sold almost all my option PUTS on the S&P500 as I saw they were up seventy to eighty percent net. Keep in mind I’m sure there is more money to be made on those but I sold on general principle that it doesn’t pay to be too greedy.

I’ve been happy so far with use of options, but I stick to simple straight-foward types of options: long calls and long puts. When adding up all my net gains and losses on options trades ever made, I’m vastly in the black having made now lots of money on options.

[stockstradr]

I don’t have an answer but I do share a painfully-learned lesson on options:

WHEN you look and see your options are substantially in-the-money (net 50% gain, for example) then don’t greedily hang on for MORE gains.

Instead CLOSE YOUR OPTIONS POSITIONS and lock in your profits.

I cannot tell you how many times I had 50% or 70% net paper profits and yet greed had me keep those option positions open, only to see my profit fall away as markets drifted back to center.

This week I sold almost all my option PUTS on the S&P500 as I saw they were up seventy to eighty percent net. Keep in mind I’m sure there is more money to be made on those but I sold on general principle that it doesn’t pay to be too greedy.

I’ve been happy so far with use of options, but I stick to simple straight-foward types of options: long calls and long puts. When adding up all my net gains and losses on options trades ever made, I’m vastly in the black having made now lots of money on options.

[stockstradr]

I don’t have an answer but I do share a painfully-learned lesson on options:

WHEN you look and see your options are substantially in-the-money (net 50% gain, for example) then don’t greedily hang on for MORE gains.

Instead CLOSE YOUR OPTIONS POSITIONS and lock in your profits.

I cannot tell you how many times I had 50% or 70% net paper profits and yet greed had me keep those option positions open, only to see my profit fall away as markets drifted back to center.

This week I sold almost all my option PUTS on the S&P500 as I saw they were up seventy to eighty percent net. Keep in mind I’m sure there is more money to be made on those but I sold on general principle that it doesn’t pay to be too greedy.

I’ve been happy so far with use of options, but I stick to simple straight-foward types of options: long calls and long puts. When adding up all my net gains and losses on options trades ever made, I’m vastly in the black having made now lots of money on options.

[stockstradr]

I don’t have an answer but I do share a painfully-learned lesson on options:

WHEN you look and see your options are substantially in-the-money (net 50% gain, for example) then don’t greedily hang on for MORE gains.

Instead CLOSE YOUR OPTIONS POSITIONS and lock in your profits.

I cannot tell you how many times I had 50% or 70% net paper profits and yet greed had me keep those option positions open, only to see my profit fall away as markets drifted back to center.

This week I sold almost all my option PUTS on the S&P500 as I saw they were up seventy to eighty percent net. Keep in mind I’m sure there is more money to be made on those but I sold on general principle that it doesn’t pay to be too greedy.

I’ve been happy so far with use of options, but I stick to simple straight-foward types of options: long calls and long puts. When adding up all my net gains and losses on options trades ever made, I’m vastly in the black having made now lots of money on options.

[stockstradr]

I don’t have an answer but I do share a painfully-learned lesson on options:

WHEN you look and see your options are substantially in-the-money (net 50% gain, for example) then don’t greedily hang on for MORE gains.

Instead CLOSE YOUR OPTIONS POSITIONS and lock in your profits.

I cannot tell you how many times I had 50% or 70% net paper profits and yet greed had me keep those option positions open, only to see my profit fall away as markets drifted back to center.

This week I sold almost all my option PUTS on the S&P500 as I saw they were up seventy to eighty percent net. Keep in mind I’m sure there is more money to be made on those but I sold on general principle that it doesn’t pay to be too greedy.

I’ve been happy so far with use of options, but I stick to simple straight-foward types of options: long calls and long puts. When adding up all my net gains and losses on options trades ever made, I’m vastly in the black having made now lots of money on options.

[vegasrenter]

stockstradr, Thanks for your input. My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts) and less worrying than when I used to practice “buy and hold” (gonad-shriveling losses) with stocks & mutual funds. However, I’ve found that 80% of put options that I’ve sold for your stated reasons went on to end way more in the money than my exit point.

Still looking for information on my original question.

[vegasrenter]

stockstradr, Thanks for your input. My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts) and less worrying than when I used to practice “buy and hold” (gonad-shriveling losses) with stocks & mutual funds. However, I’ve found that 80% of put options that I’ve sold for your stated reasons went on to end way more in the money than my exit point.

Still looking for information on my original question.

[vegasrenter]

stockstradr, Thanks for your input. My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts) and less worrying than when I used to practice “buy and hold” (gonad-shriveling losses) with stocks & mutual funds. However, I’ve found that 80% of put options that I’ve sold for your stated reasons went on to end way more in the money than my exit point.

Still looking for information on my original question.

[vegasrenter]

stockstradr, Thanks for your input. My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts) and less worrying than when I used to practice “buy and hold” (gonad-shriveling losses) with stocks & mutual funds. However, I’ve found that 80% of put options that I’ve sold for your stated reasons went on to end way more in the money than my exit point.

