Progress on “Holy Grail” Thing-y

Posted by Oskar Syahbana
10/23/2006

Since my last semi-hiatus post on searching for the holy grail, I’ve made some progress on fiddling with how options work. Not much but not small and I’ve decided to work on the following things:

Covered Call Strategy. I know that my background is fundamental analysis and it will take a great deal of time before I trully confident on trading using technical analysis. So this strategy should actually worked great on my favor. I get the chance to pick the stocks based on my fundamental analysis and basic charting for entry points and while at it, I gain additional income from writing call options (or put options, depends on what is my short-term view of this stock). Of course this is very risky if the market somehow reversed with a big gap, I will loose in both positions (if I entered a writing put position, but it’s somewhat hedged if I’m writing call options).
Four-legged strategy. Confused of what it means? I’ll explain it later on future post, but for now, it’s a strategy that Juan has developed over several years. I’m still digging through the details on how to react based on the options greek on this strategy under the supervision of Juan (you can say that he’s my mentor on this particular strategy). All I can say that this position is capital intensive (because you have to enter four position to execute this strategy) and also fundamental-analysis friendly.
The Options Greek. This whole time I always thought that when the stock price is going up, the options price will follow no matter what (and no matter how small it is). But I was wrong. There’s a lot of things that can affect the options price, which is usually referred to as the Greeks. You know, Gamma, Vega, Theta, Rho, such thing. I need to dig deeper onto this. McMillan does offered some materials on this but not by many so I have to look else where.
Indonesia Stock Market. I have neglected my only source of income lately, mostly because that I’m heavily on position and got no more cash to spare. No matter, I’ve spotted a very strong move for ANTM and PGAS and I believe that the stock will jump at least 50% by the end of the year and February 2007 respectively. That’s a big jump jose!