Stock option trades

[Rhody Trader]

I'm starting this thread to document my own trading in stock options and open a discussion of stock option selection methods and trading techniques.

I use a modified version of CANSLIM to select the underlying stocks from which to chose options. Primarily, this is a long-only method, which means it can go through some quiet periods when stocks aren't performing well. The gains, though, can be quite spectacular, especially when compared to just trading the stock.

Right now I've got positions in the March STX 25, March GFIG 55, and May BR 90 calls.

Actually, in the case of STX, I originally got in to the March 22.50s at $0.80 when the stock was around 21.50. Today, though, I rolled my strike up to the 25s. That's one of the things I really like about trading options over stocks. I sold my 22.50s for 2.60 and got in to the 25s at 1.40. That took 1.20 off the table, cutting my net exposure nearly in half, but left my upside the same.

 

[Rhody Trader]

STX call update

STX reported better than expected earnings yesterday after the close. The stock jumped more than $2 on the open this morning. The March 25 calls I rolled up in to from the 22.50s move up to about $2.30. I might be rolling up again soon!

It'll be interesting to see how far this goes. An analyst came out with a $32 target this morning. There isn't any real resistance between current prices and the Oct. 2003 peak at $31.35.

 

[Rhody Trader]

Bought EOG calls

Today I bought the April 85 calls on EOG at 6.20. The stock is breaking above the December peak in fairly strong fashion with the overall market also moving positively. My initial target for EOG is somewhere in the 90-95 area. The option is a bit pricier than I'd like. This one may only have the potential to double.

 

[garethb]

Stx

Just found this thread this morning - thanks for posting.

It will be interesting to see how STX calls fair over the next few days. At risk of being accused of a hindsight call, I might have been tempted to sell them on the gap yesterday morning, not because the stock price might not continue up but because there was probably a big spike in IV on calls as well as the jump in stock price. There is a risk of a few days consolidation in underlying price and this with the probable fall off in IV and time decay may mean that a fairly big additional move up in the stock is required to match the price that might have been had yesterday morning.

Having said that I do usually close trades too early (except when I hold them while they fall and jump off at breakeven) so you're probably right - certainly if the stock is at 30ish in March you'll be laughing.

Thanks again for posting actual trades

Gareth

 

[Rhody Trader]

Believe me, I had the very same thought. Sell on the news. The stock (and options) did trickle off as the day went on.

Gotta stick with the system, though! It's hard to argue with something that made me 200% in 2004 and probably would have made me a decent return last year too had I not spent most of the year writing a book rather than trading.

 

[Rhody Trader]

Bought SWN March 45 Calls and CRDN March 55 Calls this morning. Both stocks are coming out of basing patterns.

 

[danielharris]

Awesome great discussion about stock trades.