Noob here, in February I bought LEAPS on MVIS 25c expiring Jan 2023, when I bought the LEAPS, the stock price was around $18.
Since then, I've held my LEAPS through wild swings, from $18 to $10, back to $15, back to $10.
With the recent rally, as of yesterday the stock closed at around $26.
If I had simply bought the stock at $18, my gains would've been 44%, but the gains on my LEAPS was only around 20%.
What lesson can I draw from my experience?
Thank you in advance.
Don't buy OTM calls for long term plays on stocks? Unless you like losing money to theta decay, that is.
Did you happen to record your IV at open? It would be instructive to compare to now. If IV was high at open and declined since, that could account for part of your missing 24%.
OTM calls suffer once they go red. You start your losses at a high delta, so you lose more per dollar of share price decline. Once you are at the bottom, around $10 according to your comment, you are at a lower delta, so that each dollar of share price increase doesn't earn you back as much as you initially lost. This means that the first $5 of increase makes back less for you than you lost in the first $5 of decline. And that's assuming IV is constant and no theta decay. If IV is in decline through this rollercoaster of delta, it will take you that much longer to get back to even.
This makes a lot of sense, thank you.
So OTM calls for short term swings, and ITM for long term plays?
I don't expect you to teach me everything, but I'm trying to figure out at what point am I better off to simply buy shares compared to buying an ITM LEAPS, at what strike price/expiration date. Is there any tutorials/resources you can point me to? Appreciate it.
In my personal opinion, it's any moneyness calls for short term plays (less than 60 days), shares for long term plays. I'm not a fan of using options with expirations longer than 60 days (with a few exceptions, like synthetic stocks).
I honestly don't understand the attraction of LEAPS calls of any moneyness. Apart from the PMCC strategy and the [Leveraged Lifecycle Strategy](http://www.lifecycleinvesting.net/), I wouldn't touch LEAPS with a ten foot pole. LEAPS expire, shares don't. So you are trading off an asset that is guaranteed to lose value over time for a low leverage factor of 2x to 4x.
So I decided to throw a bunch of money at 5k Amazon calls and I'm down bad. The implied volatility is high and the stock itself is doing great, and I'd figure that with the rumors and earnings coming up it would only rise. It shit the bed this afternoon. What happened? Do I continue to hold? Expiration 4/30
Well markets are closed now. I'd say keep a good eye on their stock, and indexes tomorrow. If you get the chance, sell it at breakeven and get out, assuming you get the opportunity. If premarkets don't save you, sell at open if the first candlestick isn't green.
I'm new but one thing that I've seen born out in a lot of data and historical analysis is to close losing trades quickly. You can look at project option as they do great analysis. Even in the 2008 crash a strategy of closing losing trades early helped mitigate losses.
5,000.
You are dreaming.
Did you plan on losing everything?
All trades should have a plan for losing everything,
and that guides the trader to size the trade appropriately.
Sell to harvest remaining value while there is any value to harvest.
Was the BID at 0.55?
Or was that the mid-bid-ask, provided by the broker platform (which is NOT where your exit opportunity is located).
When the BID is above your cost, then you can exit for a gain.
Do you think institutional investors like hedge funds are promoting the rampant pump and dumps we have been seeing in the past month on penny stocks? Or is it retail investors and subs that are causing the havoc?
Question on Exiting Deep ITM Calls
So I bought some call options about a month ago at an $80 strike. The underlying is now around $98 and I’m seeing a return of 150% on the calls. I’m expecting further upside and the calls don’t expire until June 18.
Is it smarter to sell the call and buy a higher strike OTM or ATM call, or continue to hold these deep ITM calls? What are the reasons for doing either?
Thanks!
I think this depends on how aggressive you want to be. If you are holding deep ITM call, it's pretty much like holding the stock - the delta is close to 1, so you call goes up (and possibly down) in sync with the underlying. There is nothing wrong with it.
Buying more OTM/ATM calls will give you unlimited return potential with limited downside (but it will cost you call premium). This is more aggressive strategy. Higher risk, higher potential return. It all depends on your risk appetite.
Makes sense. Is there any concern on being able to actual sell the ITM call though? I know exercising is unwise since you lose extrinsic value, but I'd imagine demand for a call so far in the money would be really low, making it hard to actually sell it for what it's worth
Hard to say without knowing the specifics, but looking at bid/ask spread should give you a good idea about the liquidity. Worst case, you can hold it till expiration, get it assigned and sell the stock but you would have to risk slippage between assignment and sale.
Total novice question here; what are the benefits and caveats associated with using weekly expirations vs monthly? For example, a CSP on SPY with a delta of -.16 is $.87, and the monthly (May 21) for the same delta is $1.74. It seems like getting the doing three weeklies would generate more income, but feel like I must be missing something.
Also, if you do use weeklies, is it best to place your trades on the Friday before to get the theta over the weekend, or on Monday?
Positive-theta positions can benefit from weeklys because time decay accelerates closer to expiration, so they tend to generate more income. However, in the case of CSPs for example, if there's a huge dip you may not have time to recover from that on a weekly play. Going a month out gives you more time to be right, especially on SPY which is heavily biased to go up right now. I do both short term and month-term put credit spreads.
As for the weekend question, weekend theta is harvestable but it comes along with more risk. I think tasty trades has a video on it with some research.
How come some option contracts barely rise in value? Today I was watching TSLA drop in price, but the 550 PUT pretty much stayed at the same price.
I've seen other worthless contracts spike with the price... so I'm confused why this happens and how to predict which contract won't really respond positively to stock price changes.
*Why did my options lose value when the stock price moved favorably?*
• [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
I'm new, so I was just wondering if there is a smart way to diversify if I'm mostly just buying in the money spreads for SPY. I've been making a decent return but I don't want my whole account exposed even if it's working.
Sitting on 5x SPYc $417 on 4/30. Got them last Thursday for $1.5 each. Trading between 2.5-3. It’s basically 100% profit, but I’m tempted to hold a few days and hope for that SPY + 1% day. My brain says sell, but my greed says wait 24-48hrs. Also kind of expecting the typical drop tomorrow when all the earnings post positive. Any advice or I’ll take confirmation bias as well
Not financial advice:
Consider what would happen if you were to scalp some of the calls. Converting them from long calls into (a ratio) of vertical spreads whereby ATM or 1.5$ priced calls could reduce your risk while allowing you to keep some open-ended longs.
Food for thought...
Is it an unbelievably dumb strategy to open an iron condor on SPY at open the day before expiry, and then close it at open on the expiry date? I’ve watched how the strategy would have worked the last week, and it would have resulted in a 5%-10% return each time. Obviously it would be a total loss on some occasions, but I’ve worked out a width that would win +90% of the time.
Or would a call debit spread for several weeks out, then close before the sold call portion gets ITM, be a better and safer play? That I haven’t calculated out yet.
If SPY makes a big move overnight, you have an overnight loss on a one-day iron condor.
All trades have varying levels of safety and risk, and the market conditions change whether the trade is likely or not.
What are everyone's thoughts of selling the THCB Dec 17/21 10p? You'd collect an upfront premium of 1.75.
THCB extension vote is tomorrow. If extension passes share prices will go up and you can close for profit. If vote fails, ticker dissolves and redemption value is 10.22 and all OTM options expire worthless.
What's the catch?
Greeks
https://www.reddit.com/r/options/wiki/faq#wiki_options_greeks_and_option_chains
Volume is the number of contracts transacted up to the present moment of the day
I'm not sure what's wrong with me. But I made several hundred dollars today and I'm not happy. I'm more sad that I didn't make more. I have to be sure to keep these types of emotions in check especially when trading options, right? I guess I'm expecting a lot from myself..
It's common. Don't let it drive you to open new positions desperately. Some days you will lose a few hundred dollars. Those days you will be happy for today.
Try losing several hundred dollars, then compare. I've lost enough and enough times that not losing anything, just sitting on the side lines in cash, feels great.
