[anxvariety]

I like the exchange of ideas too.. this will be my last post on this thread though(not trying to be dramatic), unless I see further mistruths that I feel I need to fight off, because I’m burnt out and I think the information has pretty much been exchanged. I’m not debating whether or not you should buy options, it doesn’t matter to me what you or anyone else does, I only want everyone to be successful. At this point I’m just tryign to defend what I believe to be truth, and it’s not a question about options risk, it’s a question of certain statements and assertations.

The 90% number has been repeated over and over… are we willing to take Chris’ word for it? Have you found a source that backs up his claim? 90% sounds like a very *sensational* number, and it’s round too! I didn’t take his statement as fact, but as hyperbole…

I also think some responses are under an assumption that one must hold options to expiration… just because an option expires in Nov doesn’t mean the purchaser has to hold it until then, option holder can sell it yesterday or tomorrow next week or any day the market is open.

The plane scenario was to show that even if Chris statement that 90% of options expire worthless is true, it’s not synonmous with 90% of PEOPLE holding options will have them expire worthless… possible outcome % does not take into account the ENDLESS number of scenarios… just as you described… (See http://airsafe.org/ I put in about 40 hours of near non-stop time into that site before I flew the first time!!! 🙂

“He was saying that it is not risky in the way he does it with a max 5% trade and a stop loss, but it could be risky and irresponsible without those measures. I didn’t interpret him to say your trades are risky.”

He warned me about my risky situation, prior to me providing any further information about the % of my cash to option investment ratio. What does telling me that options are risky accomplish? I mentioned volatility enough to bore a person in my first post… That’s partially where some of the confusion came from, most importantly thank you for taking the time to even adress my post Chris.

“It does not however, have volatility that extreme, unless it is maxed out irresponsibly.”

I don’t feel that volatility has anything to do with $ amount of a persons portfolio, I believe that it descries past or present how much up or down a stock can go. Given that I described the stocks, and provided %, what other information can be associated with the “maxed out irresponsibly” claim. I am not trying to prove Chris wrong or challenge him, I’ve already conceeded experience and knowledge, I am genuinely interested in what he was trying to communicate by that statement in response to my post, without him knowing what % of my capital was invested in options.

“You have a 90% chance of your options expiring worthless because 900 out of every 1000 options expire worthless.”

I can’t address that statement again, because it’s been repeated at least 4 times now, and I feel that it’s slightly deceptive(this word might be a little strong, but I’m limited on vocab) and not true. Should someone else provide multi-sourced evidence that it’s fact, I’ll accept and learn from it.

The good thing is, we’ve explored lots of different opinions.. and we can for what it’s worth, use hindsight to grade our decisions based on our objectives.

Thanks everyone who read my posts, for having the patience to navigate my atrocious grammar!! 🙂

I don’t have time to scan this for broken sentneces right now my gf wants to go watch fireworks and we’re about to miss them! Happy 4th everyone!!

[anxvariety]

Sometimes I wonder if you even read what I write! But then I read what I write, and I don’t blame you!!! 🙂 I never thought he said that..

“Well, If you want volatility, my daily trading service for Bond Futures has it, LOL! It does not however, have volatility that extreme, unless it is maxed out irresponsibly. With options you do risk the full amount, and hence get the big leverage.”

“have volatility that extreme” I’m assuming was was in response to the 3 highly profitable scenarios(including PCU) that I was referring to… since thats the post he was responding to.. if not, please show me the subject of “that” in the statement… I do not think those are irresponsible trades. If all he said was “options trading was irresponsible”, I would brush it off, because anyone, including someone that knows nothing about investment can tell that a statement that generalized is no way correct.

Powayseller, if you’re lucky the price of oil won’t crash.. There are lots of acclaimed investors and businessman saying it will, including Steve Forbes.. If it crashes you would be stuck in COP for a long time.. LET ME AGAIN, get back to the WHOLE REASON that I even mentioned options…. I do not have all of my money invested in COP options or any options. I have about 15% of my cash in options. The rest of my cash is in what I consider to be safe place..

