Starting help for option trading

[sunshineh]

I have an Trading-Account (Margin-Account) at Interactive Brokers (IB) USA.
Here is what i want to do!


Now i want to do the following things:

1)For a FALLING Market > Selling Call-Option
2)For a FALLING Market > Buying Short-Option

3)For a RISING Market > Selling Put-Option
4)For a RISING Market > Buying Call-Option


Invest in these Markets:

a)S&P Mini
b)Dow
c)Dax
d)Oil
e)Gold


I need Help on the following Questions:

Q1) How much Margin do i need for each of these underlyings (a to e)? In which Cases (1 to 4) and with which underlyings do i have the biggest risk?

Q2) In which of these cases (1 to 4) is the price of such an Option - particularly affected - by a change of the volatility?

Q3) How can i calculate my Risk in all of these cases (1 to 4) and (a to e)? Could you give me an example for each?

Q4) Through which strategy can i reduce or minimize the risk?

Q5) What should I do, so that I may never get in the situation that i ruining my account? And that I never have to pay extra?

Q6) What would be the best way to Profit, if I have the Opinion that the "DOW JONES" goes down from now to about 6000 till the end of 2017.????

Q7) And how do i have to insert my ideas / trades into the "input mask" of IB?

Q8) What about the loss over time? I mean in case of buying a Put- or a Call-Option?
...how can I estimate these time-losses or schedule it? What is the best duration if I want a minimum Time-Loss (when i think my target will be reached in 6 months).

Q9) Do I need a data packages from IB for buying or selling Options?

Q10) Where can I get the Volatility and the Interest Rate for the option calculator from?

 

[sunshineh]

Sorry, perhaps I wrote to much questions for one thread.
Is anybody interessed in showing and explaining my a few questions f.e. over teamviewer - I will spend some money for that help...

My first account value is 10.000 USD.
On which underlyings can options with my account?
(S&P Mini,Dow, Dax, Oil, Gold)

 

[options-george]

Sorry, perhaps I wrote to much questions for one thread.
Is anybody interessed in showing and explaining my a few questions f.e. over teamviewer - I will spend some money for that help...

My first account value is 10.000 USD.
On which underlyings can options with my account?
(S&P Mini,Dow, Dax, Oil, Gold)

Hi Sunshineh, sorry to see that nobody has replied - yes you did ask quite a lot of questions!

I answered a few questions on beginner options questions recently (in the last two weeks - you can search for them by looking under my posts under my user profile). I also tried to point out that options trading is often more difficult to understand than originally anticipated.

I would suggest that you study your way through the option books by Natenberg and MacMillan (look on Amazon), and then come back with questions

Du bist uebrigens Deutsch?

 

[StewartC]

I have an Trading-Account (Margin-Account) at Interactive Brokers (IB) USA.
Here is what i want to do!

IB do a whole series of recorded and live webinars on the use of their platforms. You could join one of these and ask your questions. On your specific questions on instruments and margins, their live chat function is ok for these.

 

[zaysev36]

IB do a whole series of recorded and live webinars on the use of their platforms. You could join one of these and ask your questions. On your specific questions on instruments and margins, their live chat function is ok for these.

Any other sources for such stuff that are worth mentioning? Can't get access to those you've mentioned, maybe they are blocked in my country.

 

[StewartC]

If you have an account with them, you should be able their help function!

https://www.interactivebrokers.co.uk/en/index.php?f=14509#webinars

Here are soe of my bookmarked info sites:
http://www.optionseducation.org/en.html
http://www.investopedia.com/terms/o/option.asp

I will try to answer all your questions here - may take some time.

Question 1) How much Margin do i need for each of these underlyings (a to e)? In which Cases (1 to 4) and with which underlyings do i have the biggest risk?

IB have fairly dynamic margin calcs and it will depend on what you are holding besides the actual one you are looking at - for instance a covered call will have no additional margin if you have enough stock. On the platform, if you select the instrument you want and press Transmit, it will show you the margin required and impact on your cash and total margin. Don't press Ok unless you want to place an order!
Your "risk" will depend among other things on the instrument's current and future volatility. Gold is probably the most consistently slow moving of the ones you mentioned, but that could change any time.

 

[StewartC]

Q2) In which of these cases (1 to 4) is the price of such an Option - particularly affected - by a change of the volatility?

The VIX is the best-known volatility measure, on the the volatility of the S&P 500 index. There are similar VIX measures for other instruments, including gold, currencies and equities. You could look at these and compare with the options to get a view on the relative volatilities.

http://www.cboe.com/micro/vix/vixintro.aspx
http://www.cboe.com/micro/volatility/introduction.aspx

 

[StewartC]

Q3) How can i calculate my Risk in all of these cases (1 to 4) and (a to e)? Could you give me an example for each?

Absolute risk will be determined by lot size and stop loss. Risk of loss will depend on price action and volatility/change in volatility (gamma) and time decay (theta).

Q4) Through which strategy can i reduce or minimize the risk?

My view on some common stratgies:

Lowest risk
Sell covered calls on large cap stocks
Sell OTM naked puts on dividend-paying low-beta stocks

Medium risk
Credit spreads on ETFs
Debit spreads
Iron condors

Highest risk
Buying OTM puts on high-beta stocks
Buying short-dated OTM calls

 

[StewartC]

Q5) What should I do, so that I may never get in the situation that i ruining my account? And that I never have to pay extra?

From experience? Never ignore or move a mental stop loss. Keep excess margin, and if it gets low, top up or close some positions so that you don't get spiked out.

 

[StewartC]

Q6) What would be the best way to Profit, if I have the Opinion that the "DOW JONES" goes down from now to about 6000 till the end of 2017.????

Take a look at LEAPS on SPX. Maybe look at hedging with some shorter term calls to create a wide calendar spread and/or reduce cost.

http://www.cboe.com/products/leaps.aspx

 

[StewartC]

Q7) And how do i have to insert my ideas / trades into the "input mask" of IB?

Ask IB or watch their tutorials - there are hours of them:

https://www.interactivebrokers.co.uk/en/index.php?f=14509#videos

Us a VPN if you can't access from your country.

 

[StewartC]

Q8) What about the loss over time? I mean in case of buying a Put- or a Call-Option?
...how can I estimate these time-losses or schedule it? What is the best duration if I want a minimum Time-Loss (when i think my target will be reached in 6 months).


Extrinsic value of the option will decay to zero at expiry. So if you know the extrinsic value and the time to expiry you can estimate the rate of decay (theta). OTM options are all extrinsic and will decay at a steady but increasing rate, increasing significantly at about 45-60 days to expiry. ITM options will decay proportionately less. So to minimise time loss, you want to be out of the position with at least 60d still to run.

You need a graphical application to see this easily. The thinkorswim platform is one of the best to model these, IB is clunky, but there are apps that do it well.

 

[StewartC]

Q9) Do I need a data packages from IB for buying or selling Options?

IB pass through charges for real-time data, most 15-minute delayed data is free. If you are trading bog-standard options 6 months out, you will not need to pay for real-time data.

 

[StewartC]

Q10) Where can I get the Volatility and the Interest Rate for the option calculator from?

Implied volatility, while an input to the Black-Scholes pricing model, can actually be regarded as an output of the calculator, so the best source is to derive it from other option prices.

Input an IV for say an option and flex it until you get the option price, then change the strike to, say, 195, then you can see if that series is under- or over-priced relative to the first one.
Interest rate is normally the least significant factor in the model - use a constant.