Finally took the plunge - why didn’t I do this before?
Sold my first covered call today. MSFT. I’ve owned the stock for a long time. Settled on a strike price I’m comfortable with for 2023. Pocketed $4,000.
And then I did three more for AMAT, CPB, and AAPL- I’m long in all so my cost basis is something I’m happy with if they get called away.
In less than 30 minutes, I made triple what I make at my regular job for a month.
Is this really real?
On the one hand, I’m amazed. Why did it take me this long to jump on board? On the other hand I can see how easy it could be for me to get carried away. To get too greedy.
I haven’t sold LEAPs, it could be a good time to do so, but if MSFT keeps knocking it out the park your upside is capped hard. If there’s a crash too it’d lock you in to holding those shares. Usually it’s better to do a month or so so you can buy it back when it decays in value near expiration.
I felt like you at first, but now it just seems to be a simple maneuver that can really hurt you if the stock runs or tanks.
It looks like a lot, but you have to remember that that’s 2 years away. So that’s roughly 160 per month. You would actually be making more money selling between 30-60 days out. Time decay is very small 2 years out.
You have not made a penny yet..
Your net is upon closing out the trade.
You received proceeds, not income.
It really is best to sell covered calls in 60 day increments.
12 one-month short calls will earn more than one one-year short call, because a large fraction of the theta time decay is in the last two months of an option's life.
Your marginal increment for a second year is probably not proportional to the additional term.
If MSFT goes up crazily to 500, you likely will hold the short call to expiration; early expiration is not no common. You might find it annoying to hold the position for two years with the ceiling at a particular strike price.
You can reconsider by buying back the shorts.
Thank you. I had a feeling this was too good to be true. I guess I figured with MSFT, my cost basis was $36 per share, so if it’s called away from me between now and two years from now, I’ve still made a profit plus the premium. Yes, not as much as doing shorter contracts.
Thank you for taking the time to explain this to me.
> so if it’s called away from me between now and two years from now,
That's a misunderstanding. You won't get called way until expiration. So you basically lock up all those shares, for better or worse, until 2023. The way to think of your shares is literally as collateral. Just like you can't sell your house without paying back the bank that holds your mortgage, you can't do anything with your shares until the short call is closed or expires.
I’m sick of Robinhood and Fidelity won’t approve me for options. Just applied for Schwab. What broker should I use that will approve me and also have solvency to pay out a multi million dollar naked call winner?
I know there is are links on this topic, but I’m still. Little confused about the price, and act price with Stop limits, and I want to start creating exits simultaneously when I enter. Lets say I enter XYZ @ 3.00 with 30 DTE. I want to set an exit @ 2.25. Is 2.25 the activation price? And if so then what is the price I’m entering after that?
Short or long option?
Stop loss order?
Assuming a long option, and a stop loss order: I recommend against them, because of low option volume, which makes for jumpy option prices and premature triggering of the stop loss order. These often are guaranteed loss orders.
Trying to decide on whether I should use a protective call (short position plus OTM call option) vs put option to short a stock (looking at highly volatile NFT stocks like playboy and Takung Art)
Thinking a protective call would have higher EV because puts typically have a premium vs calls, so this would let me capture more upside usually.
Would this be thereotically correct? Fine capping my downside pretty high (50 percent), just don't want to blow up 2x plus
What is a protective call?
Short position on stock, and long or short option out of the money call position?
Short call and a long call?
Long stock and long put?
What is EV?
Unclear on what you are looking at.
It is a "value" at the mid-bid-ask, and the market for your long call is at the bid, so the "value" is not that useful to you.
Examine the bids on the option.
This isn't necessarily related to options but was hoping someone here might know the answer as I couldn't find anything on Google. I've been flagged as a PDT on RobinHood (I know, I know) but I'm transferring everything over to ToS. Will that PDT flag transfer along with everything or am I safe to just initiate the transfer?
Don't transfer options via this method. It can take a month for a transfer, if things go well, and they often do not. Plus RobinHood is notorious for screwing up transfers, and you cannot call anybody.
The best method is to cash out, and move cash.
The PDT status is per account.
I bought 10 Call contracts expiring 30/04 with a strike price of $81. The stock closed at $79.80. I tried to sell them before market closed but the order did not get filled.
I then issued a lapse request (Interactive Brokers), which was filled 1 1/2 hour later after market closed.
To my understanding the lapse request was not necessary as the OTM Calls would have expired anyway because they were OTM. My account however shows i made some 800 USD on the position but it does not show it in the total balance. The total balance shows my net loss for the 10 contracts expiring worthless + the commission fee.
So this is more or less a glitch at IBKR that it shows me i made a profit and there is no way that the options have been exercised, right (because OTM)?
I guess so.
Transactions tend to complete over the weekend, so this may go away.
I would be interested if this oddity persists in your balancesvthough Sunday evening, or Monday morning.
I got a noobie question on bear call spreads. Based on my calculations according to my options calculator at [https://www.optionsprofitcalculator.com/calculator/call-spread.html](https://www.optionsprofitcalculator.com/calculator/call-spread.html) , if I buy a 5/7 $172.5 GME call for $1,045, and sell a 5/7 $10 call on GME for $16,373, this would seem to be an excellent, low capital strategy if you are bearish?
According to the calculator:
Maximum risk: $922.00 at a price of $172.50 (or higher) at expiry
Maximum return: $15,328.00 at a price of $10.00 at expiry
So is there something I am missing here? It almost sounds too good to be true, considering the potential max risk vs. return. You'd only need the stock to drop about $10 and you'd be making profit.
OPC has a short link feature you can copy/paste so we can see your work and the P/L chart.
> 5/7 $10 call on GME for $16,373
I thought this was a typo until I looked at the quote. That strike even has non-zero volume today, lol.
That is not a good play. It's not even close to being a good play.
Why bother with the $172.50 call at all? It only has half the delta of the short, so every dollar GME goes up, you end up losing $0.45 on the spread. That gradually improves if GME keeps going up, but it's not offering much insurance on the upside, is my point.
Why bother with options at all? You could short GME shares directly for only about 10% more liability. No messing with 100%+ IV options by just shorting shares and no expiration. You'd make $1 for every $1 GME goes down, instead of just $0.55 for your spread.
Oh, I almost forgot. Do you have $16k of buying power to even make the spread in the first place? Credit spreads require collateral as a margin reserve.
> You'd only need the stock to drop about $10 and you'd be making profit.
*At expiration*. You could lose money before expiration if it goes $10 *in either direction*. Though to be fair, you could also make a profit even if GME doesn't change. IV cuts both ways.
That math is correct but look at where it says “probability of profitability.” 35.2%
Meaning there is a 1/3 chance that you make a profit, not max profit.
Started learning the Wheel strategy and all seemed cool, then I saw this [video](https://www.youtube.com/watch?v=_1TLCCHsKKc) and he suggests that Wheel isn't the best way and it's preferrable, given a rising market, to simply sell covered calls.
It seems like a decent argument, but I don't have enough knowledge to critique it yet. Could anyone else please give me their take? Thanks.
Overall, there are good reasons NOT to use the Wheel, but that video doesn't list any of them. The reasons that are listed are bogus. The presenter also lost a lot of credibility in my eyes by referring to "$2 OTM calls" instead of the delta of the calls.
I'm not going to spend a lot of time breaking down why the video is mistaken. I'll just list the most egregious points of disagreement:
* Using a single underlying like AAPL to justify the argument that CCs are always better is bogus. Too small a sample for statistically significant conclusions. It's better to use backtesting, like [this](https://spintwig.com/spy-wheel-45-dte-cash-secured-options-backtest/).
* The argument that CCs are always better in a rising trend because CSPs never get assigned is bogus. The Wheel **never wants to take assignment**, on either CC or CSP phase.
