why bearish?

Why (was) am I so bearish?

Finally I decided to withdraw CAD10000 from my IB account, partly because my wife pressured to take over trading rights, while mainly because I saw the picture of poor girl whose parents are lack of money. Life is very short. My kids are much more valuable than any other things. What if I lose this incremental 10000 again after incredible “betting” syndrom?

I have to admit that I was very upset with recent failing to keep my profit after last Thursday (Oct 19, 06, one day before Oct OE ) morning. On the morning of last Thursday, the market opened lower continuing down momentum. When I logged in my account and station on 10:00AM after I sent Jerry to school, I saw $48000 because my QQQQ 42PUT over tripled ($0.5-0.55) and my QQQQ 43PUT over doubled (2.35 times). How I wish to make my account over $50000 which is the milestone and I can return my profit to borrowed account.

After last Friday, I have 41500, not so bad. With my strategy of selling both side near the money options, I gained my account to 43000 at the end of Tuesday. Then when I saw others mentioning time spread strategy ( Sell near term OTM option and buy longer term same hit price OTM option), I developed this idea to sell 2 months(Nov&Dec) of near the money same striking price options. (If I keep this strategy, I won’t lost more)

Since I noticed yesterday (Monday)’s option record shows there was a huge transaction of OTM put (Nov 27.5), I was convinced that someone was betting big down. When I posted my notice on the DQ, I got many appraisal plus technical charts which made me more assured it will drop big. Last Friday’s bi-directional selling option play gave me almost 0-sum after unexpected SNDK 20% drop. I wanted to play single pro-sell side. At that time, I was actually given the warning by that fact that the prices of both direction of PUT and CALL went up in the afternoon. This didn’t make sense in a neutral market. One DQ guy posted an article warning people not to short. These are the two messages I ignored.

19m profit for a 14b market share company? 5 cents per share (beat 2 cents). It is so easy to manipulate. It closed at 33.7-33.8 and went up immediately to 38 without any rest when clock hit 4:00PM. I added some short position at above $38.

I was so scared on Tuesday evening. With the position of 1600 AMZN (300 of which were shorted above $38) and average cost of short was $34.39. Plus 4 Nov 35 Call Sell and 6 Dec 35 Call Sell ( can be deducted somehow by 2 Dec 35 Put Sell). The potential lose (at $38) will be
Stock: $3.61 * 1600 = 5776
Call Sell: $2 * 1000 = 2000
Deduct Put Sell $1 * 200 = -200
Total: $7576

What a bad day for single side option selling and short!!! I didn’t have a nice sleep on Tuesday (Oct 24).

Next day (today) .when I woke up and open the PC and TV, I saw AMZN traded above $38 in the pre-market. I didn’t cover in the pre-market since I believe it will swing someway due to its unconvincing and manipulation like Q3 report. After I sent Jerry and got to office desk at 9:27AM, I logged in and saw it dropped to $37.20, then I wait it dropping to 36.50 then I bought most of 1600 back (1500) and 100 back at $36.10. I should have bought more at 36.1-36.40 later it went up back to $37.8 level. Anyhow I recovered part of lose, and the balance was at 38500 when AMZN dropped to 36.20.

The Fed meeting didn’t give out any news bear like. The rate is unchanged to 5.25%. And quite a number of SP500 companies (at least 50% from what I feel) are reporting positive ER. Big drop is unlikely.

Something is wrong here that from middle July till now, I still have a deep bear sentiment which I saw any jump or bump will be followed by big correction drop. No, I didn’t see big drop. Some forces are manipulating the market in a way that to push most of markets up to let people happy. This is what we called election effect??? It could be and it should be.

Why bear?
1) It could be my investment history from 2000-2002 that I bought continuously to average down NT. I lost C$70000 at the time of Sep 2002.
All NTES/SINA/SOHU dropped to 10% of original value
2) Telecom industry is still under pressure that price of NT continuesly drop from 4.00 (2004 FALL) to 2.00 (2006 FALL), no salary increase from 2001 to 2004.
3) My personal/family income doesn’t show up momemtum.
4) Suspicious on GOOG/TZOO/NVDA/RIMM/SNDK/AAPL new economy.

