I've been continuing my research into options strategies. Earnings season is here again, which always causes a spike in implied volatility. GRMN released it's earnings this morning. Yesterday, the implied volatility of at the money calls were in the 80s and 90s. Today, they are in the 60s. I suspect they will continue to fall for a couple more days.
Implied volatility is the free-market version of statistical volatility. SI indicates how much the underlying stock actually fluctuates, while VI indicates how much people expect it to move. What's this mean for options? Before major events, like earnings releases, IV spikes, as do options prices. Thus, much of the movement people expect is already priced into the option. In general, right before earnings is a bad time to buy options. However, if you own shares in the underlying stock, writing covered call options is very good, or if you have cash on hand, you can make a quick 2-4% by writing cash secured puts.
Anyway, in my research, I found a great site for finding highly volatile options: http://www.schaeffersresearch.com/streetools/filters/implied_vol_filter.aspx
Here, you can specify a minimum stock price, minimum open interest, and a % out of money maximum something that I don't understand. I don't know exactly what all the filters in the Power Tools tab do, this one included, but I like sorting by the 'Call Implied' column. Unfortunately, the filter is confused by recently split stocks, where a $10 stock with a $20 strike will trade at $2 (the $20 strike option was written before the split, and the options trading house hasn't fully updated everything), so it looks like the $20 strike is trading abnormally high, when in actuality, you can't really trade it. It will also show a lot of $5 stocks with a $7.50 strike trading at $0.10. This isn't a high enough price to make much money writing options, sadly. To avoid the latter problem, I like to specify a minimum stock price of $6. Higher priced stocks have closer strike prices.
Using the sorted 'Call Implied' column, though, I've found HYTM. I don't quite know what to make of it, yet, but it's a $6.50 stock with a $7.50 November 2007 call option price of about $0.70. That means people are willing to pay a 10% premium betting on a 15% move in one month. Admittedly, HYTM's earnings is on November 5, so I don't know what the long-term IV is like. This may be a stock only worth writing options against this one time. Also, Google Finance's stock page for HYTM shows a news story where the state of Washington kicked out HYTM's drug rehabilitation cocktail because it didn't work. Collecting a 10% premium isn't a good idea if the underlying company goes broke.
Either way, I went ahead and bought 1200 shares and wrote 12 call options for $6.45 and $0.65, respectively. After commissions, I made about 9.7%, which I will fully realize on November 17. Then I'll be able to see how much a regular month's option is worth. I may end up bailing out after that time. Or, I may get my shares called away at $7.50, giving me a total profit of ~25%, instead. I can live with that.
Updated at 3:00pm
HYTM announced a double blind study, so the stock price shot up to $7.30 (+0.85 over purchase price), and DXUKU (Nov $7.5 calls) are now at $1.10. So, I missed out on some options premium profit, but at this rate, it's looking like that 25% profit on November 17 will be happening. I can still live with that.
Showing posts with label commission. Show all posts
Showing posts with label commission. Show all posts
Wednesday, October 31, 2007
Thursday, April 26, 2007
Wire Transfers
I'm breathing a bit easier this evening, as Bank of America has informed me that I have a pending wire transfer. My funds should be available at least by Monday, and that's what matters. Incidentally, I have made about 3.87% since the beginning of the year on that money. In contrast, the money I have with Merrill Lynch has made about 6.41%. Both of these numbers are before advising fees. In contrast with both of those, I have a realized gain of 9.63% plus an unrealized gain of 1.02%, totaling a 7.55% gain in my E*TRADE account, not including excess cash that earns 5% per year. So, the account I closed would appear to be my poorest performing. A good decision.
And on Monday, I will officially buy a house. Hopefully also a good decision.
And on Monday, I will officially buy a house. Hopefully also a good decision.
Monday, April 23, 2007
AMD Options Assigned
As I discussed in an earlier post, I bought 300 shares of AMD at $13.00 each, and wrote 3 options contracts to sell at $14.00 with a $0.30 premium. Well, on Friday AMD closed at $14.16, which is more than $0.05 in the money (the most common automatic exercise threshold). Not surprisingly, then, my contracts were assigned.
