Week of Sept 21, 2009

What a day for AIG. No trade for today, but I would like to mention that both my AIG Sept 15 and 19 Put had yielded 5.5% and 6.5% respectively. My initial target is have and average of 3% to 4% return monthly. So far I am still there on my monthly target.

Week of Sept 14, 2009

Oh well...I been out for a few weeks...

Lets see what's new. Well, I closed C Sept 4 Put @$0.04 (bought at $0.34), resulted a net of 5.88%, based on my calculation (minus fees etc)

Also, I wrote AIG Nov 33 Put @ $5.50 back when AIG was at $45, premium is now at $6.70. Now that didn't go well. :(

Today, I did a spread. Bought to close my STP Sept 16 Put @ $0.92 (sold at $1.10). Still a loss but minimal. I wrote STP Oct 16 Put @ $1.63.

Hope I am back for more as been really busy with work and was really not able to focus...

Week of Aug 24, 2009

Not much has happened for the pass week. I had basically held on to my trades. I had AIG Sept 15 and 19 Put but it seems that even this is deep out of the money, the time premium is still there so I guess I will sit on these till expire.

As for my C Sept 4 Put, I will consider to close and free up my fund for next trade sometime next week of so.

One trade I made this week was selling C Oct 5 Put @ $0.63. Again, after I sold, Citi traded south. It would have been better if I were to waited a couple of days but, hey, who knows.

Anyway, Citigroup has trade up and I am in green now. I hope the momentum of financial stocks would continue for a while but it is still quite uncertain at this point of time.

Have a nice weekend.

Week of Aug 17, 2009

On early Aug, I sold AIG Sept 11 Put @ $1.01. It is now at $0.17. Since I need some fund to write new puts, I decided to close this, thus a 6.59% net gain in about 2 weeks. Not too shabby.

I am trying to explore on LEAPS. If the price is right, I may buy some LEAP calls. Will see if there is any attractive potentials.

Week of Aug 10, 2009

I closed AIG Aug 14 Put @ $0.1, which I wrote on Aug 5th for $0.69. Net 3.39%.

Follow with writing AIG Sept 19 Put @ $1.45. A bit risky i know but...

Week of Aug 3, 2009

I sold AIG Aug 9 Put @ $0.79 on 7/17. I just closed this today at $0.17. A rough 5% net gain in slightly more than two weeks. I followed by selling AIG Sept 11 Put @ $1.01. I am trying to take advantage of the time value on the premium. I hope AIG would stay above $11 in weeks to come.

OPTION Basics (1) (What is an Option?)

One of my plans is to use this blog to share what I know and learn on option trading, other than creating a place to welcome anyone to share their experiences and success stories and even set backs.

So...What is an Option?

An option is a contract that provides the buyer/seller with the right to buy or sell the underlying stock (100 shares) at the specified fixed price (strike price) by the specified date (expiration) in the future.

A unit of an Option is called a contract. A contract consists of 100 shares of the underlying stock.

Strike price refers to the price which the buyer/seller agree to transact on irrespective of the actual price of the stock in the future.

E.g.

Mr. A buys “1 AIG Aug 12 Call at $1.50”.

1 – number of contract (100shares/contract)

AIG – the underlying stock

Aug – Option expiring month (Option expires on the 3rd Friday of each month)

12 – is the strike price

Call – Call option

$1.50 is the premium Mr. A pays for this contract. This $ is stated as per share basis.

So $1.50 X 100 shares => Mr. A is paying $150 of premium (excluding transaction fees)

In essence, Mr. A is buying the right to purchase 100 shares of AIG at the price of $12/share between the point of transaction till the expiry date.

Mr. A pays $1.50/share (the premium) to attain this right.