CategoryRisk Management

Using options to compound $2,800 into $16,767 while managing absolute risk: Lumber Liquidators (LL)

By Todd Gill
In Risk Management, Trades
7 Min read
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In 2016, I read a new story that I thought would make a great trade idea. It seems that Lumber Liquidators had been publicly smeared by the mainstream program 60 Minutes. They claimed that Lumber Liquidators had distributed “cancer-causing” (!) floor materials. The stock was trading around $14, down from a high of around $120 two years prior. The State of California was setting its sights on the...

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DITM options are NOT the same thing as owning stock – Part 1

By Todd Gill
In Risk Management
2 Min read
D

I keep hearing from people that “DITM options are the same as stock”.  While this statement is true with respect to the two parameters of “extrinsic value” and “delta”, DITM options have an incredibly different risk profile than stock and can be extremely useful tools.  In this post, I’ll demonstrate this.  Or rather, I’ll show you how you how you can prove this for yourself. Make a spreadsheet...

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Trading at-expiration options on 30-year bond futures (/ZB)

By Todd Gill
In Risk Management, Trades
1 Min read
T

All, I wanted to post an example of how I like to trade futures options.  I like to be long gamma, near expiration, where a relatively small move in the underlying instrument translates to big moves in the options price.  Note that here I closed out the positions where there was nothing but time premium left.  Returns for each trade were 400% win, 1,000% win and a 100% loss (with a small portion...

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