I closed my 3rd trade for a net of $0. This was interesting because it happened when the exchange rate was one to one. This changes my perspective of how important the spread actually is. You're betting on movement in a particular direction. I'm still monitoring XAG/USD (silver) and as I type, I've opened up another sell position at 16.95 --> 16.99. So the spread is 4 (4 cents that is), and I'm selling 4 lots. That puts me down ($.04)*100*4 = -$160.
The price has to go down 4 cents for me to break even, then I'll be on the positive end, and that's when I'll close. I'm still unsure as to how the two prices come about, but for now, at least I understand a little more of what I'm looking to happen. I've looked at the chart going back for the last few years, and I'm looking for some reversion. The indicators (RSI, MACD,..) will come in handy soon.
RobinHood:
I accomplished a lot of disclosure readings for options. As I heard in a blog, it's true that brokerages have to assign you a level for executing certain types of options trade. RobinHood assigns level 2 and gives you ability to execute long calls, long puts, covered calls, and cash-covered puts. It was a quick process and I was able to apply for and be approved in minutes. Here's a link:
https://support.robinhood.com/hc/en-us/articles/360001227566
I opened up an energy stock and looked at the trading options. Contract volumes were from 0-6 for most puts to sell. They also show all the greeks including delta, gamma, theta, vega, and rho. All the information's there, and it's free to use.
As per the "Characteristics and Risks of Standardized Options" disclosure available on the RobinHood site,
Premium
The premium is the price that the holder of an option pays and the writer of an option receives for the rights conveyed by the option. It is the price set by the holder and writer, or their brokers, in a transaction in an options market where the option is traded. It is not a standardized term of the option. The premium does not constitute a "down-payment." It is simply and entirely a nonrefundable payment in full - from the option holder to the option writer - for the rights conveyed by the option.
The premium is not fixed by the options markets or by OCC. Premiums are subject to continuous s\change in response to market and economic forces, including changes in the trading conditions on the markets where the particular options are traded.
Long and Short
The word long refers to a person's position as the holder of an option, and the word short refers to a person's position as the writer of an option.
Covered Call Writer
If the writer of a physical delivery call option owns or acquires the amount of the underlying interest that is deliverable upon exercise of the call, he is said to be a covered call writer. ... A call option writer who is not a covered writer may hold another option in a spread position and thereby offset some or all of the risk of the option he has written.
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Alright, that's it for today. More reading and trading to come.
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