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Friday, August 21, 2009

Options Trading

A couple of weeks ago I mentioned that I had started using the simulator to simulate options trading, since I do not have a real options account and wanted to follow the options market. The first couple of days I bought one call and two puts just to watch them. The call went positive, so I sold it at a small profit (not counting commissions).

The puts I bought (top two) never went anywhere and are going to expire worthless. Since then I bought some more puts, this time with the idea of trying to make a profit from them. The SPY puts were sold Monday when they went profitable, the BAC puts never went anywhere and are going to expire. Yesterday I bought September XLF puts,, which did well after I bought them yesterday, then got killed this morning. One thing I am learning about options is that being right about both direction and timing is much more critical that it is with buying stocks, as these things make huge percentage moves in a very short time. Ah, the magic of massive leverage.

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