“In the Zeal Intelligence newsletter (for conservative investors) they only recommend buying shares, i.e. long positions. No puts, calls, options, shorts.”

I’d appreciate if you’d show me where they say that they don’t reccomend it.. because they do share their option trades in the newsletter… of course all tips are going to have a disclaimer.

“While you got lucky with the COP option”

Powayseller, I haven’t gotten lucky.. I am still holding the options.. So I haven’t gottten lucky.. Do you think I’d be holding these options if it was a definite 90% chance of losing 100%??????????? I’m not saying I won’t lose 100%, because sure I might.. but I’ll address the very misleading 90% quote by Chris in the last paragraph.

“Since 90% of options expire worthless, you have a 90% chance of losing ALL your money when you buy options. Pretty risky…”

Powayseller, PLEASE read my last post.. When you are Chris says that 90% chance of losing all money.. it’s like saying that you have a 50% chance of crashing in a plane.. sure there are two outcomes, but that doesnt represent 50% probability… You msut also take into account the investor can sell the options at any time before expiration..

I hope Lueng_lewis responds to the 90% quote that being misleadingly(made up word?) tossed around..

[anxvariety]

Whatever my tone, it’s intended to stirr up debate… but I will take repsonsibilty for it if it seems personal or insane. Thanks for taking the time to respond to my questions to you.

Almost 100% of milk cartons expire worthless… Unless you like drinking homemade curds.. I’d rather try and drink my milk long before the expiration… I don’t even feel comfortable drinking it a day before it expires! How many cars expire worthless? I don’t want to own a car when it expires.. how many people keep their car until it stops working? At least with options you know when the expiration is, and you can get away from them before that 90% period… sure maybe it’s hard to get away from them being down 25-50-75%.. but I am willing to cut my losses and try again. I definitely don’t want to own something that’s ‘expired’.

For the most part these aren’t options that I’ve picked out either.. like I’ve said, hopefully enough, I have been following Zeal’s reccomendations. Picking which to invest in, is sort of an art that I don’t have the time for with a job in another profession. Though, the FRO options that I bought&sold had 450-something%(.6->3.30) return were ones that I picked out… I’m going to call it beginners luck for now though! Because, I know in investing it’s not really about where you were or have been, more so where you end up, or down 😉

From Quoteland.com:

“I made my money by selling too soon.” -Bernard Baruch

“I have probably purchased fifty ‘hot tips’ in my career, maybe even more. When I put them all together, I know I am a net loser.” -Charles M. Schwab

[anxvariety]

Awesome writing leung_lewis.. Hopefully people take the time to read it thoroughly, because I think covered call writing is right up your average piggington posters alley..

Powayseller, Maybe I mistyped.. but I didn’t mean to say that options are a safe place for a person to put money.. NOO way, like I said I had almost a -75% swing before stabilizing to the figures I posted earlier. If we ever hear someone pitch safe and volatility in the same sentence, lets grab all our valuables and run!

I was really tryign to answer the original question, in a little bit different approach.. but the idea is:
The options allow an investor get in on alot of upside for less money up front(leverage) VS. fronting alot of money to buying shares of the stock.. By doing this, you can use the rest of your money(the majority of your money) to buy CDs or gold or whatever you consider a safe place to park your money.

I was trying to show earlier in my example of the COP NOV 60 call option purchase VS. COP $60 stock purchase, that with 1/3rd the up front capital, the gain for the option holder was the same as the stock holder… the risk is that the option holder ends up with nothing if the company isn’t at their strike price by the expiration date.. but do you really want to wait it out long in COP if it dips to 40 for a couple of years anyways? Is Connoco Phillips going to flop? If so, I’d rather have options go to zero than my stock.

[anxvariety]

Good question.. when the stock wend down to 57, these COP options were down probably around 60-70%(dont know the exact #)

I don’t know how easy or hard it is… I look at amatuer level information like moving averages, bollinger bands, insider buying, industry trend, and most importantly what Zeal says!! 🙂

Hopefully I’m not giving off a vibe like I’ve pulled it off, or I can do it over again, because I probably just got good advice from Zeal and also got lucky. I was just suggesting that it might be an interesting approach for enabling a person to park most of their money in something super safe, yet still get some highly leveraged volatility with a little bit of money.