Still looking for information on my original question.

[vegasrenter]

stockstradr, Thanks for your input. My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts) and less worrying than when I used to practice “buy and hold” (gonad-shriveling losses) with stocks & mutual funds. However, I’ve found that 80% of put options that I’ve sold for your stated reasons went on to end way more in the money than my exit point.

Still looking for information on my original question.

[stockstradr]

My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts)

So, here is a question for YOU: why do you think my typical net profit is 50% to say 90%, while you’re claimed profit is multiple X initial investment?

ANSWER: either you have inside information (making certain profit on illegal trades) OR you are playing SUCKER BETS, which is the sign of someone quite new to strategic investing with options and who is choosing poorly in terms of RISK/REWARD ratios.

Seasoned pro’s use options analysis spreadsheets to run RISK/REWARDS simulations to predict options response to a inputed (hypothetical) anticipated market move, so they can identify optimal choices to reduce risk while maintaining a reasonable reward.

You see, back in Oct ’07 at the peak of the market, I could have easily purchased puts at strike prices that would have now returned me 5X or 10X…so WHY didn’t I?

If you really don’t know the answer to that question, then may I suggest you read this book and other similar books:

Options as a Strategic Investment by Lawrence G. McMillan

As for your original question, just look at the typical daily VOLUME of the options you are buying. Don’t buy options that are too thinly traded, and don’t worry about such questions when you do buy options that have sufficient daily trading volume (to ensure an efficient market for unloading them when needed)

[stockstradr]

My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts)

So, here is a question for YOU: why do you think my typical net profit is 50% to say 90%, while you’re claimed profit is multiple X initial investment?

ANSWER: either you have inside information (making certain profit on illegal trades) OR you are playing SUCKER BETS, which is the sign of someone quite new to strategic investing with options and who is choosing poorly in terms of RISK/REWARD ratios.

Seasoned pro’s use options analysis spreadsheets to run RISK/REWARDS simulations to predict options response to a inputed (hypothetical) anticipated market move, so they can identify optimal choices to reduce risk while maintaining a reasonable reward.

You see, back in Oct ’07 at the peak of the market, I could have easily purchased puts at strike prices that would have now returned me 5X or 10X…so WHY didn’t I?

If you really don’t know the answer to that question, then may I suggest you read this book and other similar books:

Options as a Strategic Investment by Lawrence G. McMillan

As for your original question, just look at the typical daily VOLUME of the options you are buying. Don’t buy options that are too thinly traded, and don’t worry about such questions when you do buy options that have sufficient daily trading volume (to ensure an efficient market for unloading them when needed)

[stockstradr]

My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts)

So, here is a question for YOU: why do you think my typical net profit is 50% to say 90%, while you’re claimed profit is multiple X initial investment?

ANSWER: either you have inside information (making certain profit on illegal trades) OR you are playing SUCKER BETS, which is the sign of someone quite new to strategic investing with options and who is choosing poorly in terms of RISK/REWARD ratios.

Seasoned pro’s use options analysis spreadsheets to run RISK/REWARDS simulations to predict options response to a inputed (hypothetical) anticipated market move, so they can identify optimal choices to reduce risk while maintaining a reasonable reward.

You see, back in Oct ’07 at the peak of the market, I could have easily purchased puts at strike prices that would have now returned me 5X or 10X…so WHY didn’t I?

If you really don’t know the answer to that question, then may I suggest you read this book and other similar books:

Options as a Strategic Investment by Lawrence G. McMillan

As for your original question, just look at the typical daily VOLUME of the options you are buying. Don’t buy options that are too thinly traded, and don’t worry about such questions when you do buy options that have sufficient daily trading volume (to ensure an efficient market for unloading them when needed)

[stockstradr]

My experience with trading options has been FAR more profitable (nice multi-X gains on small at-risk $ amounts)

So, here is a question for YOU: why do you think my typical net profit is 50% to say 90%, while you’re claimed profit is multiple X initial investment?

ANSWER: either you have inside information (making certain profit on illegal trades) OR you are playing SUCKER BETS, which is the sign of someone quite new to strategic investing with options and who is choosing poorly in terms of RISK/REWARD ratios.

Seasoned pro’s use options analysis spreadsheets to run RISK/REWARDS simulations to predict options response to a inputed (hypothetical) anticipated market move, so they can identify optimal choices to reduce risk while maintaining a reasonable reward.

You see, back in Oct ’07 at the peak of the market, I could have easily purchased puts at strike prices that would have now returned me 5X or 10X…so WHY didn’t I?

If you really don’t know the answer to that question, then may I suggest you read this book and other similar books:

Options as a Strategic Investment by Lawrence G. McMillan

As for your original question, just look at the typical daily VOLUME of the options you are buying. Don’t buy options that are too thinly traded, and don’t worry about such questions when you do buy options that have sufficient daily trading volume (to ensure an efficient market for unloading them when needed)

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