Now what could happen if my wife (always buy bull) jump in at this moment when I still think most of these stocks are over values. Let god bless my family.

Calendar Spread

Calendar Spread Option Strategy
When you are fairly neutral on the market and you want to generate additional income from your investments, there is an option strategy that is worth your consideration. This strategy involves selling an option with a nearby expiration, against the purchase of an option (with the same strike price) which has an expiration date that is further out.

A Calendar Spread is an option spread where the strike prices are the same, but they have different expiration dates. These spreads are also referred to as horizontal spreads or time spreads.

Calendar spreads can provide a way to add value to your portfolio through your purchase of a long term option with a reduced cost basis, provided by a near term option that you sold.

One very favorable point to a Calendar Spread is the value of time decay. Although both options lose time value as time passes, the option you sold loses value much more quickly than the option you bought. Therefore, if your prediction of a neutral market is correct, the value of your Calendar Spread will increase as time passes. A Calendar Spread takes advantage of time value differentials during neutral markets.

When the near term option expires, you have several alternatives. If you are still predicting a neutral market, you can hold on to your long position, if there is sufficient time left on it, and sell another short term option against that long position. If you are dealing in calls and you fear that the market may go down, you can close out your long position and take the profits. If you are dealing in calls and you predict a more bullish market, you could just hang on to your long position and take a larger profit in the future. In any of the cases, your cost basis on your long position was reduced by the premium you collected from the option you sold.

It is also important to cover risks and caveats of this strategy. Your loss is limited to the net premium you paid (the money you paid for the option you purchased minus the money you received for the near-term option you sold.

When we implement spreads of this nature, we try to buy long term options that are undervalued. A good option program like Option-Aid, can help you verify that the long term option is undervalued. For the short position, we look for options that are overvalued, since we are selling that position. Option-Aid can also help you verify that your short position is overvalued. This strategy helps to maximize our profits.

There are many different ways to implement a Calendar Spread, depending on your goals and your market outlook.

One popular implementation of the Calendar Spread is try to generate income similar to a Covered Call strategy, but involves buying LEAPS (Long Term Equity Anticipation Securities) instead of the actual stock. So calls are sold against the LEAPS instead of the actual stock. This is done because the LEAPS can be purchased much more cheaply than the actual stock, which can generate much higher returns on invested capital. The risk with this implementation is that the underlying stock goes down in price instead of staying neutral, causing your LEAPS to go down in value. If the underlying stock goes up in price at expiration of the near term option (instead of staying neutral), you could buy back the option you sold and then sell another option, one or more months out.

When you implement this type of spread, you are hoping that the near term option you sold expires worthless. Then you can sell more options a little further out and continue to collect more premium. This either decreases the cost basis of the LEAPS you purchased, or produces recurring income for you.

It is important to analyze your expectations for the underlying asset and for the market before selecting your strategy.

When you are analyzing potential option positions, it helps to have a computer program like Option-Aid that swiftly calculates volatility impacts, probabilities, statistics, and other parameters of interest. These programs can pay for themselves with the first trade that they help you with.

Get FREE Option Tips
The Option Trading Tips Newsletter is published by MindXpansion, the developers of Option-Aid. This newsletter gives you information for maximizing your profits in options trading, including option strategies and market indicators. Fill in the following information to subscribe to this FREE service.


http://www.mindxpansion.com/options/calendar-spread.html

如果你能看到delta, 一般就能看到gamma, theta, vega,

See Put/Call in stockcharts

http://stockcharts.com/h-sc/ui?s=$CPC

PROS:

- QQQQ OPTION 42P
FIRST HALF: GAIN 200%
SECOND HALF: GAIN 30% (I HAVE COUPLE OF CHANCES TO GAIN 200%, WHILE I MISSED)

- QQQQ OPTION 43P
GAIN: 100%

- SELL OTM OPTIONS: (INCLUDING AMD PUT)
OVERALL: GAIN 4% OF UNDERLYING STOCK VALUE


CONS:

GOOG SHORT: LOSE 7.2%
SELL AMD OTM PUT: LOSE 250% OF SELLING VALUE
SELL SNDK OTM PUT: LOSE 400% OF SELLING VALUE