Ever have one of those days where you keep thinking to yourself “man, none of my stocks are moving”… and then you realize you’ve been monitoring a screenshot of your platform by mistake? :-) I don’t think I’ll put on any trades today…. I didn’t get enough sleep last night.
I’ve been taking snapshots of my options quotes at times that I think are interesting for certain stocks. I really want to get a feel for how they move, and I don’t have charts of options available through my broker. I haven’t really gone back and reviewed them much, but I can tell already that it is a mysterious and complicated world.
Take the AMGN puts today. I thought, maybe if AMGN closes weak, I’d look to buy some puts monday after any buying pressure in the morning plays itself out. As of around 1:30PM or so, the stock was at 71.21. The Feb 75 puts had 3.90 on the ask. Which means they are basically entirely intrinsic value. I think, well, maybe that’s normal since they’re in the money and it’s nearly February. But, isn’t volatility supposed to be a factor, and isn’t AMGN making a big swing right now? Warning sign (since it confuses me… not since I think I know enough for this to warn me about anything specific).
Then, to confuse me even more, I see that the March 75 puts also had 3.90 on the ask. So, not only can I get Feb puts without paying any kind of premium, I can get March puts without paying any kind of premium. I have no idea what this means, but whenever something looks like a free lunch, I assume someone smarter than me is around the corner waiting to hand me the bill.
Anyway, I certainly find situations like this interesting. Hopefully I’ll feel more knowledgeable about all this sooner rather than later.
[EDIT: if you want to know why I got no sleep, it's because I finally had enough comment spam that I had no choice but to do something about it. I'm not a fan of the filters, and I'm not a fan of captchas. So, I've opted to change my copy of wordpress's internals. I think I've mucked with it enough that any generic wordpress-attacking bot won't work anymore. If someone wants to spam me badly enough that they'll write custom code to attack move-the-markets, then I think they deserve to get through! Of course, I'll still just delete those comments in a moderation queue, so they won't win no matter what...].
January 26th, 2007 at 1:22 pm
i have never done that, but i have sat at a stop sign waiting on the light to change :-)
gl with the options
January 26th, 2007 at 6:33 pm
I’ve lost $ with options before, so I have some insight, though not anywhere near that of the real options traders out there.
There should be some volatility premium in those puts, but the market seems to be stacked against the option buyer (in the sense of buying a single position, either a call or a put; I’ve never done spreads or anything else). Every time I tried to buy options, I ended up overpaying for the volatility I was anticipating.
As far as your Feb/Mar going at the same ask at intrinsic value (they can’t be priced any cheaper or arbitrage occurs), that says to me that the odds are that the stock is not likely to be at or below $71 for the next few months. While there is “volatility” in the stock, it’s all likely to be upside rather than down. Check the calls and see if you see the same thing…
January 26th, 2007 at 8:07 pm
@Prospectus, it was just 21 cents away from $71 at the time, which makes it weird to me that no one wanted to price the puts as if it would drop any further. Since there was a big gap down, maybe it could have been that a lot of people woke up to big profits? And, they wanted to sell their position bad enough to sell them at practically exercise value? Dunno… I will be very interested in what the price does if AMGN shows weakness monday.
January 26th, 2007 at 11:02 pm
That is the funniest reason I have ever heard for missing sleep!
LOL!
January 26th, 2007 at 11:08 pm
It didn’t seem so funny at the time :-) Comments are emailed to me, and my blackberry was having a seizure with all the spam comments. Enough was enough!
January 26th, 2007 at 11:14 pm
I should add, I haven’t gotten any spam comments since I made the changes. About 24hrs, so far. So, that’s a good sign. If it starts up again, I’ll do something more drastic!
January 27th, 2007 at 1:04 am
So….me commenting like this….with nothing much to say. Would that be considered spam?
And, in turn, make you not get enough sleep?
Which, then in turn, translates to me making you not get enough sleep?
LOL!
January 27th, 2007 at 2:47 am
Are we creating another hype? Options trading hype..LOL. Anyway, I am still reading to figure out this instrument.
My site has been hit by spam comments, more than double than usual recently. Does it mean I am getting famous? LOL. I have been playing around with bad_behaviour, askimet and spam karma..etc at least, these plugins filter some stupid spams. But, now they are spamming my email. Even though I’d never published my email address on my site…
Hope to read more from you on options trading!
January 27th, 2007 at 7:27 am
@TG: It’s not your comments that keep me up at night.
January 27th, 2007 at 7:32 am
@Gav: no, it’s not hype until I make that “Wow, I made $27 bajillion dollars using just $30 in less than a week, and any day now I’ll start an experiment where I show you how anyone who wants it bad can do it too” post.
I would say the fact that you broke your hosting service is a better indication that you are famous! The amount of spam I get definitely rises with the popularity of the site, though.
January 27th, 2007 at 3:05 pm
Richard,
Hi. Sleep well last night?
January 27th, 2007 at 11:10 pm
@TG: I slept like a baby. I woke up every three hours and cried. :-) just kidding.