So, I automatically sold 300 shares of AMD at $14.00 with a $20.06 commission. I'm not sure how the commission is computed, honestly. But, I made $300 - $20.06 in the sale, plus $90 - $15.24, minus the original purchase commission of $12.99. All together this is a profit of $341.77, which is an 8.76% profit on my initial $3900 investment under a month ago. Not too bad.
Even better, I really do think AMD will go down in price again, and I don't think I would have sold my shares otherwise. So, I'm locking in some profit that would otherwise have been likely to disappear in the near future. This is a short term capital gain, however. Also, I'm more impressed with the rate of return than the actual dollar value of the profit. Still, $350 is most of a washing machine.
So, I automatically sold 300 shares of AMD at $14.00 with a $20.06 commission. I'm not sure how the commission is computed, honestly. But, I made $300 - $20.06 in the sale, plus $90 - $15.24, minus the original purchase commission of $12.99. All together this is a profit of $341.77, which is an 8.76% profit on my initial $3900 investment under a month ago. Not too bad.
Even better, I really do think AMD will go down in price again, and I don't think I would have sold my shares otherwise. So, I'm locking in some profit that would otherwise have been likely to disappear in the near future. This is a short term capital gain, however. Also, I'm more impressed with the rate of return than the actual dollar value of the profit. Still, $350 is most of a washing machine.
Tuesday, April 10, 2007
AMD and Call Options
Today, AMD spiked up as high as 13.61, from a previous close of 12.86. This spike prompted me to go ahead and write 3 April $14.00 call options. Since no one else knows what I'm talking about, I'll explain a bit. A call option allows the holder to buy shares of a stock at a given price (the strike price). Option contracts are typically for 100 shares. The writer of a call option owns these 100 shares, but promises to sell them whenever the option holder asks for them. For this right to buy stock at a set price, the option holder pays the option writer a premium (quoted per share).
A little while ago I bought 300 shares of AMD at $13.00. Thus, I can cover 3 contracts worth of call options. That is precisely what I did. April's expiration date is the 21st. This means I sold the option to buy 300 shares of AMD at $14.00 at any time before the 21st of April. Someone paid me $0.30 per share for this honor. So, I made $90 today, minus $15.24 of commission ($12.99 + $0.75/contract). So, $74.76 in profit. Since I paid $3912.99 (including commission again), I made 74.76/3912.99 = 1.91%. This is also immediately available cash - not just a paper gain.
When these options expire, I will either have sold my shares of AMD for a 7.7% profit (in about 3 weeks), or I will have the shares and be able to write more call options for May. I see the latter as far more likely. AMD got a boost today by saying they won't lose as much money as everyone feared, and that they'll be restructuring the company to cut costs. I don't see this as a lasting price increase, yet. This month is a risky month for options writers, though. AMD releases their 1Q results on the 17th. If they did better than people expected, the price could spike, and I may have to sell. Still, 7.7% (plus the 1.9% made today!) is very acceptable.
A little while ago I bought 300 shares of AMD at $13.00. Thus, I can cover 3 contracts worth of call options. That is precisely what I did. April's expiration date is the 21st. This means I sold the option to buy 300 shares of AMD at $14.00 at any time before the 21st of April. Someone paid me $0.30 per share for this honor. So, I made $90 today, minus $15.24 of commission ($12.99 + $0.75/contract). So, $74.76 in profit. Since I paid $3912.99 (including commission again), I made 74.76/3912.99 = 1.91%. This is also immediately available cash - not just a paper gain.
When these options expire, I will either have sold my shares of AMD for a 7.7% profit (in about 3 weeks), or I will have the shares and be able to write more call options for May. I see the latter as far more likely. AMD got a boost today by saying they won't lose as much money as everyone feared, and that they'll be restructuring the company to cut costs. I don't see this as a lasting price increase, yet. This month is a risky month for options writers, though. AMD releases their 1Q results on the 17th. If they did better than people expected, the price could spike, and I may have to sell. Still, 7.7% (plus the 1.9% made today!) is very acceptable.