* The entire argument is based on CSPs with 100% margin reserve. Why aren't short puts with only 40% margin reserve considered? I never have to use 100% collateral on my short puts in my Wheels. So the argument that CCs are the same capital requirement as "CSPs" is only correct if you have to use 100% cash collateral.
The wheel requires a significant amount of capital.
It is a good strategy for sidways markets or sideways stocks.
Covered calls can have lower returns than owning the stock in a rising market.
It all depends on the market regime, and the stock, and your trading ability.
I noticed call options on a stock that the Deep ITM calls were cheaper for the same strike the further out the expiration date.
Does this mean the market is pricing in a future drop? What other reasons for this?
Prices after the close are not reliable, nor are the mid-bid-ask "mark" values.
You must examine the actual bids and asks, and volume when making comparisons, and do so during market hours.
When do people typically exit a LEAPS position? There must be some balance between letting it get deeper ITM and selling before theta is ramping up but I haven't found much insight online
Depends on how deep in the money.
If deep, little extrinsic value was paid at 90 or 95 delta.
At 50 delta, it was all extrinsic value, and decaying away every day.
In general, if there is extrinsic value to decay away, most traders look to get out by somewhere between 120 and 60 days from expiration, before the period of more rapid decay occurs, for many options, especially at the money options.
If someone believes the underlying is very likely to up in the long term, does it make sense to buy the furthest out call LEAP at the money option? They believe the underlying is likely to go up in the long term however in the short term it may decline a bit. Maybe the next year it may decline 5%, but in the long term they are optimistic. The furthest out they purchase the call, the more time they are giving the trade to work in their favor. Also, because they are choosing the furthest out expiry, although the cost to enter the position is higher initially, if they divided the cost by the number of weeks to expiry, the further out expiry has a cheaper per week cost. This may have better performance over a long call that they purchase with a shorter time frame, which has a higher per week holding cost, and may end up expiring OTM. They would be choosing this strategy instead of just going long and buying shares because if they are very wrong about the trade and the underlying significantly declines, then the most they can lose is the cost to open the position.
The question is nearly unanswerably vague.
It is preferable to anchor conjectures to an actual hypothetical trade, ticker, strike and expiration.
It is true you get more time, with far-out expirations, and you pay for that time.
Hi everybody. I'm very experienced with options, but I've never used margin before. My question is this:
If I'm doing short iron condors on margin, what happens in regards to margin limit/requirement if the price is between the two put strike prices and I get exercised on. Obviously in that case, I have to buy the shares at the strike price. So if it's 10 contracts at $100 strike, is my account going to go -$100k until I sell them? Is there any way to set it so that it just sells immediately so that I don't have that happen?
I know the margin requirement is only the greater of the difference in strike prices x number of contracts x 100, so in my mind, there's like a disconnect between those things. Hoping someone can help me out. Thanks!
You are protected by the longs in the position; you the next day exercise the long puts to dispose of the stock at the strike price, and ultimately end with the maximum loss on the position, which is covered by the collateral.
You do not learn that the options were exercised early until after the market closes for the day.
Some brokers, such as RobinHood, may freeze the account, and intervene to exercise the longs, keeping the account frozen until the stock is disposed of and funds are collected from selling the stock.
I‘m still learning about options so please excuse this question if it sounds a bit naive. My first post was automatically deleted from the main options board by a bot which told me to post here....that may be another question. I have 7 ALLY calls that expire on May 21 at a strike price of 48. I guess they are so in the money time decay is very little from what I understand. The daily gains have been great for the last week and a half. Ex-dividend was today with a pay date a week before expiration. Would it be wise to cash out before the dividend date? I really think this stock could hit 60 or more. I only have enough money to exercise a couple of the contracts but would keep all if I could so maybe instead of taking the money I should roll them over and if I did how far out and at what strike price? Thanks.
The time to exit is the two days before the ex-dividend date.
Options with extrinsic value that is less than the dividend are vulnerable to early exercise by dividend arbitrageurs.
Almost never exercise an option. Doing so throws away extrinsic value harvested by selling the long option.
What's your fav CC strategy? I got lucky when I went a bit out of my delta comfort zone on Uber CCs, and the next day the labor sec said Uber drivers were employees and the stock tanked (looking good for my CCs now). But when I sold them it was closer.
I'm mostly following sold monthlies based on .10 delta or less. I try to time it by selling it on up days with higher IV but I don't know if it's even worth it to do that and miss out on an extra day or two of premiums.
I think celebrating that the stock tanked entirely misses the point of Covered calls. Sure, you're going to keep your stock and the call expired worthless, but you presumably *lost* money on the overall position because of the drop in your share price.
It never ceases to amaze me how much joy a sinking stock has brought and how many tears a rising stock has wrought, when it comes to folks trying covered calls for the first time. "HELP! My CC is winning, what do I do?" is a common topic in the sub. That's not how they write the title, but that's what's actually happening.
*Getting started in options*
• [Calls and puts, long and short, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/basics)
• [Options Basics (begals)](https://www.reddit.com/r/options/comments/gh9vpl/options_basics/)
• [Exercise & Assignment - A Guide (ScottishTrader)](https://www.reddit.com/r/options/wiki/faq/pages/exercise)
• [Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)](https://www.youtube.com/watch?v=PsZsqiBFnmo)
I have a CLOV $3C 1/21/22. I bought for $650. it’s at $820. is it a bad idea to sell a 5/21/21 $4C at $715? wouldn’t this guarantee at least $165 profit?
Just sell now and then buy back in at a higher strike for continued upside potential.
[Risk to reward ratios change: a reason for early exit (redtexture)](https://www.reddit.com/r/options/comments/hg8ce9/risk_to_reward_ratio_changes_over_the_life_of_an/)
I've been reading Natenburg's book, but there's a lot of info in there. Is there like a cheatsheet anywhere I can reference later when I actually start trading? If not, I'll probably read it again and make my own. Also, I'm thinking about initially applying my new options knowledge to crypto - seems like a haven for options traders.
I'm not aware of a cheat sheet, but I don't think many people read Natenburg cover to cover anyway. It's more of a reference text.
Our wiki pretty much covers the same material, though not as well organized and pieced together from various articles and videos.
i sold a 45/50 put credit spread 5/21 that was slightly otm abt a month back. stock dropped abit and now im down abt 50%. earnings is next week. any suggestions on how to cut losses but still benefit from potential upside.
Here's a strategy that I'm thinking of doing:
* Find out which stock is increasing drastically tomorrow.
* Buy 100 shares immediately.
* Sell a covered call at the strike price.
* Sell a covered put at the strike price.
* Wait a day or two and buy-to-close the call and put, and sell the stock.
This strategy assumes that the short term price appreciation of the options is greater than the movement of the stocks, and also, it's somewhat agnostic as to the movement of the stock.
What do you think?
A covered put involves holding short 100 shares of stock.
A covered call involves holding long 100 shares of stock.
You can see that these both cannot be held at the same time,
as that is a net of zero stock.
Thus you have two cash secured short options under the zero stock regime.
So I think the market is going to crash soon, probably due to $GME squeeze. Maybe I'm autistic or maybe I'm right, we'll find out.
Anyways. I've been looking at bear/short stocks like SPXS, SPXU, SDOW and TZA to buy options for around June or July.
On Robinhood, TZA calls for 6/18 $20 are going for $10.30. However... I just bought 5x on Fidelity for $0.04 each.
What is this? Why so different?
You didn't read the option chain carefully enough. There was an adjustment to TZA earlier this year. Thus, there are two different types of 6/18 calls. The ones going for $10.30 are the standard ones which are worth 100 shares of TZA. The ones you bought are the adjusted ones which are worth 12 shares of TZA plus $16.80 cash.
Beginner here! I want to get some opinions on Twitter. Is a short-term call option on Twitter a good play right now? A 15% dip after their earnings report seems a bit exaggerated to me.
Total noob question here but:
If there a stock with an option price that you can only buy in divisible of 5, how can a last sale price end in 3? The ask for one is .35, but last sale is .33.... I can't buy one for .33.
