Motley Fool Options Whiz Live Chat I
1:57
Danny Hsia (TMFTerp): 
Hi Fools! Danny Hsia, Motley Fool Options Publisher, here. The guys will be here soon and we'll get started in a few minutes!
Wednesday August 8, 2012 1:57 Danny Hsia (TMFTerp)
2:00
Danny Hsia (TMFTerp): 
Welcome to today's live chat with Motley Fool Options' Jeff Fischer and the Motley Fool Options team! We're excited to have you here -- and answer any of your questions about the Options Whiz today. But first, a few reminders:
Wednesday August 8, 2012 2:00 Danny Hsia (TMFTerp)
2:00
Danny Hsia (TMFTerp): 
1. This chat is text only (no sound/audio)
2. There is no need to resubmit your question. Once you hit submit it goes into a queue that we will work our way through.
3. We cannot give personalized investing advice.
4. Please remember to scroll up. Once the chat gets going, it really gets going -- and things move fast.
5. If you have to leave early or would like to read the chat transcript, it will be available on this page shortly after the chat ends. Simply click the play button in this frame.
6. Have fun!
Wednesday August 8, 2012 2:00 Danny Hsia (TMFTerp)
2:01
Bryan (TMF42): 
Hey all! Welcome! I look forward to answering as many questions as possible, so keep them coming.
Wednesday August 8, 2012 2:01 Bryan (TMF42)
2:01
[Comment From EarlEarl: ] 
Will we be able to save the dialog after the session in complete?
Wednesday August 8, 2012 2:01 Earl
2:01
Danny (TMFTerp): 
@ Earl: A full transcript of the chat will be available here shortly after the chat is done, so feel free to come back to check it out.
Wednesday August 8, 2012 2:01 Danny (TMFTerp)
2:02
Jeff (TMFFischer): 
Greetings, Fools! Thank you for joining us! We're going to start answering your questions now...
Wednesday August 8, 2012 2:02 Jeff (TMFFischer)
2:03
Nick (TMFCrow): 
Future Options Fools, welcome to our live chat! I’m excited to answer your questions. All questions go into queue and we’ll answer them as quickly as we can. There are already several questions so let's get to it.
Wednesday August 8, 2012 2:03 Nick (TMFCrow)
2:04
[Comment From James R. ORearJames R. ORear: ] 
How do you judge the time frame for either selling covered calls or selling puts?
Wednesday August 8, 2012 2:04 James R. ORear
2:04
Bryan (TMF42): 
@James R. ORear:

We only use options when we have what we believe to be a well-informed opinion on the underlying stock. Our opinion on the underlying stock and possible catalysts helps guide that time-frame decision. We never speculate on earnings reports for any given quarter, we try and make a longer-term judgment and use options to highlight that view.

In general, when we buy options we look far out so our thesis has time to play out. When we sell options, we look a bit shorter because the time value per day tends to be more attractive.
Wednesday August 8, 2012 2:04 Bryan (TMF42)
2:04
[Comment From SittingduckSittingduck: ] 
How much does it cost to hire "the Motley Fool Options" experts to help me with my trades?
Wednesday August 8, 2012 2:04 Sittingduck
2:04
Danny (TMFTerp): 
@Sittingduck: We're still working out the final numbers on what we think will be the best value for joining the Motley Fool Options service. As soon as we have finalized that info you'll receive information about it!
Wednesday August 8, 2012 2:04 Danny (TMFTerp)
2:05
[Comment From MarcMarc: ] 
Can you recommend a good beginners book for us to learn the terminology and basics to intermediate jargon?
Wednesday August 8, 2012 2:05 Marc
2:05
Jeff (TMFFischer): 
@Marc: Honestly, our Options U. service, which is part of Motley Fool Options, and part of which you're seeing in the Options Whiz site, is the best place for beginners to start and learn that I know of. It offers all of the lessons you need in chronological order, and also has discussion boards to ask your questions. A book can't compare. That said, "Options As A Strategic Investment" is the bible of options investing that is also approachable for beginners. It's by Lawrence McMillan.
Wednesday August 8, 2012 2:05 Jeff (TMFFischer)
2:05
[Comment From john schwartzjohn schwartz: ] 
no questions; just listening.
Wednesday August 8, 2012 2:05 john schwartz
2:05
Jeff (TMFFischer): 
Welcome!
Wednesday August 8, 2012 2:05 Jeff (TMFFischer)
2:06
[Comment From Ken TaubenfeldKen Taubenfeld: ] 
Do you need enough money in your option account to cover calls you write, or are there any rules that limit the amount of your call?
Wednesday August 8, 2012 2:06 Ken Taubenfeld
2:06
Nick (TMFCrow): 
Ken,