Sunday, April 8, 2007
Made an Offer
Last Sunday, I went to open houses, as usual. I found [1386311 - 20981 W 116th St - $310,000], which has an amazing backyard. It's got a two-story deck with a screened in sun room (which they filled with a hot tub that wouldn't stay). The yard continued on into a park with sand volleyball, community pool, and a basketball court and playground. The location is fairly ideal, and it's got a lot of cool things about it. My mom found the kitchen to be a bit small, and I found the basement to be a bit smaller than I'd like.
We also found [1376482 - 14557 S Greenwood St - $289,000], which was better than [1375753 - 14116 W 53rd Tr - $288,500] from last time, and in a better location. I still wasn't in love with it for any reason, but it had a decent yard, and was surrounded by nicer houses (which can help resale, apparently).
On Friday, JD and I went to 7 houses, including [1385690 - 15969 Clairborne St - $299,950]. It's a very open house, has a large basement (in two main sections), and large bedrooms. While walking through it, I kept asking, "Where are the negatives?" The only two we could find were the small backyard and the tandem garage. But, the backyard doesn't have a fence to the right, so it opens into the neighbor's yard, which is nice for now. A three-car garage would help while having roommates, but it's not necessary, really. If you go look at the listing for this house, don't worry about the two bedrooms in the basement - they're actually on the top floor with the rest.
Yesterday (Saturday), JD, Carrie, my brother Brian and his girlfriend Aimee, and my parents all joined me in visiting these top three houses. We saw them in reverse order. Everyone liked the Clairborne house and found the Greenwood house lacking. As much as we liked the 116th St house a week ago, it just didn't compare to the Clairborne house. It's considerably smaller, a bit more expensive, and more cut up into actual rooms, instead of areas. The greenspace was the main selling feature, we felt. But, you can't add openness to a house, or much size. For the price difference, I could add a pretty nice deck to the Clairborne house, if I really wanted to. The basement wasn't as nicely finished in the Clairborne house, but it was much bigger, should I ever want to upgrade it.
So, I went back to my parents' house and watched some tennis until JD showed up with some paperwork. He talked about how the comparable houses in the neighborhood have been selling for more, often, and how the subdivision is ending its new construction, which means houses in the area should start to appreciate more. Basically, that this appears to be a pretty good deal. So, we drafted up the paperwork and I signed an offer for $280,000. This includes a home warranty, but little else. Being vacant, there is no washer, dryer, or refrigerator to negotiate over. Once we agree on a price, we can add in closing costs so I can finance those as well. The owners bought the house for $265,000, though, so at $280,000, minus 6% in agent commissions, they'd only be taking in $263,000. The $299,950 asking price is after coming down from about $330,000, so I'm not sure how much lower they can go. We'll find out, though!
I'm pretty excited about the house. It's over 4200 finished square feet for under $300,000. It's located right around 159th and Ridgeview, so it's close to at least one friend from work. The basement has a little exercise room or den, which would be perfect for our LEGO room. At 151st and Ridgeview is Garmin, so it's possible my brother can keep me with a supply of roommates. So, my brother can come over and play ping pong or darts after work, and it's got fairly ready access to I-35.
So, probably a $290,000 house, $230,000 in debt, an extra little bit in monthly income, and lots of maintenance. But, I'll have a house of my own, and I'm pretty happy about that.
We also found [1376482 - 14557 S Greenwood St - $289,000], which was better than [1375753 - 14116 W 53rd Tr - $288,500] from last time, and in a better location. I still wasn't in love with it for any reason, but it had a decent yard, and was surrounded by nicer houses (which can help resale, apparently).
On Friday, JD and I went to 7 houses, including [1385690 - 15969 Clairborne St - $299,950]. It's a very open house, has a large basement (in two main sections), and large bedrooms. While walking through it, I kept asking, "Where are the negatives?" The only two we could find were the small backyard and the tandem garage. But, the backyard doesn't have a fence to the right, so it opens into the neighbor's yard, which is nice for now. A three-car garage would help while having roommates, but it's not necessary, really. If you go look at the listing for this house, don't worry about the two bedrooms in the basement - they're actually on the top floor with the rest.