If you get Zeal Newsletter, there is a part where they list their currently open positions and what % gain they’ve had.. overall since I’ve subscribed Zeal has done very well.. maybe in the past they didn’t, maybe the only reason I found them was because they started to gain popularity as precious metals took off? Don’t know for sure…

[anxvariety]

Powayseller,

Two parts to this message…

Part 1
The basic answer to ”would you please post your losses as well as your wins” is below:

The sum of all my option buy and sells for 2006 –
Realized gain for 2006: 56%
Unrealized gain for 2006: 27%

I have no realized losses for 2006, but I have some unrealized losses(~$-600) I’ll happily send you the line items if you send me an email address to send it to… [email protected]

…and then it all came crashing down! 🙂

Part 2

I think investors like you that are interested in options but don’t necessarily want to follow things day by day and deal with high % risk would be most interested in ‘writing covered calls’. I’ll post links at very bottom. I have a feeling you’ll REALLY like the concept. The tax guy I use was the first person to tell me about them… it’s sort of a best of both worlds, at least based on what I know about you(from reading your posts).

Covered call:
http://en.wikipedia.org/wiki/Covered_call

The wiki almost overcomplicates it here’s another:
http://invest-faq.com/articles/deriv-option-covered-call.html

Here’s my attempt at an explanation:
You are long on COP and have 500 shares… You decide to write a covered call.. You sell 1 Jan 07 $70 option for the market price (right now they are $2.95).. This means you are now obligated to sell the person that bought the option from you 100 shares of COP for $70 in the 3rd week of January of 07. Each option represents 100 shares – so they give you $295 dollars for that option… if the stock price doesn’t go to $70 or above in between now and Jan 07, their option expires worthless and you keep the $295… if the stock price is $75 in Jan 07 or anytime before that, the person can take it away from you and give you $70 each for 100 shares(the stock could also be at $100 at this time)- they can then sell them and profit that $5 for themselves… So your risk is in opportunity cost, or as that Invest FAQ link puts it: “While the covered-call writer has no risk of losing huge amounts of money, there is an attendant risk of missing out on large gains.” and “My personal advice for new options people is to begin by writing covered call options for stocks currently trading below the strike price of the option; in jargon, to begin by writing out-of-the-money covered calls.”

[anxvariety]

“Well, If you want volatility, my daily trading service for Bond Futures has it, LOL!”

“I just am pointing out that futures trading has that kind of volatility every day.”

So what’s the difference between your service and the market ? I don’t understand..

I want to put the smallest amount of cash up front to realize the biggest gains.. Sure this approach can mean losing 100% of whats invested in the options, but you can lose 100% in a stock too and that would be alot more cash… This approach will allow me to put my safe money into something that I think is solid as metal.. gold… and I can stuff my pillows for an acid rainy day.

“It [newsletter] does not however, have volatility that extreme, unless it is maxed out irresponsibly.”

Are you saying you’re controlling your upside? Wouldn’t you be better off controlling your downside if risk is your concern? Either way, both are impossible…

I also think you’re jumping the gun saying that an option with a 300% gain is snynoymous with irresponsibility. COP(ConocoPhillips) is a 6x earnings stock and it’s NOV 60 calls have doubled in 2.5 weeks.

For anyone else reading that wants to know what the original purpouse of my message was.. it’s my perspective on how to park money, that is to put the least up for risk to try and get the biggest gains. A few weeks ago a respected poster here said they were going to pull the trigger(buy) on COP(ConocPhillips) stock @ $60.. this was the same day another person I know 😉 bought the COP NOV 60 options. I’ll do a quick comparison with abritrary amounts, so if anyone is interested they can compare the 2 scenarios.. stock vs. same stocks options.