If you're writing naked calls --a strategy we don't suggest for most investors-- there are margin requirements because you're exposed to unlimited potential losses if the underlying stock goes up. We only recommend writing calls as part of a covered call or spread strategy where your max loss is capped and a rising stock will usually earn you max profits and not a loss. We can teach you how!
Wednesday August 8, 2012 2:06 Nick (TMFCrow)
2:07
[Comment From ED SED S: ] 
How much money should you put at risk when you for starting out?
Wednesday August 8, 2012 2:07 ED S
2:07
Jeff (TMFFischer): 
@ED S: Options work with stocks. People who try to separate the two are not using them correctly, in our opinion. Options should be used in your stock portfolio to hedge, get better buy prices or better sell prices, leverage results, earn income... but all of it alongside a stock portfolio. So, the two work together, complementing each other. In other words, how much you'll invest in options is dependent on how much you have in a stock portfolio. Options may grow to become a portion of that.
Wednesday August 8, 2012 2:07 Jeff (TMFFischer)
2:07
[Comment From IggybiggyIggybiggy: ] 
just learning as well - carry on please
Wednesday August 8, 2012 2:07 Iggybiggy
2:08
[Comment From ScotScot: ] 
How can you determine a fair time value for an option?
Wednesday August 8, 2012 2:08 Scot
2:08
Bryan (TMF42): 
@Scot:

The options markets are highly liquid and are generally very efficient. We don't spend much time using Black Scholes or other option pricing models to ferret out minor discrepancies. We look to understand the underlying stock and look for mispricings there -- or if the stock is fairly valued, we match a neutral options strategy to the stock.

If you are looking to simply calculate the value of an option there are numerous B-S options pricing models available for free on the web and you can compare the theoretical price to the market price. We don't spend much time on this though, commissions will likely eat up any discrepancies you find.

When we're comparing different options choices on the same underlying we do look at the time value per day and try to maximize that way.
Wednesday August 8, 2012 2:08 Bryan (TMF42)
2:09
[Comment From johnjohn: ] 
any suggestions on trading platforms (inexpensive)
Wednesday August 8, 2012 2:09 john
2:09
Jeff (TMFFischer): 
@John: We just use our broker to track our positions, personally. We're investing with options and stocks, so most brokers will do. I like TD Ameritrade. We're not active traders; we use options strategically in a stock portfolio. Motley Fool Options offers several options ideas every month, for income, greater returns, etc, and you can fit your favorites into your portfolio.
Wednesday August 8, 2012 2:09 Jeff (TMFFischer)
2:10
[Comment From GeorgeGeorge: ] 
How can you best choose stocks to use for options, puts, calls, the whole works and how does the cost of the transactions figure in the cost of the whole thing?
Wednesday August 8, 2012 2:10 George
2:10
Nick (TMFCrow): 
George,

Great question, but the answer is outside the scope of a short post. Suffice to say we've spent years understanding many businesses and we overlay our option strategy to better express our thesis for the stock. Business analysis is our edge! It improves our accuracy and overall profits, too.
Wednesday August 8, 2012 2:10 Nick (TMFCrow)
2:10
[Comment From jeffjeff: ] 
would y'all analyze my latest options purchase and tell me how bad it was?
Wednesday August 8, 2012 2:10 jeff
2:10
Bryan (TMF42): 
@Jeff:

We have to be careful about giving personal advice -- we need to speak more in generalities.

However, it's hard to analyze your options purchase without knowing your view on the underlying. If your options purchase matches your thesis on the underlying, and you understood the potential return and risk, your purchase probably wasn't that bad.

However, if you don't have the basics of options down pat, your purchase was probably a speculation and not an investment. Options can be used (for good!) as a speculating instrument, but they should be a part of a broader portfolio attached to a bigger financial plan.
Wednesday August 8, 2012 2:10 Bryan (TMF42)
2:10
[Comment From GuestGuest: ] 
Do you know of any tool or method to track profits on options. I find it difficult to track my performance
Wednesday August 8, 2012 2:10 Guest
2:10
Jeff (TMFFischer): 
@Guest: I like to avoid extra data input, so I use the gain/loss section of my broker, personally. It's all on a cash and % basis, but with options, you're usually just trying to make cash. You shouldn't compare options to an index benchmark, in my opinion. Different tool for different purposes.
Wednesday August 8, 2012 2:10 Jeff (TMFFischer)
2:12
Bryan (TMF42): 
@David:

Options are leveraged instruments -- you control more of the underlying than is represented by the value of the options on your statement.