Yesterday (Saturday), JD, Carrie, my brother Brian and his girlfriend Aimee, and my parents all joined me in visiting these top three houses. We saw them in reverse order. Everyone liked the Clairborne house and found the Greenwood house lacking. As much as we liked the 116th St house a week ago, it just didn't compare to the Clairborne house. It's considerably smaller, a bit more expensive, and more cut up into actual rooms, instead of areas. The greenspace was the main selling feature, we felt. But, you can't add openness to a house, or much size. For the price difference, I could add a pretty nice deck to the Clairborne house, if I really wanted to. The basement wasn't as nicely finished in the Clairborne house, but it was much bigger, should I ever want to upgrade it.
So, I went back to my parents' house and watched some tennis until JD showed up with some paperwork. He talked about how the comparable houses in the neighborhood have been selling for more, often, and how the subdivision is ending its new construction, which means houses in the area should start to appreciate more. Basically, that this appears to be a pretty good deal. So, we drafted up the paperwork and I signed an offer for $280,000. This includes a home warranty, but little else. Being vacant, there is no washer, dryer, or refrigerator to negotiate over. Once we agree on a price, we can add in closing costs so I can finance those as well. The owners bought the house for $265,000, though, so at $280,000, minus 6% in agent commissions, they'd only be taking in $263,000. The $299,950 asking price is after coming down from about $330,000, so I'm not sure how much lower they can go. We'll find out, though!
I'm pretty excited about the house. It's over 4200 finished square feet for under $300,000. It's located right around 159th and Ridgeview, so it's close to at least one friend from work. The basement has a little exercise room or den, which would be perfect for our LEGO room. At 151st and Ridgeview is Garmin, so it's possible my brother can keep me with a supply of roommates. So, my brother can come over and play ping pong or darts after work, and it's got fairly ready access to I-35.
So, probably a $290,000 house, $230,000 in debt, an extra little bit in monthly income, and lots of maintenance. But, I'll have a house of my own, and I'm pretty happy about that.
Sunday, March 25, 2007
House Hunting
I was house sitting last week at my parents' house. This means I need to update everyone on both last week's and this week's housing search.
Well, last week, I went out with my agent, Carrie, and my mother.
We found [1385397 - 5347 Gleason Rd - $307,000], which I really liked. I even had a feeling of wanting to make an offer. It has a pretty good basement, which makes up for the deck taking up most of the backyard. It's a bit west, and a bit north, but the location is manageable. Overall, I think it was my favorite.
My mom and JD liked [1375753 - 14116 W 53rd Tr - $288,500] the best. It was the end of the day, though, so Carrie and I weren't terribly thrilled. It seemed like just another nice house. The backyard is also small, and the basement is finished, but not all that homey.
On the value side, we found [1360857 - 5703 Noland Rd - $249,900]. It was built in 1987, but had the feel of a 1970s house. There was a tiny bit of wood rot in the back of the house, only had a 2-car garage and only 2 full baths. But, it was still a lot of house for $250,000. The master bedroom suite was simply amazing, but not always in a good way. It was a bit gaudy.
Sunday's open house search yielded [1382477 - 9930 W 128 Tr - $299,900]. This had a very nice first floor, an amazing basement (though not suited for ping pong), and decent size rooms. The main drawback is the cut up basement and the single shared bathroom for three bedrooms on the top floor.
This Saturday, JD, Carrie and I went back out to a few houses. Revisiting [1385397 - 5347 Gleason Rd - $307,000], I noticed some layout issues. When you walk in the front door, you see quite a few different stairs and not much of any given room. The bedrooms on the top floor are slightly weird shaped and aren't always practical when positioning a bed, desk, and TV.
When we went back to [1375753 - 14116 W 53rd Tr - $288,500], the basement looked more usable, the kitchen looked nicer, and the great room seemed more pleasant. The backyard seemed a bit more usable, but still not big enough for volleyball. Overall, though, it has started to beat out the Gleason house. I just wish it weren't so far north.
We also went back to [1382477 - 9930 W 128 Tr - $299,900], which was still nice, but not as good as the 53rd Tr house, so I've eliminated it. [1360857 - 5703 Noland Rd - $249,900] has changed to backup offers status, so that's out, too. [1356306 - 8136 Lingle Ln - $289,950] from a few weeks ago has also changed to backup offers status. I'm not terribly upset by either of these, though. The California front/back split ([1358668 - 7901 W 155th Pl - $294,500]) is still listed as active, but that was for sale by owner, so it may take a bit of time for that to update. Besides, it only had 3 bedrooms on the top floor, which could hurt resale.
