Category: Option Trading

Blowing out of SLV to buy BOOM

The Marine Engineer needed training doing trades in Ameritrade so I fell on the sword and blew out of SLV in real time to buy an option trading strategy.  The greatest part of Ameritrade I have discovered to date is the feature that if you click on Trade in Options Screens it will prepopulate the trade ticket.

So we looked for our previous strategy ECA in the CFRA five star option screens and it was gone.  Well if it isn’t currently recommended by a paid trading service, there is no way I am going to touch it.  We looked for a cheap trade but found none.  So we went ghetto and looked at the CFRA four star list in option screens.  We found Boom.

I sold my SLV at market (who knows the price) and gambled that the system would recognize I had cash funds to trade (no margin in IRA) and it worked.  Bought 100 shares at market and sold the April 16 2018 Call at 12.5.  I believe I received $180 for the call which reduced the cost of owning Boom (trading at 12.95) to 11.5 approximately.

The Marine Engineer was persuaded to make the same trade in good faith.

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Getting Paid to Buy ECA (Cash Covered Put)

Ok we want to buy ECA because it is cheap and recommended as an option strategy (covered call) on CFRA 5 Stars in Ameritrade.

We can buy it at market, put in a limit order to buy at specific price, or sell a put for income.  Since we have the cash on hand to cover buying the stock if exercised, we are allowed to sell the put for income and strategy.

In simple terms we can get paid $100 per contract to agree to buy the stock at 10.

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Bargain Option Trading Found

Frustrated with my inability to trade unless having $3400 to buy CLR,  I left the recommendations of S&P Capital IQ and investigated the recommendations of other services.  I found cheaper option trades!

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I choose CFRA 5 Starts and found option strategies on stocks as cheap as $8 a share.  If I blow out of SLV I can trade two covered contracts at a time.  Here is an example: ECA

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I am going to wake up the Marine Engineer up next door and tell him this is what we are doing.  I told him I would lead by example.

Some more information on ECA:

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Here is the specific Option Trade Recommended:  Sell this Call after buying the stock.

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CLR (Continental Resources Inc.) To The Rescue!!!

The Marine Engineer in the next room is ready to trade.  Flush with cash and a quick study in options (he is an engineer), he is ready to engage in covered calls.

So we logged into Ameritrade and went to the Research Tab and located Options Screener.

We selected S&P Capital IQ Top 10 List and found the cheapest trade: CLR

The advisory service recommends buying CLR and selling the October 20, 2017 32.00 Call.
Breakeven is 30.50.
We discussed using a put or rolling the call (covered call) to preserve profits or limit losses.

I can’t make the trade till I pull a few more containers out of the Los Angeles rail yard.
I will stay with the cheapest trade and milk it for cash till it falls off the list.
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SLV Call Premiums Are A Yawn

So logged onto Ameritrade to follow up with action after seeing a trade on StockOptionsChannel.Com and found the premiums not reflecting the strategy likely due to market action.  Seems better to hold onto SLV and sell it after adding new money for a better recommended trade.

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Upon a closer look the strategies posted on StockOptionsChannel.Com was correct in reporting the premiums found in Ameritrade.  I misread the price of the premiums.  However the returns on these strategies are so underwhelming I will do something else and not give away the stock for nothing.  The lesson here is don’t but stock without a viable option strategy.

Hardly Seems Worth It

Checked out StockOptionsChannel.Com for a strategy with my boring long 100 shares of SLV.  Selling 16.50 call that expires in 2 days will generate a 11% annual return.  I not sure if the premium income covers the cost of the trade.

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However if I sell the 16 call I will get $87 and have a 60% chance of getting rid of this junk.  Then I can move on to something better.