Everything Options
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Guest, it's time once again for the massively important and exciting FoH Asshat Tournament!
Go here and give us your nominations!Who's been the biggest Asshat in the last year? Give us your worst ones!
Fogel
Mr. Poopybutthole
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I look at stocks I wouldn't mind owning. Then from there it depends on whats happening with them at the moment. For example I'd love to sell puts on PLTR because it had a couple down days putting it near its support level which means two things. Since it's at support it's more likely to stay flat or bounce back up reducing the chance of my put being assigned, and the volatility from it going up and down means the premium will be extremely high.
Sanrith Descartes
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Yes, to at least some extent. I wont trade anything on stocks that are total shit in my book. Its why I don't dabble in penny stocks etc. There are two competing mechanics at work. Risk and reward. We drill this down to implied volatility and premium. IV acts a multiplier for premium. With higher IV comes higher premiums which also comes with higher risk of being assigned. Personally, i prefer a mix of the two. I will trade options on low vol stocks because I like them and because it is the safest money to calculate my risk at. Two examples.
Example 1: KO
Go 10% down from the current price and a month out and write puts for 15 cents. Its IV is 21. The odds of being assigned at 10% down are very slim.
Example 2 CCIV
Go 15% down and the same month out and the premium is $13. Yes $13 dollars for writing the $50 strike when the price is $58. The IV is 288. The odds of being assigned are quite high. Options are math. Its a lot of numbers, calculations and ideally technical analysis to find the safest strikes to make money and not be assigned. To put this one in perspective, I wrote the $35 strike on CCIV with the stock at $50. That would be a 30% drop and its still possible I get assigned. But I got more than $7 to take the risk.
The above is discussing writing puts, the concepts are the same on the call side. Start with companies you feel are good or have a great future. From that pool constantly look for opportunities. Every day. One bad tweet or downgrade can cause a good stock to temporarily dip. That is when you jump and write the put.
Sanrith Descartes
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Sanrith Descartes
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Im still waiting for CCIV to actually announce its DA with Lucid so my 35 strikes go to pennies to close.
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Rangoth
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Cool and thanks for the input, I understand the way all of that affects the premiums, but I was curious if you basically do a top down approach or down up approach, so to speak, with how you look for opportunity.
For example I have been picking stocks I like and maybe want dividends for(aka stocks I don't mind holding long should I be exercised) and going from there. However I fear I've been sort of artificially capping myself to the company's or industries I know(or think I know).
I feel like I am missing opportunity because maybe I should instead be searching based on criteria first, then scanning the list to find stable/decent options(no pun intended). I'm sure there are tickers I've never thought of which may be very valid choices for perhaps a 1% gain over what I find when I start with a pre-defined limited list. 1% annualized is a good number.
For example I have been picking stocks I like and maybe want dividends for(aka stocks I don't mind holding long should I be exercised) and going from there. However I fear I've been sort of artificially capping myself to the company's or industries I know(or think I know).
I feel like I am missing opportunity because maybe I should instead be searching based on criteria first, then scanning the list to find stable/decent options(no pun intended). I'm sure there are tickers I've never thought of which may be very valid choices for perhaps a 1% gain over what I find when I start with a pre-defined limited list. 1% annualized is a good number.
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Sanrith Descartes
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Something I learned a long time ago is that we all get bandwidth capped. The market is just too broad to watch all of it. Keeping your focus on a manageable number of stocks/sectors is really the only way to make it work (in my opinion). For instance, right now I have so many options written that I am capped out on what I can effectively keep an eye one (combined with my individual long stock positions). You are going to miss opportunities every day. There is just too much to watch.
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Fogel
Mr. Poopybutthole
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I chase premium more than some of the others, so I kind of focus on that, and then look for which stocks I've had on my radar past and future that get me what I'm looking for. Whether I'm doing weekly or monthly options I like to average at least 1% ROR per week on my options.
Rangoth
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That's kind of how I feel when I see people talking about new stocks every day here. By the time I read about and figure out what it is and what's going It's already made so much movement that it's too high risk for me to want to get in being bagholder dude who bought it at the top of it's peak
I have been paying attention to SPACs more thanks to that other thread and got in on a few in the 10.40ish range, all went to 12+ and I sold so that was an awesome learning experience for me. But with some of the others I am still too skeptical to jump in because they are already high. I'll keep that discussion in the other thread though.