Option buyer:
Puts up $5k(arbitrary comparison amount) on 6/6 for 733 COP NOV 60 options at $6.80
Today 7/3 the options are listed @ $9.20.

Net profit if sold now: $6743(current price x # of options) – $5000(cost) = $1743 profit

Stock buyer:
Puts up 14k(arbitrary comparison amount) for 233 shares of COP @ $60:
Today 7/3 the stock price is listed @ $66.82
Net profit if sold now: $15569(current price x # of shares) – $14000(cost) = $1569 profit

With 1/3rd the investment options investor earned about the same profit. To me, that’s reducing your exposure/risk… allowing you to park more money in whatever safe investments you choose.. for me that investment is gold and silver.

If you find a math error sorry.. I’m not anywhere close to perfect 🙂

[anxvariety]

I have been trading options lately instead of stocks.. and I have done better than I’ve ever done in stocks.. Keep in mind it’s only been a few months, in fairness, I’ll report back with any gloom I experience if it happens..

With options you get way more leverage and upside, with a predefined amount of loss risk up front.

The stock market has been so volatile lately, that with a very small amount of money you can see enormous gains in options.

I’ll give an example of some options that I bought and screwed up on.

I bought 500 PCUIP(Sep 80) calls on 6/13 for $3.30 cents each.. the total cost was: $1,713.25 including $13 comission. The underyling stock for these options is Southern Copper(PCU).

I sold a few days later, because I had realized some gains – and got a little skittish… well now 15 days later those options are at $14.20… If I hadn’t of sold(I don’t regret my instincts to sell, I’m happy with my gains) those options would be worth 500 x $14.20 = $7100, in other words $5387 profit.

I know it’s a woulda coulda situation, but I thought that would be better than sounding like I’m bragging.. in fairness, in the last month I did have 2 other notable situations, one where I realized 300% gain(Underlying stock = FRO).. and another where I experienced a -16k swing(Underlying stock = COP) that is now back to +2k(that was a 18k rollercoaster!)

Can anyone show another place you can put your money where you can get that kind of volatility? The example(plus one of the others I mentioned) was 300% in 2 weeks, with only a couple thousand dollar invesment.. Maybe this isn’t a fair example, as the oil and precious metal markets had a pretty serious downward correction with a recovery.

I feel that the stock market is going to be real reactive over the next couple of years, and in general I don’t see things going up much overall but just bouncing between their averages.. See CSCO, MSFT price over last few years for example. I believe this presents and incredible opportunity with options investing, because it doesn’t matter if the stock has year over year gains so much… just that it’s a solid company with alot of buy and sell activity.

This is just my perspective, I consider myself a amatuer investor. Zeal LLC, to which I’ve been a subscriber now for 8 months, is where I got the leads on 2 of the 3 option trades I referred to above.

[anxvariety]

I go between paranoid and optimistic about the markets.. but I think I’ve settled a little bit. Afterall, I did post a few weeks ago that I was going to pull my weekly paycheck in cash and buy a % of gold.. so far so good, but I haven’t been as extreme as I proposed.

One reason… Looking at all the houses on the coast, and all the new development in Oceanside(North County) I feel that some areas just really aren’t succeptible do a downturn at least in a catasprophic way… maybe it’s not 1 for 1, as in for each bad area there’s one good area.. but even if there’s one good or steady area per 10 bad it might not be so bad.. I guess that for few every people that are living paycheck to paycheck there’s a person that has quite a bit of cash and won’t be seriously affected, as in not standing in soup lines or thinking about jumping out of their window…. you know all those old money people, and frugal construction workers that have made a killing off the boom.. they probably have enough money to survive for 10 years… oh wait, their money is probably in banks!! Do they have any gold? OH NO, I’m already paranoid again!! 🙂

[anxvariety]

sakina96,

Some/most illegal immigrants will argue that they are the ones being taken advantage of.. I sort of agree, but I doubt they would agree with my proposition to fix the problem!