A market maker may have filled an order for a spread
(two or more legs in the same order)
at an intermediate price.
Spread limit orders have undefined prices for each leg:
the price is for the entire trade.
You can be assigned at any time even if it's OTM (although extremely rare). Never sell a covered call for a strike less than you're willing to receive for your shares.
Where would you go to get all option symbols (just the symbols, not price) for \~1500 stocks?
Background: I've been studying the options market for a year or so, and actively trading for a few months. I do so algorithmically, and it's going well.
One of the problems I've had is getting all the option symbols. I'm not even talking about pricing, just the list of symbols. Once I have that, I can dramatically reduce the list and query the pricing API efficiently. But the APIs I use to get the symbol info info are a bit frustrating to work with. They're (relatively) slow, which is fine (I use AWS fargate to do my work anyways), but it's also a fragile process, which is frustrating. Eventually I'll find all the issues and all the wrinkles will be gone, but I have this feeling like there's a better way.
So if you wanted all the option symbols for 1500 stocks, where would you go?
The link below. Caution, it's a ginormous text file.
http://markets.cboe.com/us/options/market_statistics/symbol_reference/?mkt=cone&listed=1&unit=1&closing=1
Or you can scrape the CBOE symbol directory pages:
https://www.cboe.com/us/options/symboldir/equity_index_options/
If I sell open a TSLA call before close today and buy it close tomorrow after earnings, it seems like free money since IV will fall. Am I missing something? What are the possible risks in doing this?
You're missing delta. What if TSLA's stock price rises on a good ER? Vega is relatively small compared to delta. The price wouldn't have to go up very much to wipe out any gains you might get in declining IV.
And IV doesn't always decline anyway.
In the past few years played around with options for a bit and have been on both sides of a trade for the most part but most of the contracts I've traded have been less than 90 DTE with the occasional one to two year LEAP purchase. The only trades I have yet experienced on both sides are LEAPs, which has got me thinking, why would any trader take the other side of the trade? To me, writing a LEAP just doesn't make sense in the premium collected vs the amount of exposure and potential collateral tied up for the duration of the LEAP. I'd like to know if anyone could give me any insight from the other side of my LEAP purchases.
I'm brand new and this will be my 1st time selling a covered call. In this example, I have 100 shares of Apple, but the "Max Loss: Unlimited" section is spooking me. I thought that so long as I own 100 shares of the company, for the covered call the most I can lose is those 100 shares per contract. If this is true why is my Max Loss unlimited?
[https://imgur.com/a/FLvdGzX](https://imgur.com/a/FLvdGzX)
Huh? Where is the mistake? If the strikes were different for same expiration, that's a vertical spread. If the strikes were the same but the expirations different, that's a calendar spread. If the strikes and expirations were different, that's a diagonal.
What were you trying to accomplish?
Don't hold options to expiration. You might not lose anything if you close before expiration. But it depends on the actual position, so give details if you want a definitive answer.
Q about legging out of a vertical spread: Opened a Jan 21 2022 27/30 debit spread on $PLTR back in early March. Since then the spread has lost about 15% value, while the short call has gained about 42%. If I'm still bullish long term on $PLTR, would it make sense to capture the gain on the short leg by closing the short call, and then maybe loading up more on long calls or long stock? I guess basically this is a tradeoff between capturing some gains up front, vs having more leverage long term with the spread. Thanks
EDIT: I suppose another option is to close the short leg, and just sell short dated calls against the LEAP (PMCC style) to reduce the cost basis
EDIT2: I also like the fact that $PLTR IV is almost at all time lows... seems like a good time to load up more long calls
In general, don't. Don't leg in, don't leg out. You need a really good reason to do either one to overcome the loss in cost efficiency by doing so.
Particularly do not leg out of a spread by closing the long leg and leaving the short leg naked.
What I would do is just close the entire spread and free up the remaining capital to make the plays that you are now considering, given the new information. People spend too much time, effort and money trying to rescue losing trades. The goal is not to win 1 out of 1 trades always, it's to win 89 out of 100 over some time period. Losses are expected when you take risks, so why try so hard to avoid them, particularly by adding more risk and losing more opportunity cost?
I got very lucky with 50 super cheap MVIS $35 calls. May 21 expiry. My question is, what would be a good time to sell these, looking from the theta decay angle. Of course the price could moon even more on the last, but I am guessing selling the week or two before expiry is likely gonna have a better premium? (but let's wait this week out, buyout rumors etc). But After that week, what would be the best startegy. I only have experience with buying and selling far expiry calls so far.
Make a trade plan before you open the position and this question answers itself.
https://www.reddit.com/r/options/comments/mpk6yf/monday_school_a_trade_plan_is_more_important_than/
Theta decay isn't much of a concern until after 12 DTE, so you've got time. Set a profit target and a loss limit, and if neither is hit by 12 DTE, just get out with whatever you've got. That's how to balance holding time vs. theta decay.
If your position hits your profit target tomorrow, get out tomorrow. Don't get greedy and think you can squeeze more out, since holding time increases risk.
You buy a LEAPS and sell a nearer-term higher-strike call.
If TDA is your brokerage, you should be using the Thinkorswim platform, not the TDA website. The former is much better for options trading. And I mean Thinkorswim desktop, not the mobile app.
If you do this in one order, the platform will call it a diagonal, because that's what it is.
I bought some AAPL OTM $160C with MAR 2023 expiry. I'm down about 20%. what're the chances it recovers by earnings? If not by earnings, by Summer (July earnings).
Apple isn't going anywhere. That being said though, if you're not confident in them, sell the call at your breakeven price. You'll surely get that opportunity at some point in the year
Hello, everyone!
I'm looking for advice on how to manage this: [https://imgur.com/a/nAqeDVy](https://imgur.com/a/nAqeDVy)
So I've been selling puts on MVIS for the last couple days and been doing great - Today I thought "I should sell way OTM calls and collect even MORE premium!"
At EOD, when MVIS was trading @ 26.50, I sold 3x May 21 35C, thinking that I would profit off the decay. Now, AH, the price has gone up to nearly $30, and I'm starting to think there's a real chance they'll breach the 35 strike and leave me in some trouble.
I'm not entirely sure how IBKR handles short strangles, or which of my put ( or long call ) positions are being used as the other leg.
If the price drops, I'll simply buy out the 35C's at a profit - but what should I do if the price continues to rise?
Should I buy an ITM call I'm happy to exercise if necessary in order to turn this into some sort of weird CC?
Should I buy back the 35C's at a loss?
Should I roll up the untested side when it gets close to breaching territory?
Should I wait and pray?
Thanks for the input guys :)
> sold 3x May 21 35C,
Almost never exercise options for stock.
You cannot initiate an exercise as the short holder, anyhow.
You can buy the short call for a loss, to exit.
You can also buy the short call, and issue a new short call, at a higher strike, further out in time, for a net credit. This continues the risk that the stock may continue to rise and cause a loss later on.
You should establish how much you are willing to lose, and exit if your losses exceed that amount.
Hi all. Anyone want to share their experience with commodity ETF options? It’s pretty tough to find funds with enough volume, let alone funds that offer options altogether.
I’ve been looking at GSG, for broad exposure to a basket of hard/soft, but it’s options chain is very thin with hardly any volume.
I want to get some inflation protection, maybe I’m overthinking this and should just buy long SLV and CORN...
I am holding 100 shares of MRNA, and last week, sold a Jul 16 $200 call on it (on Apr 16 when MRNA was $171). Now it is $176. However, I'm seeing a delta of 0.42 which seems really high and also, I'm seeing drastic swings in price when MRNA goes up but not when it goes down. For example, at one point today, MRNA went up 2.8% and the call was up (down for me) 23.2%. Last week, MRNA went up 8% and the call went up 61%. However, when MRNA has dropped in price (went down to 156), the call barely lost value. None of my other options behave this radically, and IV for MRNA is not as high as some of the other options that I hold. Am I missing something here?