I feel like my biggest problem is changing my old-school mindset of "hold good companies". It's hard to retrain my brain that making 8% if I'm on an exercised covered call(because the stock naturally rose over the 2 months I had it) is perfectly ok, because I could then sell puts for lower than my covered call price to "get back in" to that same stock with that same money if I wanted to or I could move on.
What are people's opinions on that type of think? For instance I own some TSN, outside of corona this has been an extremely stable stock for 5 years. So instead of just getting more of it and making a safe 2% weekly on covered calls, I feel like I should go for 5%(with higher risk of being exercised) because I can jump back in on a low swing via put or limit buy in a dip. There is really zero benefit of me just squatting on that stock outside of dividend dates, right?
Re-training my brain to think that way is my current struggle.
I have been paying attention to SPACs more thanks to that other thread and got in on a few in the 10.40ish range, all went to 12+ and I sold so that was an awesome learning experience for me. But with some of the others I am still too skeptical to jump in because they are already high. I'll keep that discussion in the other thread though.
I feel like my biggest problem is changing my old-school mindset of "hold good companies". It's hard to retrain my brain that making 8% if I'm on an exercised covered call(because the stock naturally rose over the 2 months I had it) is perfectly ok, because I could then sell puts for lower than my covered call price to "get back in" to that same stock with that same money if I wanted to or I could move on.
What are people's opinions on that type of think? For instance I own some TSN, outside of corona this has been an extremely stable stock for 5 years. So instead of just getting more of it and making a safe 2% weekly on covered calls, I feel like I should go for 5%(with higher risk of being exercised) because I can jump back in on a low swing via put or limit buy in a dip. There is really zero benefit of me just squatting on that stock outside of dividend dates, right?
Re-training my brain to think that way is my current struggle.
Sanrith Descartes
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Its not either/or. Buy and hold quality blue chips and trade options on stuff. My portfolio of long term holds include AAPL, MSFT, NVDA, LMT, HD, DIS, CRM, AMZN etc. I own those for life. ETFs like QQQ/FTEC/SPY etc also have a place. I truly use options as a way to let whatever I am currently holding in cash to make me money while I seek out longer investments with it.That's kind of how I feel when I see people talking about new stocks every day here. By the time I read about and figure out what it is and what's going It's already made so much movement that it's too high risk for me to want to get in being bagholder dude who bought it at the top of it's peak
I have been paying attention to SPACs more thanks to that other thread and got in on a few in the 10.40ish range, all went to 12+ and I sold so that was an awesome learning experience for me. But with some of the others I am still too skeptical to jump in because they are already high. I'll keep that discussion in the other thread though.
I feel like my biggest problem is changing my old-school mindset of "hold good companies". It's hard to retrain my brain that making 8% if I'm on an exercised covered call(because the stock naturally rose over the 2 months I had it) is perfectly ok, because I could then sell puts for lower than my covered call price to "get back in" to that same stock with that same money if I wanted to or I could move on.
What are people's opinions on that type of think? For instance I own some TSN, outside of corona this has been an extremely stable stock for 5 years. So instead of just getting more of it and making a safe 2% weekly on covered calls, I feel like I should go for 5%(with higher risk of being exercised) because I can jump back in on a low swing via put or limit buy in a dip. There is really zero benefit of me just squatting on that stock outside of dividend dates, right?
Re-training my brain to think that way is my current struggle.
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Blazin
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Beauty of options, could have bought QQQ long at yesterday's bottom and made more but was able to enter a very low risk trade (3/19 exp 290 puts) and make a great cash gain a day later. Worst case is I buy the top 100 of the nasdaq at over 12% off. Collected $4,250 in premium. This is how I work to consistently earn income on my money. I've made 2.5% so far for 2021 with this money so on pace for over 10-12% for the year while taking no where near market level risk, not even close. If the market runs sideways all year I'll likely still hit that mark, if it runs up I'll hit my mark, if we have a correction year I'll hit it. Worst case is a crash which if that happens I'll be down a fraction of the amount of someone who was simply long the equity if down at all.
I don't do this with all my portfolio this is just one particular basket, the least risk one. Note I end my own trade year at the holiday's which I *Try* to take off but if I do trade that period for goal tracking it's in the next period.
I don't do this with all my portfolio this is just one particular basket, the least risk one. Note I end my own trade year at the holiday's which I *Try* to take off but if I do trade that period for goal tracking it's in the next period.