Personally I don’t agree with using things in ways different than they were intended.. Allowing illegal citizens access to the systems that are designed for citizens(SS, healthcare, welfare) is a problem that will poke it’s head out later when it’s more expensive and difficult to fix.. aka the elite have run off with all the money

In my opinion this is an integrity problem that exists in the DNA of all politicians(joke?). The systems you and I pay taxes into are working overtime to keep the raft afloat even though it’s got holes everywhere.. I’d bet everything I have that someone on the high-up(cheap labor?) is benefiting most from this – because no way in America does the lowest class get anything for free!!

Warning I have no idea what I’m talking about.. I guess this should go at the beggining?? 🙂

[anxvariety]

Yeah, middle class kid motivation is a big one.. and that’s a really scary problem.. I think america has a gigantic problem with alcohol and that partying you’re talking about.. especially with the generation I’m in.. people that are 22-30 right now. I have so few friends that care about anything other than their next paycheck, or how drunk they got last weekend, that I wonder who’s going to be filling all the skilled /education required jobs! I blame some of it on MTV – they sell a ”whatevvverrr” type attitude/perspective to kids.. where it’s ‘cool’ not to care about stuff…

[anxvariety]

I think the government pumped money into the immigration walkout so that they could guage what sort of impact the immigrants have, and also try and measure exactly how many are here.

Watch now as they slowly ween companies off immigrant predominant labor and create programs or incentives for companies to hire middle class tax payer citizens.

When I grew up I used to see the kids of middle class parents working at Taco Bell, Carls Jr, Dominos, etc… Seems like now most of those kids are in construction or don’t work at all because their parents are paying for everything for them(home equity debit card?). Maybe this isn’t reality but it sure seems that way to me…

I think those Taco Bell jobs might start getting filled by the middle class again if stuff starts to hit the fan.

[anxvariety]

doofrat, sure.. but look at gold over the last 1000 or 2000 years.. or however long it’s been used..

Maybe we’ll have a magnetic pole reversal on earth and gold will turn into mashed potatos.. but in the meantime, I’m comfortable with ‘storing value’ in something that is accepted worldwide and has value actual value apart from a promise.. plus, with gold you don’t really have to worry about counterfeit, since it costs more money to create than the gold than it’s worth.. unlike paper, which is probably relatively pretty easy and cheap to counterfeit.

Plus.. if anything else, I can have some prety cool earings 🙂

[anxvariety]

I wouldn’t be excited if I had a couplle hundred thousand in the bank.. and it was in limbo for months or years while the FDIC sorted out the mess.. that would be a time when I would want as much cash as possible to scavenge/survive the markets.

“Not all economists think that the FDIC is a good idea. The main fear of its critics is that the government will, for very large banks (which they consider “too big to be allowed to fail”), use the FDIC fund money to “bailout” a large bank, rather than letting it fail and paying the up to $100,000 amount per depositor. These economists believe that free market political decision making in this matter will lead to the best net result, and that there is not enough money to adequately use FDIC funds to “prop up” banks. Some advocate privatizing the FDIC insurance money, with the caveat of not allowing the “too big to fail” system. These critics mostly believe that the current FDIC insurance would fail as did the FSLIC, and would require a bailout from the government.”
http://en.wikipedia.org/wiki/FDIC

“Americans are spending everything they’re making and more, pushing the national savings rate to the lowest point since the Great Depression.

Soaring home prices apparently have convinced people they don’t have to worry about saving, a belief that could be seriously tested as 78 million baby boomers begin to retire. “
http://www.breitbart.com/news/2006/01/30/D8FF6D700.html

Anytime we break Great Depression records.. I’m going to get skittish! 🙂

[anxvariety]

PS, I don’t have any specific information regarding terrorist attack on FDIC headquarters or the world cracking into 3 peices and floating apart into space.. I’m just thinking that I don’t have much to gain by having money in the banks right now..

Who knows if anything bad will happen.. I just think if something bad does happpen, the little guy/girl won’t be represented too well and won’t know about it until it’s too late…

I wasn’t making a reccomendation to people my making this post.. mostly just seeing if anyone else was doing something like this (pulling their money from banks).

[Author]

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