Investing: Inverse Bond ETFs versus Gold ETFs?

I see something my husband, Dogs (maybe I should call him Mr. Cat... He always calls me Mrs. Dogs and I'm a cat, I don't get it).... Anyway, he left something out.

Trading 101 ... You need to have the discipline to DO what the market is doing and not what you think it should be doing.  Also, take what the market gives you, if that isn't what you thought it should be, doesn't matter, take it and leave.

I did that just this morning, I had a GTC in for X, it was a dime away from X and the market stated to turn. I changed my order, took what the market was paying (my brick), and threw the brick on the pile.  Now waiting for the market to tell me what to do next.  Patience will make you a fortune.  That fortune is made one brick at a time and not all in one day.

Cat... Mrs. Dogs... Whatever my name is.

A quickie about IPO's, if you'aren't real high up the food chain with your broker, dont do it, you will get the garbage and it invariably gets cheaper in the secondary market.  Its a flipping game, and the hot ones dont come by too often, and even then its just a stampeding herd of money managers and hedge funds fighting for the 1st buy.anyways.

I hope Mrs. Dogs keeps Mr. Cat around for a long time.

Plantguy - great point about IPOs.  I should have been clearer - we would watch for IPOs and trade the retrace after the initial euphoria of buying something new had run its course.  Typical response was a spike and then a fade - the fade was usually good for a couple of points.

Dogs,

Just a quick question; what are the premiums like on puts nowadays?

Plantguy90...

That would depend on the intrinsic value and the time value...The greater the stock price, the greater the option price. The more volatile the stock, the greater the price.  The more time, the greater the cost, but it is always the wise thing to do... Buy as much time as you can afford.... One doesn't want to fight time decay.  I have paid as little a dime a contract to as much as $50/contract.

Cat

 

 

 

 

plantguy -

Yeah - what Cat said.

It depends is the short answer.  The job of a market maker is to create fluidity in the market (second to separating people from their money).  He does this by managing the spread between the bid and ask price for an option - or a stock for that matter. 

Fast moving, high priced stocks have larger spreads than slower, less volatile stocks.  I have seen 10 dollar spreads between bid and ask prices on Google options.  On more thinly traded or less volatile stocks, the spread may be as low as 20 cents.

Cat hit the time element piece and I think that is the most critical part to understand.  You can buy in the money (currently trading around $82.96 so $85 is the first in the money put strike price) Puts on Goldman Sachs expiring in March for $9.15 and sell them for $9.20.

This breaks down as follows:  $85 - $82.96 = $2.04 real or intrinsic value.  $9.15 - $2.04 = $7.11 of time value.  About what you'd expect given the current climate in the financial sector.

As far as buying time on the option here's a great illustration.  The same $85 strike price put options expiring in October are going for Bid $22.45 and ask $22.65.

In this case you still have $2.04 in real value but by buying 8 months out in time in October, you have over $20 of time value associated with the option for the same strike price.

This is where the market maker can screw with you.  If he inflates the options out in time, you can get fairly significant price movement with little accompanying movement in the option price.  We have been in trades where there was a $7 move in the stock price and the option price didn't move.  We have also been in trades where the stock price was flat to down for the day and the option price when up.

And for those reading this post who aren't familiar with options - Call options increase in value as the underlying stock price rises.  Put options increase in value as the stock price falls.

The keys with options trading IMO are as follows:

Buy at or in the money

Buy as much time as possible (October vs. March given the above example) 

Sell the option while it is still going in the direction you thought it would - it's much easier to get out as the price is still rising over trying to sell once it has turned and the option value is falling.  That's when the market maker gets nasty - you may have a sell order in to sell 20 contracts at $8.  The market maker may fill 4 at $8 and then drop the price to $7.80 hoping you will follow.

I hate it when they do that.............. 

Hi

I was given your name by another member< i think it was AO> 

I was also interested in investing methods

Would you be able to help off  of Chrismartenson's site?

thanks 

Mike 

mike009@att.net