We commonly have members starting with as little as $10,000, but it is hard to maintain adequate diversification -- you have to be very careful. A much more comfortable starting amount is $25,000.
Wednesday August 8, 2012 2:12 Bryan (TMF42)
2:12
[Comment From DavidDavid: ] 
What is the minimum amount of money you'd recommend using in investing with options?
Wednesday August 8, 2012 2:12 David
2:12
[Comment From jagewonjagewon: ] 
Please talk about using options as a retiree to generate additional income without a large amount of risk. How much of one's portfolio should be used for such options?
Wednesday August 8, 2012 2:12 jagewon
2:12
Jeff (TMFFischer): 
@jagewon: This is a sweet spot for options. As I answered earlier, options complement your stock portfolio, and however much of them you want to use, you can. There are retirement portfolios that are 100% devoted to covered calls. You buy stocks, and write covered calls on all of them. That's less risk than just owning stocks, and provides regular income. You could also just have a portfolio of put-writing until you get shares. But most people will have a good portion of the portfolio in stocks with upside, and maybe 20% - 30% of their positions having some option attached. But it's all about your goals. There's no limit or minimum.
Wednesday August 8, 2012 2:12 Jeff (TMFFischer)
2:13
Danny (TMFTerp): 
@brad and hockeyman2000: the Options service will be re-opening on Tues, Aug 21. Keep an eye on your inbox for all the relevant info!
Wednesday August 8, 2012 2:13 Danny (TMFTerp)
2:13
[Comment From bradbrad: ] 
Sorry if I missed this question already but when does this service open again? Somehow I wasn't able to renew last year and have been on the sidelines since my Pro expired.
Wednesday August 8, 2012 2:13 brad
2:13
[Comment From hockeyman2000hockeyman2000: ] 
What is the timeframe for the Aug 15 event?
Wednesday August 8, 2012 2:13 hockeyman2000
2:14
[Comment From Frank BowerFrank Bower: ] 
How long will it be available ? Frank
Wednesday August 8, 2012 2:14 Frank Bower
2:14
Jeff (TMFFischer): 
@Frank: Options Whiz is available basically until Motley Fool Options closes to new members again... and then all the content is in Motley Fool Options... and that's where we are, too, of course, and our recommendations...
Wednesday August 8, 2012 2:14 Jeff (TMFFischer)
2:14
[Comment From tonytony: ] 
when doing covered calls can you profit short term when stock goes down in price or you can wait expiration to collect profit?
Wednesday August 8, 2012 2:14 tony
2:15
[Comment From AndrewAndrew: ] 
I'm interested in buying puts to short equities that I think are going to see big down moves within a short period, but I don't know how to tell whether I am paying to much for the option, or whether it's a good deal. How do I evaluate this?
Wednesday August 8, 2012 2:15 Andrew
2:15
Nick (TMFCrow): 
Hi Andrew,

This is a great question. Without getting into the nuances of options pricing because we'll never have an edge there, even though we understand it well. The key to being good at buying puts (in addition to being correct) is to look at the breakeven point for the strategy. Will the stock fall below that point? With a high enough probability? Before expiration? Is the risk/reward favorable? Finally, is the thesis backed by fundamentals? If you can answer those questions, you'll do well overtime.
Wednesday August 8, 2012 2:15 Nick (TMFCrow)
2:15
Jeff (TMFFischer): 
@Tony: Certainly, at least somewhat. When a stock declines, you'll have a growing profit in the covered calls. You can wait for expiration to earn the full profit or close the option early (anytime) for the partial profit you have at the time.
Wednesday August 8, 2012 2:15 Jeff (TMFFischer)
2:16
[Comment From JimJim: ] 
will the WHIZ offer actual stike points for individual options
Wednesday August 8, 2012 2:16 Jim
2:16
Jeff (TMFFischer): 
@Jim: Whiz is a site to show you some of what Motley Fool Options has to offer. Motley Fool Options provides very specific guidance in each recommendation: strike prices, limit orders, max. risk and reward, and more... Our Trade Alerts are very specific.
Wednesday August 8, 2012 2:16 Jeff (TMFFischer)
2:17
Danny (TMFTerp): 
@Frank Bower: At the moment we don't know specifically how long it will be open, so you should keep an eye on your email for info!
Wednesday August 8, 2012 2:17 Danny (TMFTerp)
2:18
[Comment From RichRich: ] 
Why are options better than srop losses for protecting a stock position?
Wednesday August 8, 2012 2:18 Rich
2:18
Nick (TMFCrow): 
Rich,

Aren't temporary flash crashes enough of a reason? Locking in losses, which are often temporary has always struck me as the opposite of investing. When you understand a business and it's value stop losses are a thing of the past.
Wednesday August 8, 2012 2:18 Nick (TMFCrow)
2:18
[Comment From JimBJimB: ] 
How do i get my broker (CS) to allow me to trade anything. I'm restricted to covered calls now.
Wednesday August 8, 2012 2:18 JimB
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