| EQDEK | SLGN May 2009 55 CALL | Sell to Open | 3 | @ | $1.90 |
During this afternoon’s webinar, Mike Chupka and I looked at our Plain Vanilla trades using the PowerOptions Portfolio tools. Initially, we saw that the April 55 call could have been sold for $0.70 per contract, but after using the powerful NEW Comparison tool in the PowerOptions Portfolio, it appeared the May 55 strike call was a much better Income Method #1 choice. (more…)
Okay, so here’s an adjustment to the “Plain Vanilla” PNRA RPM.
“Plain Vanilla” means that for these trades I’m only showing Income Method #1: Selling a Covered Call. (more…)
There is no guarantee for a number of FISSION trades per month…just like you wouldn’t put on new trades every month in your own account if you don’t feel the market conditions apply, or if you can’t find any trades that meet your risk/reward/projection criteria…so we don’t either.
However, there are always some RPMs open, so we are always watching to see if we can apply some income method trades to existing RPMs we have open.
Remember the principle…FIST, Forced Ideal Sized Trade.
A good rule of thumb is to limit your risk in an RPM (radioactive profit machine) to single digit risk, like 3% to 8% is great. AND…that percentage in cash should be less than 1% of your trading captial.
This is a feasible solution…But, the risk profile of the trade would change significantly if you repurchased the stock at a much different price than where you were called out. If the stock was assigned at a price within a few pennies of the call strike, then you repurchased at the few pennies higher price, the risk in the trade would be close, but if you sold a 50 strike call, and the stock went to 56, you were assigned, then you repurchased at 57, you missed out on that 7 points of stock appreciation, so your risk in the new married put would be much different. (more…)
By itself, a Bull Call Debit spread would work better on a bullish stock over a Bear Call Credit spread. But, in the context of an RPM the Bear Call Credit spread behaves much differently and better than a Bull Call Debit Spread. (more…)
What’s the problem?
Well, here’s the deal… Recently I had the experience of having a stock go down 11.1% while I was holding it. That was over the course of 51 days holding time.
Thing is, even though the stock went from $65.81 to $58.53 a share… I made a small PROFIT on it. (more…)
Question:
What is the advantage of buying stock with an in the money married put over just buying the call of the same strike price to start the trade?
Answer:
The most powerful benefit is that this arrangement doesn’t allow you to become overextended. It FORCES a position size that doesn’t hurt too badly if it goes against, whereas someone wishing to invest in the same issue with the same sentiment might be tempted to over-trade their available capital.
Also, there are adjustments that can be done with the put that cannot be done at a profit with a long call.
Finally, there is the fact that many accounts cannot be traded with pure options plays, or that people may own stock as a part of their compensation plan at work, and these strategies directly benefit those situations.