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Author Topic: Options Trading Reality TV Show - OptionsXtress  (Read 2541 times)

Jay Sadie

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Options Trading Reality TV Show - OptionsXtress
« on: March 13, 2012, 04:04:00 AM »

Nothing captures the attention of TV audiences more than reality shows, a popular trend these days. There are singing reality shows, game shows, dance reality shows, hidden camera shows, celebrity shows, renovation shows, social experiments, and many more.

I have been trying very hard to come up with my idea of what would be a winning reality TV show. When I put my thinking cap on I quickly discovered that almost any conceivable idea I came up with had already been done. Surely at some point people will start getting bored with these shows... or will they?

Many years ago I got involved with Stock Options Trading, where you don't actually buy stocks directly, but someone who owns the stocks sells you the right to trade them for a limited time period. This makes it possible to buy a stock that would be too expensive to purchase outright. You could also say that you are "borrowing" someone else's shares, to do with as you please during the Option Period. Options also limit the amount of money you put at risk. If you buy a stock outright at let's say $100 per share, and you purchase 1,000 shares, you are risking $100,000 of your money. You could lose it all if the stock suddenly tanks to zero (which does happen, but rarely). If, on the other hand, you purchase 1,000 options at let's say $5 per option for 30 days, you are only risking $5,000. But, you only have 30 days to make money on it. If the stock's price goes to $110 within 30 days you will basically double your money, because you will sell the stock at $110, less the $100 price tag when you bought it. So, although you made $10 profit, you have to deduct the $5 you paid for the "right" to trade it, which leaves you with a Net profit of $5 (less commissions).

The nice thing about Options is that you can also make money on a stock that loses value, if you decide to play it that way. Positive Options are referred to as "Calls", and negative Options are referred to as "Puts". A Put is where you are betting on the fact that the stock's price will be going down. So, using the example above, if you buy 1,000 Puts at $5 per Put, and the stock's price falls to $90 within the 30-day period, you will be doubling your money.

Now, it sounds pretty easy, but I can assure you that it is far from it. Many factors came into play when you try to enter the Options market. Your worst enemy is "Time". You may think that 30 days (used in the example above) is plenty of time to make some money, but you would be wrong. It goes by very quickly. Now, you can buy an Option for 60 days, 90 days or much longer, but each 30 day period comes with a "premium". The longer the period you want to "borrow" the stock, the more you pay for it. There are fancy trader's terms for all these, like Delta's, but I'm not going to bore you with these.

Your other very important enemies are Fear and Greed, the downfall of most non-professional traders. Let's examine Greed first. Using the example above again, let's say the stock price goes to $104 the day after you purchased the Call Option. If you sell the Option you will make approximately $3.50 x 1,000 = $3,500. Not bad for investing $5,000 for only 24 hours. Where can you get a return like that? Let me explain how I got to the $3.50. You paid $5 and the stock price went up by $4, so you may think that you made $4, but every day the Option price "decays" due to the time factor, and it also depends on its volatility factor. If a stock is very volatile you will pay a lot more for an Option than when it is a stable stock that hardly moves. There is very little reason to buy an Option on a solid stable stock where the price hardly moves, unless you think that something is going to happen to light a fire under it, like a takeover, or a world event that will dramatically effect it. To get back to Greed, it is very difficult for most people to sell the Option on the second day when the price suddenly shot up by $4. Most will think that it is on the move and will want to hold out longer so they can make more money, instead of cashing in and taking the profit. But, what if the very next day the price drops by $6? This is where Fear comes in. Not only have you lost your $3,500 potential profit, but the Option price may be down to $4, so you are now in the red to the tune of about $1,000. Panic sets in and you sell your Option, because you don’t want to lose more money. The next day the stock’s price shoots up to $112! Now you feel like a complete idiot...

Options literally can create major ups and downs with your emotions. Unlike stocks where you can “ride out the storm” and wait for it to recover, Options can wreak havoc, cause euphoria the one minute and deep despair shortly after. These extreme emotions is exactly what TV audiences will lap up. They will share these anxieties with the participants, and will at the same time be amazed at how exhilarating Options trading can be. Although I used days in my examples above, stock prices can move dramatically in minutes, or even seconds. You have to think extremely fast and cool-headed when you enter the domain of “Day Traders”, especially an “Option Day Trader”.

My idea for this Option Trader Reality Show will be to let two members of the audience play against one another in a real-time face-off. They will each receive $10,000 to start with. Each player will have a dedicated trader on a computer that will place the trades chosen by the players. When the game starts each player will choose one or two  stocks from a list of 20 possible choices. The TV Show will obviously have to be recorded during the day when the Stock Market is open. The host will let each player choose his\her stocks and the game will start. As soon as a player has lost more than 50% of his/her portfolio they are immediately removed from the game, and a new audience member will be called upon to continue the game. If the remaining player has made a profit, the profit is banked and both players start out with $10,000 again. The “banked” amount is safe and the player will go home with at least that amount of money. There is a time-limit of 30 minutes per player. Anyone who is not in the green after playing for 30 minutes will be eliminated, to make room for the next player. This will ensure more excitement, and will place pressure on players... exactly what we need in a Reality TV Show.

A good player can stay in the game indefinitely and can make a lot of money. The audience will root for their favourite player, and will at regular intervals be prompted by the host on what a player should do. A player may ask the audience to vote on whether to buy or sell. Each player can do this up to 3 times per 15 minute period. TV viewers can also participate via Twitter or Facebook.

If after two 30 minute periods both players are in the green the player with the highest profit goes through to the next round, i.e. a new challenger joins the game, the winner’s profits get “banked”, and they start all over with $10,000 each. The loser keeps his/her profits and leaves the game.

Two large screens will display the portfolios and trades of the competing traders to the audience. Second-by-second graphs will show the current stock prices of the Options of each player. Imagine the groan of the audience if there is a sudden dip on the screen (if the player chose to play a Call), or exciting applause (if the player chose to play a Put in this case). The audience will share the mood of each player... the stress, the pain, and quite possibly the tantalizing euphoria of a successful trade.

For more of my own personal ideas please click here...
« Last Edit: March 13, 2012, 04:34:42 AM by Jay Sadie »
"I do not think there is any thrill that can go through the human heart like that felt by the inventor as he sees some creation of the brain unfolding to success." - Nikola Tesla
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