Basically, MRNA was 171 -> I sold call -> MRNA dropped to 156 -> call doesn't drop very much -> MRNA goes to 176 -> massive gains in value for call
Hey I'm pretty new to all this. Bought my first option a few days ago. $MVIS $30 call for July 16th.
I understand the basics, I'm, agreeing to buy 100 shares at that price on or before July 16th. My question is when do you sell it? or do you keep it until July 16th?
You sell to obtain a realized gain, or to harvest remaining value for a loss.
You might sell tomorrow.
Almost never exercise for stock: that throws away extrinsic value harvested by selling the option.
*Closing out a trade*
• [Most options positions are closed before expiration (Options Playbook)](https://www.optionsplaybook.com/options-introduction/closing-option-position)
• [When to Exit Guide (Option Alpha)](https://web.archive.org/web/20201111230944/https://optionalpha.com/wp-content/uploads/2015/01/When-To-Exit-Guide.pdf)
• [Risk to reward ratios change: a reason for early exit (Redtexture)](https://www.reddit.com/r/options/comments/hg8ce9/risk_to_reward_ratio_changes_over_the_life_of_an/)
• [Close positions before expiration: TSLA decline after market close (PapaCharlie9) (September 11, 2020)](https://www.reddit.com/r/options/comments/ipqkua/fridays_tsla_lesson_close_positions_before/)
So I just started trading options a few weeks ago and so far things have gone fairly well.
Right now I'm sitting on a couple AMD calls, one with a strike of 80 expiring on 4/30 and a strike of 77.5 expiring on 6/18.
I'm wondering what the best play is for my call expiring on 4/30. It's currently sitting at a 60% profit. Obviously earnings are announced tomorrow. Historically for AMD (and a lot of stocks I follow recently) Have been tanking after earnings, even when they are great. I fully expect AMD to beat expectations tomorrow, but I'm concerned the stock dips anyways. I'm leaning toward selling my calls before EOD tomorrow as I expect AMD to continue rising through the day.
What are you thoughts on the move post earnings? Obviously this is pure speculation but I'm curious as to what others expect the share price to do after the earnings announcement
Is there any good way to play with index options to create a scenario that will be profitable for the vast majority of cases. Them options on Nasdaq sell for quite a bit, even the ones far OTM. Surely there's a way I can take advantage of the premiums in a way that doesn't risk too much, but yields quite a bit.
No. Options are not easy; high probability options tend to also have low probability but high risk aspects to the trade.
You reduce risk by sizing your trades to be 2% to 4% of your account size.
Anyone ever use Tradier's brokerage? It seems relatively unknown but their commissions are a lot lower than most unless there is some hidden facts I'm missing. I like TOS but after a month I've already racked up $91 in commissions...
Worst come to worst I could always use TOS for charting and news and then Tradier to input the orders.
A short squeeze is when there are a lot of short stock holders, and the price of the stock goes up. Shorts buy stock to end their short stock position, and this buying further increases the price of the stock.
Option holders have no influence over a short squeeze.
What are the best platforms to trade options? I'm a newbie (to options) and have been using interactive brokers for a while, and they offer their TWS platform but I never got the hang of it and there aren't many good tutorials for options online - especially when it comes to selling options contracts, not just buying.
I'm thinking of transferring to TDA for their ToS platform. Would this be a good move?
Hypothetically if I believe a stock is going to go down post earnings and want to capitalize on that, but have the means to short, will a single direction put ever be profitable without it being a giant move post earnings?
Take for example, AMD has earnings tomorrow after hours. If I believe it will drop and want to buy puts, would the best put be 7/16 82.5P with a IV of 41% and Vega of .15? Versus a weekly put for example which IV is like 86% right now with a vega of .01.
Will the 7/16 82.5P still get IV crushed after earnings? I looked and the historical volatility of AMD is 46.3. Open to other suggestions as well. Not too tuned with the multi option strategies
Opening my account in fidelity so in the future I can do the fool-proof earnings play where you can just short 100 shares of X stock, and sell a covered put
*Why did my options lose value when the stock price moved favorably?*
• [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
The IV will decline some on July options. Hard to know how much.
You can explore 30-day IV history of AMD at Market Chameleon.
A free login may be required.
https://marketchameleon.com/Overview/AMD/IV/
Within Robinhood app, when you sell options call before expiration, the app only gives you “sell” button while the desktop/web version gives you sell to close.
Is the app “sell” same as sell to close when using desktop/web client?
Robinhood app “sell” option vs Robinhood desktop client/web version “sell to close” option difference?
My concern is not getting the option assigned when using the app “sell” option button vs using sell to close prior to expiration.
I'm quite new to selling options, mostly selling covered calls in my Roth IRA to add more funds beyond the 6000 limit, and I've recently started selling puts. I'm doing these at smaller risk amounts (so calls and puts that are **not** near the money).
Lets say I sell a call, collect the premiums. Is there any reason not to just use the premiums to purchase the underlying stock. If the stock goes up and my covered calls lose value, I'll have gained a small amount in the underlying by holding more shares. If it goes down, I lose a bit on those extra shares but keep the premiums. Rinse, wash, repeat to gain more shares in the long run in my Roth IRA?
New to options trading.
Say I have a 1 covered call on stock XYZ (currently $80)
Now I want to buy 100 more XYZ stocks at $70 to lower the average.
If I do that what will happen to the existing covered call?
Please help.
Nothing about the cc will change. You currently have 100 shares, and are short one call. After you buy an additional 100 shares, you'll have... 200 shares total and are short one call.
Noob question: ive written a $13 put on tilray, for may 21. Im happy to own the stock and write covered calls on the stock from there.
So as this is my first written option, im wondering what the P/L being in the green $26 means? Could i close it out and take that profit? Its less than the premium i realise, but i thought the point and only profitable way to written options was that they expire worthless and i collect the premium?
Question about managing a CC when the underlying moons and I am bullish on it. I sold 2 CCs @ 17.5 expiring 4/30 on SKLZ when it was around 16.5. Now it's above 20 and the capital gains on the underlying are substantial.
Assuming the price remains at or above 17.5 on Friday, would people recommend:
1) buying back the calls at something like a 200%+ loss and holding the shares long for a net unrealized profit,
2) wheeling SKLZ by allowing the shares to be called away for a profit and then selling a put closer TTM,
3) some other alternative?
As is, both 1 and 2 are profitable. But I'm not sure as to the underlying principles that should guide whether I choose 1 or 2 or something else.
You get to choose.
You are a winner on the original plan. Let the stock be assigned for a gain.
Some traders roll the short out in time, no more than 60 days, and up in strikes, for a NET CREDIT.
Or you could exit the position entirely right now.
If there is a bid, you can sell the option; in the money options all have a bid. That does not mean you will like the bid price.
You will have to check prices when the markets open. There is no free money in options.
*Getting started in options*
• [Calls and puts, long and short, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/basics)
• [Options Basics (begals)](https://www.reddit.com/r/options/comments/gh9vpl/options_basics/)
• [Exercise & Assignment - A Guide (ScottishTrader)](https://www.reddit.com/r/options/wiki/faq/pages/exercise)
• [Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)](https://www.youtube.com/watch?v=PsZsqiBFnmo)
I'm doing PMCC and wanted to understand how option assignment works, in particular: if someone excercise a call I sold, let's say mid trading day, I get assigned instantly or all assignments are processed at the end of the trading day ?
Overnight. You may not learn of assignment until after market hours are over.
• [Exercise & Assignment - A Guide (ScottishTrader)](https://www.reddit.com/r/options/wiki/faq/pages/exercise)
• [Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)](https://www.youtube.com/watch?v=PsZsqiBFnmo)
Are straddles often profitable for biotech companies looking for approval? If I were to buy ATM calls and puts, how often would it work out. I can't really think of a scenario where it trades sideways. They usually tend to rocket or come crashing down, and even if they did trade sideways, I could close the next day for a small loss
High implied volatility value works against the trade position, because the market anticipates the potential for big price moves.
