GameStop Corp.(GME) has been on a tear lately. I don't know if it's a short squeeze or irrational exuberance but either way, Up or Down the stock isn't going to stay where it is. At the time I put the order together, GME was at 35 1/2. I bought 5 GME July 20, 2013 $36 Calls at $2.21 and 5 GME July 20,2013 $35 Puts at $2.59 for a grand total of $2400. If GME moves away from 35 1/2 by 5 points in either direction before July 19th, I'll make money, if not, I lose. So far, progress is being made. GME closed at $36.31. I could close this position at a tiny profit right now but I'm going to ride it out a few days. This GameStop has no earnings.
I closed my stock position in TSLA to lock in the profit but I didn't want to lose out on any future rise so Friday, I bought call options on TSLA at a strike price of 57 1/2 that expire in September. This strategy frees up cash for other investments. TSLA can also be volatile so a large gain can become a loss before you notice. Buying call options limits my loss but lets me share in the gains. So far, just today, those options are up nearly 40% (the underlying security is up even more in after hours trading, w00t!!).
I also took small positions in SZYM, SPWR, NVDA and CVV and closed my position in SCTY. I want to get back into SCTY but I'm going to wait until its recent run up in price gets digested.
Difficult to see, always in motion is the future.Quote: Boz
General question, but where do you see the Dow going from here?
If I had to pick a short term direction, I would say flat but I'm terrible at overarching direction. I've been waiting for a significant correction since February. Not some one day 150 point drop but a sustained drop of 1000 or more points in the course of two or three weeks with panicky days. But every time I guess that's going to happen and sell off everything, the next day is a record high that I miss out on.
After three months, if no mega-disasters natural or man-made happen, the market will continue to go up. It always does. That's why it's important for the investor to buy a mutual fund and never look at the market again. What I'm doing is not investing, it's gambling with positive EV.
I should have waited :(Quote: s2dbaker
GME didn't move as much as I thought it would so I closed the position for a tiny profit after commissions. I'll take it.
I'm going to try the same strategy with shorter term options. It all depends on where GME is when I execute the trade but right now, GME is at $38.38. I expect it to move this week so I have three strategies from which I'm willing to choose.
1 Wide) The Long Strangle
Buy GME May 18 $39.50 Call @ $0.31
Buy GME May 18 $37.00 Put @ $0.27
Total cost (sans commission and fees ) $0.58 and I make money when it moves beyond the range $36.42 to $40.08
Risk of ruin $0.58 * 1800 = $1044
I could buy 18 with $1044
1 Narrow) The Long Strangle
Buy GME May 18 $39.00 Call @ $0.45
Buy GME May 18 $37.50 Put @ $0.40
Total cost (sans commission and fees ) $0.85 and I make money when it moves beyond the range $36.65 to $39.85
Risk of ruin $0.85 * 1200 = $1020
I could buy 12 with $1020
2 Long) The Long Straddle
Buy GME May 18 $38.50 Call @ $0.66
Buy GME May 18 $38.50 Put @ $0.81
Total cost (sans commission and fees ) $1.47 and I make money when it moves beyond the range $37.03 to $39.97
Risk of ruin $1.47
I could buy 7 with $1029
2 Short) The Long Straddle
Buy GME May 18 $38.00 Call @ $0.91
Buy GME May 18 $38.00 Put @ $0.58
Total cost (sans commission and fees ) $1.49 and I make money when it moves beyond the range $36.51 to $39.49
Risk of ruin $1.47 * 700 = $1043
I could by 7 with $1043
3) The Long Guts
Buy GME May 18 $37.00 Call @ $1.64
Buy GME May 18 $39.50 Put @ $1.47
Total cost (sans commission and fees ) $3.11 and I make money when it moves beyond the range $36.39 to $40.11
Risk of ruin $0.61 * 1700 = $1037.00
I could buy 17 with $5287 (much more money up front but $2.50 per option or $4250 is guaranteed in value )
If I'm willing to accept a half point more of risk, I would go for #1 Wide. I'm fairly confident that GME will at some point this week, trade outside of the band $36.42 to $40.08. If it trades for more than $1.00 outside of that band, I could sell the Strangle for a $1800 profit.
fear vs. greed
If you're going to make investing decisions for yourself, you nominally want to buy common stock on multiples of 100 shares. With $1000, you could buy 100 share of something that's $10 per share or 200 share of something that's $5 per share.Quote: Beardgoat
I have been saving some money and I was thinking about opening an account on etrade or ameritrade. I'd probably start out small with like $1000 because I have no experience with the market. Does anyone think this is too small of an amount to fund and trade with? Also any pointers on what type of stocks would be good for this beginner. Thanks.
When I started my investing/gambling account last October, I started with $8,000 and that money came from the escrow account after my refinance. Since I'm now in charge of paying the taxes and insurance on my own property, I decided to use this cash as seed money for my return to the market. From this account, I've paid my insurance and all of 2013's property taxes (which on Long Island is a LOT!) and the account is currently worth $13,400 (thank you Tesla).
$1000 might be a little light but you could invest in a something safe like a mutual fund until you're more comfortable with calling your own shots. I suggest joining The Motley Fool community and reading up on "How To Invest". They will tell you to do the exact opposite of what I'm doing because what I'm doing is not investing, it's gambling and they are right!