Everything Options

ShakyJake said:

New to options here and have yet to buy any. Looking for opinions... so, general consensus it seems is that gold and silver may see a spike sometime in the next year or two. Would it be such a bad idea to buy a call option on some gold and silver mining ETFs with an expiration date sometime in, say, late 22 or 23?

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My advice is to go back to page one and read this thread. It will save you money.
As Fogel said, stick to selling puts, and I would do one contract on the monthly to get your feet wet. There is a lot to digest. Especially the Greeks and the math behind them.

You need to REALLY grasp the larger picture of what options trading is. Buy/write, call/put, theta decay (when it's on your side and when it's not), calculating an exit strategy for every trade, understanding rolls and when it's the right call for you, whether to buy out or be exercised. The list is really long. Read first, ask questions second. Trade third.

ShakyJake said:

Well, my thought is that it's a gamble. I wouldn't care gambling, say, 600 bucks in a call option if there's a possibility it could generate a crazy return. The gold and silver markets have been dogged for quite some time now and there has to be a rebound at some point. That's why I'm thinking buying a call that's a couple years out gives some time for that rebound to occur.

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Stop. This isnt a casino. Don't put 600$ on a hunch. The options market is math and technical analysis. You use these two variables to develop a risk model. Most good trade platforms will back test your trade for 2-years and give you the percentage chance of being exercised.

If you want to gamble on big returns go buy altcoins for pennies.

You can make really good money trading options, but you have to learn it and put the work in. Maximize return while minimizing downside risk. That is the answer. I track every single option trade. I have only lost money on less than 10% of them. I dont gamble. I play the percentages and always have the odds in my favor.

Wingz said:

How is Southwest (LUV) green and not red right now? With all of their issues and rising fuel costs I'm completely shocked.

They got earnings next week and I can't imagine it doesn't drop especially with guidance, gonna get some $51 puts for 10/29 and see if that works out.

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It has been beaten to crap the last couple of days.

ShakyJake said:

I read the opening post and then scanned the following 5 pages. I didn't see a follow-up post about SELLING calls and puts.

So my newbie question, and I'm sure it's probably been answered somewhere in between:

How retarded of a strategy is it to sell a call that's way OTM for a stock that expires, say, less than a couple weeks out? For example right now it looks like I could sell a call for TSLA with a strike price of 855 that expires Oct 21. I would collect a cool $1475 and the odds of that stock hitting 855 by next Thursday is probably non-existent....right??

Another question is, what if it DID hit 855 and you don't actually own those shares? That's called a 'naked' call, right?

EDIT: I just looked at the chart for TSLA. Hitting 855 isn't so far fetched. But my general idea is the same. Perhaps a stock that isn't so bullish.
EDIT2: I may have answered my own question. Spot checking various stocks, any option with a strike price that's unrealistic is effectively worthless. In theory it looks like you could get away with a few bucks but probably not worth the risk/effort.

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Ok welcome to options. Yes options that have a high likelihood of expiring worthless are... well... Nearly worthless. If they weren't then something wouldn't be quite right with the market, would it?

That being said selling something you don't own is called naked. And yes you should have big balls and a big bank account to trade naked options. With puts, you can put up the cash to cover puts you sell (called cash covered puts ironically). Options are math. Lots of math. This is good because you can have a good mathematical idea of how they are going to turn out. Fidelity and others have options calculators that will back test 2 years of data on a stock and let you know the percentage probability of being assigned. If the chance of you being assigned in 6%, you can't expect a reasonably high premium for that 6% chance of you losing.

With TSLA you are risking 80k plus per option contract. With SPY 44k per contract. Make sure you are liquid enough to assume that amount of risk.

This being said, you can make slow steady money trading low beta value stocks that have historically very limited price action. They are also lower priced stocks and you can run low risk option placed and make the money on volume.

Make 12 cents on a F option doesn't sound like much but it's only $1200 to cover so for 12k you can grab $144 premium every month.

When it comes to options, risk and reward are tied at the hip. Want higher premium? Trade higher IV stocks. But it comes with higher risk.

Naked options should be treated like naked FOH members. Not a pretty sight and to be avoided at all costs.

Option prices at the open. I have never really understood how prices on options get so fucked up at the open. You see really overexaggerated price moves right at 9:30. Is it just due to no pre-market action and people panicking with orders to buy/sell at the open?

ShakyJake said:

I read the opening post and then scanned the following 5 pages. I didn't see a follow-up post about SELLING calls and puts.

So my newbie question, and I'm sure it's probably been answered somewhere in between:

How retarded of a strategy is it to sell a call that's way OTM for a stock that expires, say, less than a couple weeks out? For example right now it looks like I could sell a call for TSLA with a strike price of 855 that expires Oct 21. I would collect a cool $1475 and the odds of that stock hitting 855 by next Thursday is probably non-existent....right??

Another question is, what if it DID hit 855 and you don't actually own those shares? That's called a 'naked' call, right?

EDIT: I just looked at the chart for TSLA. Hitting 855 isn't so far fetched. But my general idea is the same. Perhaps a stock that isn't so bullish.
EDIT2: I may have answered my own question. Spot checking various stocks, any option with a strike price that's unrealistic is effectively worthless. In theory it looks like you could get away with a few bucks but probably not worth the risk/effort.

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ShakyJake said:

Thanks! Saved me 85 grand.

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Practice on paper for a while. Track those results (including this one when it expires this week). Its the only way to get better without losing your house.

ShakyJake said:

Oh, I am. I'm not living trading anytime soon. I've been watching various videos on option strategies for beginners to figure out which fits best for me.

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Make sure you develop a viable "overall strategy". By this I mean what are you trying to accomplish. For example, are the options you main revenue driver? Someone like Blazin uses options to generate a lot of his alpha. Or are options something you use for "a little extra return" on stocks you own or are you using them to possibly enter positions you want at a lower price and making return if it doesnt sink that low.

This overall strategy will help you decide on targets and risk/reward profiles.

F covered calls expire Friday. Currently in the money by 6 cents.