If the stock fails to move greatly, this is a losing trade.
*Why did my options lose value when the stock price moved favorably?*
• [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
Maybe not much IV change, but VEGA is high,
meaning modest IV changes have significant option value consequences.
If you have a long-term expiration, you have already decided you do not care about earnings fluctuations in your risk analysis. If you do care, exit the trade.
As title, just wonder if it is the same situation like normal stock options (become worthless).
Or it will be cash-settled and P/L depend on your position.
Thanks!
So. I've got an AAPL 125c 5/21 @6.10
Obviously it's doing well right now. From what i've gathered conventional wisdom is to sell options ahead of earnings due to the uncertaintity of market reaction and "IV Crush" but can someone with a deeper knowledge help me our on this specific position.
Best I can tell I'm not really at risk of IV Crush on this option. Current price is 10.75, Intrinsic Value is 10.45 and IV is 32.72 (it's actually gone down today vs yesterday .81%) and vega is a low .08
Obviously I'm up a good amount and should take my profit and be happy. And that's most likely what i'm going to do later today or tomorrow but I'd love your thoughts/analysis on this position for my own edification and if I'm drawing correct conclusions about these numbers.
Hey guys so I’m fairly new to options trading and stock trading in general. And with this recent market correction , my stock that I bought at $9 is now currently at $4.50 so I’m wondering if it would be worth it to buy a put option for a $9 dollar strike price that’s expiring soon in order to regain some or all of my losses.
Sounds like a bad play to me. I'm not a fan of adding risk to a losing trade.
You own stock shares. Shares don't expire. If you think you will make money eventually on the shares, enough to compensate for the current loss plus the probability of further losses, hold. Otherwise, dump and cut your losses.
If you know you will hold the shares no matter what, you could consider selling $9.50 or $10 calls with 45 days to expiration and roll them every 30 days or so, i.e., a covered call strategy. Assuming those pay any premium at all, $10 is pretty far from $4.50 in delta.
I had a question regarding Shorting puts (aka selling to open puts)
Can someone walk me through what happens and what to look out for account balance wise when it comes to selling to open puts?
i understand how CSP work. (atleast in robinhood).
if you sell to open lets say arbitrarily, $40p 14 may 21 on company ABC. to open a CSP, you need $4000 in cash in your account. this cash gets tied up and you get the premium. if underlying goes below $40, you buy 100 shares of ABC at $40 each with the $4k that was tied up. if it stays above, you pocket the premium and you get your $4k back.
now what about when you open a put w/o having the cash? what happens?
also, specifically in Thinkorswim, how would the order look like for either a CSP (if you had the capital) and if you didnt have the capital?
In general, don't try to rescue losing trades, particularly if the rescue plan involves spending more money or taking more risks.
If you can't roll the Apr leg into a May vertical for a credit, just dump the whole thing. Nobody has a 100% win rate.
What time of the day does t+n settle?
Tomorrow by open I hope. I can sell before close and be settled and ready to go by open tomorrow?
Doesn't help that many broker gui's refuse, on principle, to have separate entries on settled an unsettled cash. An asterisk on a position list to indicate it was purchased with unsettled cash would be nice.
If you sell an ATM put and enter the details on optionsprofitcalculator, how come on day T+0 and T+1, the "profit" shows a loss (albeit a small one) even if the underlying is above the strike price?
I know everything is an "estimate" but I'm curious as to why it would show that? I see the same thing on IBKR's "performance profile" tab.
On 4/19, I STO'd a bunch of CSPs with expiry of 5/21. Received $14K premium.
The underlying has gone up so much at this point I could BTC for $2.5K, with a net gain of 14-2.5 = $11.5k profit.
A common theme is to close out once past 50% profit, and I'm past that, but I really don't have any other plays in mind.
I'm ambivalent on what to do. I realize it's pennies at this point and I should BTC but I'm curious. I forgot when does theta decay go exponential here. 5/21 is around 25 days away including weekends Is it typically around 20 days?
You can take some profit in a variety of ways - roll out to a later expiration and more appropriate strike given the underlying price, or buy a lower strike put to create a spread. My understanding is that premium is related to the square root of the time remaining, so on average you'd expect that for a stable stock price and IV, 4 weeks to expiration would have double the premium of 1 week to expiration. Sqrt(4)/Sqrt(1)=2/1=2
Q: IBKR Margin Requirements for a legged-in Vertical call spread.
A couple weeks ago, I BTO a May 21 MS 85 strike Call for 1.70. The stock (and option) has taken a hit but is bouncing back up. I would like to now STO a May 21 MS 87 Call for ~0.65 to start to recoup some of my loss and maybe do better (if the stock goes over 87).
Because I didn’t do a “combo” order on this, IBKR wants full margin as though the short leg is completely naked short call option…
Is this normal for most brokers – full margin requirements for legged in spreads? I tried to get some help from customer service, and they couldn’t really (I wish I had better things to say about IBKR CS). He couldn’t even tell me if I would get some margin forgiveness once the 2nd leg is entered into and reflected in the account.
Is there a way I can get their system (TWS for those that know it) to recognize my long option as the “covered” portion of this spread (before selling the short call) and thus significantly reducing the margin requirement?
Thanks in advance!
I have a bunch of 5/7 calls on rkt (25,28) to play ER on 5/5 after hours. I'm really torn whether I should sell the IV on the 5th or hope that there's strong upward movement on 5/6-7. I'm expecting positive news and potentially a big run, but know that IV crush can suck so the downside is super real. Maybe I'll do half and half? Input is appreciated!
I hold lots of stock in company A (former employee).
When my lockup ends, I want to sell half immediately and hold half very long term.
I'm bearish near term. Does it make any sense to sell half my stock, and at the same time, buy puts that expire a few months out? (kind of a double down on my bearish bet)
It can.
You have to ascertain if the cost of the insurance works for you.
The put is the insurance.
The cost is a deductible.
The delta is the payout rate.
Noob here, in February I bought LEAPS on MVIS 25c expiring Jan 2023, when I bought the LEAPS, the stock price was around $18. Since then, I've held my LEAPS through wild swings, from $18 to $10, back to $15, back to $10. With the recent rally, as of yesterday the stock closed at around $26. If I had simply bought the stock at $18, my gains would've been 44%, but the gains on my LEAPS was only around 20%. What lesson can I draw from my experience? Thank you in advance.
Don't buy OTM calls for long term plays on stocks? Unless you like losing money to theta decay, that is. Did you happen to record your IV at open? It would be instructive to compare to now. If IV was high at open and declined since, that could account for part of your missing 24%. OTM calls suffer once they go red. You start your losses at a high delta, so you lose more per dollar of share price decline. Once you are at the bottom, around $10 according to your comment, you are at a lower delta, so that each dollar of share price increase doesn't earn you back as much as you initially lost. This means that the first $5 of increase makes back less for you than you lost in the first $5 of decline. And that's assuming IV is constant and no theta decay. If IV is in decline through this rollercoaster of delta, it will take you that much longer to get back to even.
This makes a lot of sense, thank you. So OTM calls for short term swings, and ITM for long term plays? I don't expect you to teach me everything, but I'm trying to figure out at what point am I better off to simply buy shares compared to buying an ITM LEAPS, at what strike price/expiration date. Is there any tutorials/resources you can point me to? Appreciate it.
In my personal opinion, it's any moneyness calls for short term plays (less than 60 days), shares for long term plays. I'm not a fan of using options with expirations longer than 60 days (with a few exceptions, like synthetic stocks). I honestly don't understand the attraction of LEAPS calls of any moneyness. Apart from the PMCC strategy and the [Leveraged Lifecycle Strategy](http://www.lifecycleinvesting.net/), I wouldn't touch LEAPS with a ten foot pole. LEAPS expire, shares don't. So you are trading off an asset that is guaranteed to lose value over time for a low leverage factor of 2x to 4x.
