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I usually do not calculate the stop as a percentage of the option price. You are correct, my loss was significanlty below 100 %, a value, which is chosen by many traders.
I usually take a support / resistance in the chart of the underlying as my stop. Of course I take care that the loss of the option trade is in the order of magnitude of my maximum risk (or smaller) when the stop is hit.
"CATTLE: * Sell April cattle 128.00 call at 272 with an objective of zero. Risk a total of 77 points from entry. "
This is a trade recommended in Hightower report in today's newsletter before US opening. I know It is a call at 128 strike. But I don't know the formular to translate 272 into the selling price (not the premium per option contract)
Anybody can share? This is the first time I am going to take a trade from Hightower report. What's your experience in taking HT trades?
I do not know how the option price is shown in your platform. On both of the platforms I use the price would be shown as 2.72. As this is not a valid price you can enter 2.700 or 2.725 .
This is the premium per option contract, which is the same as the price of the option.
Remember that tomorrow after the close the monthly Cattle on Feed Report will be published. Volatility today and tomorrow will be high, but a surprize in the report is always possible. Limit moves happen once in a while on Mondays after the CoF Report.
I only follow trade recommendations by others if I fully understand them, and agree with them.
Regarding Live Cattle, I feel comfortable with the LCJ P114/C134 and the LCM P100/C126 strangles which I had entered weeks ago.
For the next couple of weeks strong production figures (good for a low price) and high consumption (good for a high price) are expected. In such situation I prefer selling strangles, as it is not clear which of the two effects will be stronger.
the multiplier with my broker is 400.
That is, you multiply the premium per option by 400
However, the LEJ8 C128 cost around 2 right now for me.
So I assume Hightower multiplied the option price already by 100.
Your multiplier would thus be 4, and the selling price for you 4x272=1088
I do not know where the difference in notation comes from. Possible HT thinks it is more readable.
With my broker I can see the selling price in the option order before I send it. Maybe you can do that as well at your platform.
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I read the HT report a while back when I was able to find it. (Now i dont anymore).
I found the explanations useful and I took ideas from them. They had mostly a different timeframe from mine, so I did not solely rely on HT.
The factor of 100 usually stems from using either US Dollars or US Cents. The factor to multiply the option price in points with for Live Cattle to receive the option price in US Dollars is either 400 (more usual) or 4 (nomenclature of Hightower).
Of the last 7 years only the June 2012 contract dropped from about where futures are now to 2.000. But fundamentals are different now and I don't see that large a drop.
