I promised an accounting for these strategies and now that GME's options have expired we can count the money. I'm going to include a "What If" to demonstrate how these would have worked out "If" GME had closed at a price of $41.50Quote: s2dbaker
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 $1.49 * 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 )
GME Closed at $39.76
Proceeds, $0.26 * 18 * 100 = $468
Cost, $0.85 * 18 * 100 = $1044
Net Loss $576
What If = gain of $2556
Proceeds, $0.76 * 12 * 100 = $912
Cost, $0.85 * 12 * 100 = $1020
Net Loss $108
What If = gain of $730
Proceeds, $1.26 * 7 * 100 = $882
Cost, $1.47 * 7 * 100 = $1029
Net Loss $147
What If = gain of $1071
Proceeds, $1.76 * 7 * 100 = $1232
Cost, $1.49 * 7 * 100 = $1043
Net Gain $189
What If = gain of $1407
Proceeds, $2.76 * 17 * 100 = $4692
Cost, $3.11 * 17 * 100 = $5287
Net Loss $595
What If = gain of $2363
I incorrectly named the straddles long and short, they should have been short and long respectively. Since GME went up in price, the strategy that actually made money should be labelled Long. Four out of the five strategies lost money including the one that I favored. As it should be, the strategies with the lowest risk did better than the ones with the highest risk but in our "What If" scenario, the low risk instruments were the poorest performers.
I learned something. If you expect a stock to rise a lot in the short term, then a straddle with in the money calls and out of the money puts is probably the best way to go. If you expect a stock to stay flat, it's probably best to sell a strangle (just be careful, you could be on the hook for a LOT of money if things don't work out).
"These findings suggest that the novel virus had been evolving and might, with a few amino acid mutations, adapt to humans," say the authors of a published Wednesday evening by the New England Journal of Medicine.
Webby says the H7N9 viruses analyzed so far have receptors that allow them to latch onto cells of both birds and humans. To transmit efficiently between humans, the virus has to lose its avian gene sequences. The Nanjing virus samples seem to be on the way to doing just that.
"On a scale from 1 to 10 — from an avian virus with no potential to infect humans to a fully human-adapted strain — we don't know exactly where this H7N9 is," Webby says. "But I think we can safely say from these data that it might be closer to 10 than the avian viruses we've seen infecting humans in the last decade."
In other words, he thinks H7N9 is close to becoming capable of causing a catastrophic flu pandemic.
I was wrong yet again.
I also noticed that on the short term, I have been unwinding positions too early. I have been leaving money on the table by getting out too early. It happened again today. I had a TSLA 92.5 Call in my IRA that expired today. I sold if when TSLA was at 94.5 (Netted $0) but I could have gotten a $300 profit had I waited two hours. Argh!
I am going to buck my feeling of dread by staying in the market since I'm always wrong about market direction. Next week should be a low volume record setting rise followed by that 2000 point drop I've been predicting since last fall.
By the way, it looks like the bubble finally burst on GME. It would have been a good day to own some puts.
The NextGen consoles coming out require a person to d/l the game to a hard drive, which then makes the disk itself unnecessary. The buyer is free to give said disk to any of his friends who may want the game (they'd have to acquire an online code to use it, but that is obtained right through the console and then they can get rid of the disk). In short, I see the value of the disk itself dropping a bunch, which is bound to put a hurting on GameStop since that's where a lot of their revenue comes from.
I'd look to Sony. With the fury over the new Xbox "gaming console" (they keep using that word. I do not think it means what they think it means), I think many are going to switch over.
Just to be clear, these people are always wrong. Here is what they sent me on August 25, 2009Quote: Moneynews
Dear Moneynews Reader,
I recently interviewed my favorite stock picker . . . Bill Spetrino.
Bill’s model portfolio has captured 161% returns since 2009 and his readers have done great following his wisdom (one man even made $1.2 million listening to Bill’s advice).
But with the stock market hitting all-time highs, I wanted to see if Bill thought it was time to get out before the a sell-off wipes out our gains.
To my surprise, Bill said: “Buy more.”
In fact, he believes the stock market is poised to rally 399% (catapulting the Dow to 60,000!).
We can expect to market to crash. The question is when, not if.Quote: Moneynews, August 25, 2009
The U.S. dollar is going the way of the Mexican peso: down!
More than $10 trillion in government spending is triggering a sudden and massive devaluation.
The TARP chief told Congress the federal bailout will now total over $23 trillion! That would be over $70,000 per person.
But if you act fast, you can protect your life savings from 1970s-style mega-inflation . . . and you could DOUBLE your money . . .
I guess they think that if they predict everything will happen then they'll get something right.Quote: Moneynews
Wiedemer, best known for correctly predicting the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States during the “Great Recession”, provides disturbing evidence in the video interview for 50 percent unemployment, a 90 percent stock market crash, and 100 percent annual inflation . . . starting as soon as 2013.