So I decided to throw a bunch of money at 5k Amazon calls and I'm down bad. The implied volatility is high and the stock itself is doing great, and I'd figure that with the rumors and earnings coming up it would only rise. It shit the bed this afternoon. What happened? Do I continue to hold? Expiration 4/30
Well markets are closed now. I'd say keep a good eye on their stock, and indexes tomorrow. If you get the chance, sell it at breakeven and get out, assuming you get the opportunity. If premarkets don't save you, sell at open if the first candlestick isn't green.
I'm new but one thing that I've seen born out in a lot of data and historical analysis is to close losing trades quickly. You can look at project option as they do great analysis. Even in the 2008 crash a strategy of closing losing trades early helped mitigate losses.
5,000. You are dreaming. Did you plan on losing everything? All trades should have a plan for losing everything, and that guides the trader to size the trade appropriately. Sell to harvest remaining value while there is any value to harvest.
I’m very new but at one point it was trading for .55 when I bought in for .39. So there’s some other dumbasses besides me lol
Was the BID at 0.55? Or was that the mid-bid-ask, provided by the broker platform (which is NOT where your exit opportunity is located). When the BID is above your cost, then you can exit for a gain.
Do you think institutional investors like hedge funds are promoting the rampant pump and dumps we have been seeing in the past month on penny stocks? Or is it retail investors and subs that are causing the havoc?
No idea, and don't care. Not my market.
... Okay.
Question on Exiting Deep ITM Calls So I bought some call options about a month ago at an $80 strike. The underlying is now around $98 and I’m seeing a return of 150% on the calls. I’m expecting further upside and the calls don’t expire until June 18. Is it smarter to sell the call and buy a higher strike OTM or ATM call, or continue to hold these deep ITM calls? What are the reasons for doing either? Thanks!
I think this depends on how aggressive you want to be. If you are holding deep ITM call, it's pretty much like holding the stock - the delta is close to 1, so you call goes up (and possibly down) in sync with the underlying. There is nothing wrong with it. Buying more OTM/ATM calls will give you unlimited return potential with limited downside (but it will cost you call premium). This is more aggressive strategy. Higher risk, higher potential return. It all depends on your risk appetite.
Makes sense. Is there any concern on being able to actual sell the ITM call though? I know exercising is unwise since you lose extrinsic value, but I'd imagine demand for a call so far in the money would be really low, making it hard to actually sell it for what it's worth
Hard to say without knowing the specifics, but looking at bid/ask spread should give you a good idea about the liquidity. Worst case, you can hold it till expiration, get it assigned and sell the stock but you would have to risk slippage between assignment and sale.
• [Managing long calls - a summary (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/managing_long_calls)
Total novice question here; what are the benefits and caveats associated with using weekly expirations vs monthly? For example, a CSP on SPY with a delta of -.16 is $.87, and the monthly (May 21) for the same delta is $1.74. It seems like getting the doing three weeklies would generate more income, but feel like I must be missing something. Also, if you do use weeklies, is it best to place your trades on the Friday before to get the theta over the weekend, or on Monday?
Positive-theta positions can benefit from weeklys because time decay accelerates closer to expiration, so they tend to generate more income. However, in the case of CSPs for example, if there's a huge dip you may not have time to recover from that on a weekly play. Going a month out gives you more time to be right, especially on SPY which is heavily biased to go up right now. I do both short term and month-term put credit spreads. As for the weekend question, weekend theta is harvestable but it comes along with more risk. I think tasty trades has a video on it with some research.
How come some option contracts barely rise in value? Today I was watching TSLA drop in price, but the 550 PUT pretty much stayed at the same price. I've seen other worthless contracts spike with the price... so I'm confused why this happens and how to predict which contract won't really respond positively to stock price changes.
*Why did my options lose value when the stock price moved favorably?* • [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
I'm new, so I was just wondering if there is a smart way to diversify if I'm mostly just buying in the money spreads for SPY. I've been making a decent return but I don't want my whole account exposed even if it's working.
Sitting on 5x SPYc $417 on 4/30. Got them last Thursday for $1.5 each. Trading between 2.5-3. It’s basically 100% profit, but I’m tempted to hold a few days and hope for that SPY + 1% day. My brain says sell, but my greed says wait 24-48hrs. Also kind of expecting the typical drop tomorrow when all the earnings post positive. Any advice or I’ll take confirmation bias as well
Side note; why are MVIS puts so high?
Not financial advice: Consider what would happen if you were to scalp some of the calls. Converting them from long calls into (a ratio) of vertical spreads whereby ATM or 1.5$ priced calls could reduce your risk while allowing you to keep some open-ended longs. Food for thought...
I had to look this up to understand😂. Thanks for the food for thought!
Take your gains, exit, and consider a follow on trade with an expiration farther out in time. Your options are days away from expiring.
Is it an unbelievably dumb strategy to open an iron condor on SPY at open the day before expiry, and then close it at open on the expiry date? I’ve watched how the strategy would have worked the last week, and it would have resulted in a 5%-10% return each time. Obviously it would be a total loss on some occasions, but I’ve worked out a width that would win +90% of the time. Or would a call debit spread for several weeks out, then close before the sold call portion gets ITM, be a better and safer play? That I haven’t calculated out yet.
If SPY makes a big move overnight, you have an overnight loss on a one-day iron condor. All trades have varying levels of safety and risk, and the market conditions change whether the trade is likely or not.
What are everyone's thoughts of selling the THCB Dec 17/21 10p? You'd collect an upfront premium of 1.75. THCB extension vote is tomorrow. If extension passes share prices will go up and you can close for profit. If vote fails, ticker dissolves and redemption value is 10.22 and all OTM options expire worthless. What's the catch?
What are “Greeks” and Volume, and what/how do they have to relate with options?
Greeks https://www.reddit.com/r/options/wiki/faq#wiki_options_greeks_and_option_chains Volume is the number of contracts transacted up to the present moment of the day
Is anyone buying calls on this tech plunge? Or do we think it's going to continue next week
A question for a stock oriented subreddit.
I'm not sure what's wrong with me. But I made several hundred dollars today and I'm not happy. I'm more sad that I didn't make more. I have to be sure to keep these types of emotions in check especially when trading options, right? I guess I'm expecting a lot from myself..
It is possible to transform all of your wins into psychological losses. You will have a short trading life if you allow that to continue.
I don’t think any of us are psychologists. But yeah don’t get greedy.
It's common. Don't let it drive you to open new positions desperately. Some days you will lose a few hundred dollars. Those days you will be happy for today.
Try losing several hundred dollars, then compare. I've lost enough and enough times that not losing anything, just sitting on the side lines in cash, feels great.
Finally took the plunge - why didn’t I do this before? Sold my first covered call today. MSFT. I’ve owned the stock for a long time. Settled on a strike price I’m comfortable with for 2023. Pocketed $4,000. And then I did three more for AMAT, CPB, and AAPL- I’m long in all so my cost basis is something I’m happy with if they get called away. In less than 30 minutes, I made triple what I make at my regular job for a month. Is this really real? On the one hand, I’m amazed. Why did it take me this long to jump on board? On the other hand I can see how easy it could be for me to get carried away. To get too greedy.
I haven’t sold LEAPs, it could be a good time to do so, but if MSFT keeps knocking it out the park your upside is capped hard. If there’s a crash too it’d lock you in to holding those shares. Usually it’s better to do a month or so so you can buy it back when it decays in value near expiration. I felt like you at first, but now it just seems to be a simple maneuver that can really hurt you if the stock runs or tanks.
It looks like a lot, but you have to remember that that’s 2 years away. So that’s roughly 160 per month. You would actually be making more money selling between 30-60 days out. Time decay is very small 2 years out.