Today, I couldn't find any promising houses online to tour. So, I drove around randomly looking for open house signs. It was kind of fun, but not all that productive, so we quickly lost interest. Everyone else liked a for sale by owner house for $339,950, but the basement wasn't great, in my opinion, and the for sale by owner part means I would need to pay JD's commission. The location was better than the 53rd Tr house, but the house wasn't nearly $50k better.
I've told my agent to show me some more houses in the Lenexa area, so I'm closer to coworkers, family, and social functions. We are going out again on Tuesday. I will then do another tour on Saturday. If I'm up for it, I will then do another open house search on Sunday. I then plan on making an offer during the week on my favorite house. I'm ready for this hunt to be over.
Well, last week, I went out with my agent, Carrie, and my mother.
We found [1385397 - 5347 Gleason Rd - $307,000], which I really liked. I even had a feeling of wanting to make an offer. It has a pretty good basement, which makes up for the deck taking up most of the backyard. It's a bit west, and a bit north, but the location is manageable. Overall, I think it was my favorite.
My mom and JD liked [1375753 - 14116 W 53rd Tr - $288,500] the best. It was the end of the day, though, so Carrie and I weren't terribly thrilled. It seemed like just another nice house. The backyard is also small, and the basement is finished, but not all that homey.
On the value side, we found [1360857 - 5703 Noland Rd - $249,900]. It was built in 1987, but had the feel of a 1970s house. There was a tiny bit of wood rot in the back of the house, only had a 2-car garage and only 2 full baths. But, it was still a lot of house for $250,000. The master bedroom suite was simply amazing, but not always in a good way. It was a bit gaudy.
Sunday's open house search yielded [1382477 - 9930 W 128 Tr - $299,900]. This had a very nice first floor, an amazing basement (though not suited for ping pong), and decent size rooms. The main drawback is the cut up basement and the single shared bathroom for three bedrooms on the top floor.
This Saturday, JD, Carrie and I went back out to a few houses. Revisiting [1385397 - 5347 Gleason Rd - $307,000], I noticed some layout issues. When you walk in the front door, you see quite a few different stairs and not much of any given room. The bedrooms on the top floor are slightly weird shaped and aren't always practical when positioning a bed, desk, and TV.
When we went back to [1375753 - 14116 W 53rd Tr - $288,500], the basement looked more usable, the kitchen looked nicer, and the great room seemed more pleasant. The backyard seemed a bit more usable, but still not big enough for volleyball. Overall, though, it has started to beat out the Gleason house. I just wish it weren't so far north.
We also went back to [1382477 - 9930 W 128 Tr - $299,900], which was still nice, but not as good as the 53rd Tr house, so I've eliminated it. [1360857 - 5703 Noland Rd - $249,900] has changed to backup offers status, so that's out, too. [1356306 - 8136 Lingle Ln - $289,950] from a few weeks ago has also changed to backup offers status. I'm not terribly upset by either of these, though. The California front/back split ([1358668 - 7901 W 155th Pl - $294,500]) is still listed as active, but that was for sale by owner, so it may take a bit of time for that to update. Besides, it only had 3 bedrooms on the top floor, which could hurt resale.
Today, I couldn't find any promising houses online to tour. So, I drove around randomly looking for open house signs. It was kind of fun, but not all that productive, so we quickly lost interest. Everyone else liked a for sale by owner house for $339,950, but the basement wasn't great, in my opinion, and the for sale by owner part means I would need to pay JD's commission. The location was better than the 53rd Tr house, but the house wasn't nearly $50k better.
I've told my agent to show me some more houses in the Lenexa area, so I'm closer to coworkers, family, and social functions. We are going out again on Tuesday. I will then do another tour on Saturday. If I'm up for it, I will then do another open house search on Sunday. I then plan on making an offer during the week on my favorite house. I'm ready for this hunt to be over.
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