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Blazin
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Tmac
MOre appropriate for this thread, but wanted to show an example of combining owning equity and using both calls and puts.
SO let's say right now you buy 100 share of PLTR @ 28.19 . Sell the March'19 $33 strike call against it and collect $2.34 and buy the March'19 $26 strike put for $2.35.
Total cost basis then is $2839.00
Now this chart shows the possible outcomes. $28.39 is the breakeven, if it trades higher than at 3/19 make money below that lose money. Sounds the same as if I had just bought the stock right? Well no, without the options I could lose 100% all $2,838 I used to buy the stock but instead I have now limited my downside to a maximum of ($239) but I have also limited my upside with the maximum I can make is $461 if PLTR trades @ or above $33.00/share on 3/19
Rangoth
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MOre appropriate for this thread, but wanted to show an example of combining owning equity and using both calls and puts.
SO let's say right now you buy 100 share of PLTR @ 28.19 . Sell the March'19 $33 strike call against it and collect $2.34 and buy the March'19 $26 strike put for $2.35.
Total cost basis then is $2839.00
View attachment 336163
Now this chart shows the possible outcomes. $28.39 is the breakeven, if it trades higher than at 3/19 make money below that lose money. Sounds the same as if I had just bought the stock right? Well no, without the options I could lose 100% all $2,838 I used to buy the stock but instead I have now limited my downside to a maximum of ($239) but I have also limited my upside with the maximum I can make is $461 if PLTR trades @ or above $33.00/share on 3/19
View attachment 336164
Gotcha, but if the stock did not have such a high IV there would be no need to buy the 26PUT for the most part though if I am understanding correctly. The reason you would do that in this case is because this stock swings like mad and you want to avoid hold 100 shares as it plummets to 0$(or whatever near that).
On the flip side, that high IV is why the premiums are 2$ something instead of .20-.40cents like it is on a more stable stock, like my TSN example above for the same timeframe. I feel like I would have to watch that stuff like a hawk which I am not always good at. I've been doing something more similar to what Blazin posted above, barely making 1-2% per option but pretty far OTM and unlikely to get exercised.
This is where I was starting to rethink my strategy, at least just a little. For some companies that are just on a 45 degree fucking angle upwards, this is probably a stupid idea as holding that stock until it starts to settle, again assuming a stable organization with good fundamentals(AMAZ/NVIDIA/Walmart/TESLA), those things just keep rising, so I dont want my shares to be called.
But after reading and learning from everyone here it got me thinking about my TSN example. Again ignoring covid this thing swung 5-12$ regularly about every 3-6 months. So it got me thinking, maybe I should be more aggressive as it nears the resistance and let myself be called, then be more conservative on puts until it hits support and get aggressive to be called and "play the swings" harder. This would amplify my measly little 1-2% trades by dumping and picking up in full during swings.
Yea yea, easier said than done to predict these swings accurately and in theory it would cause me to be forever chasing a stock like TESLA as it just seems to moon emoji. Anyway not just going to flip the switch and start doing this or anything, it's just making me rethink my "hold forever" strat on some stocks. to a "once the difference between my cost basis and current price is some number(say 5-9%) go hard and let myself get called because its win already at a decent % then do it again with the same or some other stock"
TLDR: Ditch the attachment to hold and once I make my x%, dump and move on(outside of some crazy scenarios)
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Fogel
Mr. Poopybutthole
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Probably going to get assigned VLDR unless a miracle happens. Mar 19 25 calls are selling for 1.75, not too bad really. Also going to be adding FUBO to my weekly puts, has been trading over 42 for almost a month and you can sell the 39 put and still pick up over 2% ROR for one week.
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Well all my covered calls remained safe today except CCIV, and even though that nose dive it took looked interesting, was not near enough to preserve them. I'd like to get back into CCIV, but need some more crash action on it. One bad rumor should shake them hands.
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Blazin
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The gap was still too far to make it worth it to me, was 35 strike $3 dollar premium. *plus* I still have some margin call obligations to meet next week and this CC sale today will wipe them all out since it was still a sale of CCIV at 100 percent gain.
I decided , since this is a meme spac after all, to hope for a new entry point hopefully soon if there is some more pullback.
edit: woops I lost more than just my CCIV. My OSTK shares will now be called away. was less tragic then the CCIV though. 90 strike $4 premium. shares were bought for 61.50 so I'm ok with it since its a healthy profit and it will help tackle the margin. glass half full
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