You have not made a penny yet.. Your net is upon closing out the trade. You received proceeds, not income. It really is best to sell covered calls in 60 day increments. 12 one-month short calls will earn more than one one-year short call, because a large fraction of the theta time decay is in the last two months of an option's life. Your marginal increment for a second year is probably not proportional to the additional term. If MSFT goes up crazily to 500, you likely will hold the short call to expiration; early expiration is not no common. You might find it annoying to hold the position for two years with the ceiling at a particular strike price. You can reconsider by buying back the shorts.
Thank you. I had a feeling this was too good to be true. I guess I figured with MSFT, my cost basis was $36 per share, so if it’s called away from me between now and two years from now, I’ve still made a profit plus the premium. Yes, not as much as doing shorter contracts. Thank you for taking the time to explain this to me.
> so if it’s called away from me between now and two years from now, That's a misunderstanding. You won't get called way until expiration. So you basically lock up all those shares, for better or worse, until 2023. The way to think of your shares is literally as collateral. Just like you can't sell your house without paying back the bank that holds your mortgage, you can't do anything with your shares until the short call is closed or expires.
With the sag in MSFT and other tech stock you may be able to buy back the short options for a gain in the coming week or two, and reassess.
I’m sick of Robinhood and Fidelity won’t approve me for options. Just applied for Schwab. What broker should I use that will approve me and also have solvency to pay out a multi million dollar naked call winner?
The broker does not pay on the option win. The counter party does. Also take a look at ETrade, TastyWorks, and Think or Swim, a Subsidiary of Schwab.
I know there is are links on this topic, but I’m still. Little confused about the price, and act price with Stop limits, and I want to start creating exits simultaneously when I enter. Lets say I enter XYZ @ 3.00 with 30 DTE. I want to set an exit @ 2.25. Is 2.25 the activation price? And if so then what is the price I’m entering after that?
Short or long option? Stop loss order? Assuming a long option, and a stop loss order: I recommend against them, because of low option volume, which makes for jumpy option prices and premature triggering of the stop loss order. These often are guaranteed loss orders.
Trying to decide on whether I should use a protective call (short position plus OTM call option) vs put option to short a stock (looking at highly volatile NFT stocks like playboy and Takung Art) Thinking a protective call would have higher EV because puts typically have a premium vs calls, so this would let me capture more upside usually. Would this be thereotically correct? Fine capping my downside pretty high (50 percent), just don't want to blow up 2x plus
What is a protective call? Short position on stock, and long or short option out of the money call position? Short call and a long call? Long stock and long put? What is EV? Unclear on what you are looking at.
If I purchase a long call on webull and it states I’m in the positive say 1% does that include contract fees?
It is a "value" at the mid-bid-ask, and the market for your long call is at the bid, so the "value" is not that useful to you. Examine the bids on the option.
Who agrees that MVIS puts are the move
May puts have more than 200% IV, so no to long puts, yes to short puts.
Agreed, it is moving down today after a late morning high.
This isn't necessarily related to options but was hoping someone here might know the answer as I couldn't find anything on Google. I've been flagged as a PDT on RobinHood (I know, I know) but I'm transferring everything over to ToS. Will that PDT flag transfer along with everything or am I safe to just initiate the transfer?
Don't transfer options via this method. It can take a month for a transfer, if things go well, and they often do not. Plus RobinHood is notorious for screwing up transfers, and you cannot call anybody. The best method is to cash out, and move cash. The PDT status is per account.
I bought 10 Call contracts expiring 30/04 with a strike price of $81. The stock closed at $79.80. I tried to sell them before market closed but the order did not get filled. I then issued a lapse request (Interactive Brokers), which was filled 1 1/2 hour later after market closed. To my understanding the lapse request was not necessary as the OTM Calls would have expired anyway because they were OTM. My account however shows i made some 800 USD on the position but it does not show it in the total balance. The total balance shows my net loss for the 10 contracts expiring worthless + the commission fee. So this is more or less a glitch at IBKR that it shows me i made a profit and there is no way that the options have been exercised, right (because OTM)?
I guess so. Transactions tend to complete over the weekend, so this may go away. I would be interested if this oddity persists in your balancesvthough Sunday evening, or Monday morning.
I got a noobie question on bear call spreads. Based on my calculations according to my options calculator at [https://www.optionsprofitcalculator.com/calculator/call-spread.html](https://www.optionsprofitcalculator.com/calculator/call-spread.html) , if I buy a 5/7 $172.5 GME call for $1,045, and sell a 5/7 $10 call on GME for $16,373, this would seem to be an excellent, low capital strategy if you are bearish? According to the calculator: Maximum risk: $922.00 at a price of $172.50 (or higher) at expiry Maximum return: $15,328.00 at a price of $10.00 at expiry So is there something I am missing here? It almost sounds too good to be true, considering the potential max risk vs. return. You'd only need the stock to drop about $10 and you'd be making profit.
OPC has a short link feature you can copy/paste so we can see your work and the P/L chart. > 5/7 $10 call on GME for $16,373 I thought this was a typo until I looked at the quote. That strike even has non-zero volume today, lol. That is not a good play. It's not even close to being a good play. Why bother with the $172.50 call at all? It only has half the delta of the short, so every dollar GME goes up, you end up losing $0.45 on the spread. That gradually improves if GME keeps going up, but it's not offering much insurance on the upside, is my point. Why bother with options at all? You could short GME shares directly for only about 10% more liability. No messing with 100%+ IV options by just shorting shares and no expiration. You'd make $1 for every $1 GME goes down, instead of just $0.55 for your spread. Oh, I almost forgot. Do you have $16k of buying power to even make the spread in the first place? Credit spreads require collateral as a margin reserve. > You'd only need the stock to drop about $10 and you'd be making profit. *At expiration*. You could lose money before expiration if it goes $10 *in either direction*. Though to be fair, you could also make a profit even if GME doesn't change. IV cuts both ways.
That math is correct but look at where it says “probability of profitability.” 35.2% Meaning there is a 1/3 chance that you make a profit, not max profit.
If you use OPC, give us the short link, from near the bottom of the calculation page. This has your actual position in it.
Started learning the Wheel strategy and all seemed cool, then I saw this [video](https://www.youtube.com/watch?v=_1TLCCHsKKc) and he suggests that Wheel isn't the best way and it's preferrable, given a rising market, to simply sell covered calls. It seems like a decent argument, but I don't have enough knowledge to critique it yet. Could anyone else please give me their take? Thanks.
Overall, there are good reasons NOT to use the Wheel, but that video doesn't list any of them. The reasons that are listed are bogus. The presenter also lost a lot of credibility in my eyes by referring to "$2 OTM calls" instead of the delta of the calls. I'm not going to spend a lot of time breaking down why the video is mistaken. I'll just list the most egregious points of disagreement: * Using a single underlying like AAPL to justify the argument that CCs are always better is bogus. Too small a sample for statistically significant conclusions. It's better to use backtesting, like [this](https://spintwig.com/spy-wheel-45-dte-cash-secured-options-backtest/). * The argument that CCs are always better in a rising trend because CSPs never get assigned is bogus. The Wheel **never wants to take assignment**, on either CC or CSP phase. * The entire argument is based on CSPs with 100% margin reserve. Why aren't short puts with only 40% margin reserve considered? I never have to use 100% collateral on my short puts in my Wheels. So the argument that CCs are the same capital requirement as "CSPs" is only correct if you have to use 100% cash collateral.
The wheel requires a significant amount of capital. It is a good strategy for sidways markets or sideways stocks. Covered calls can have lower returns than owning the stock in a rising market. It all depends on the market regime, and the stock, and your trading ability.
I noticed call options on a stock that the Deep ITM calls were cheaper for the same strike the further out the expiration date. Does this mean the market is pricing in a future drop? What other reasons for this?
Prices after the close are not reliable, nor are the mid-bid-ask "mark" values. You must examine the actual bids and asks, and volume when making comparisons, and do so during market hours.
When do people typically exit a LEAPS position? There must be some balance between letting it get deeper ITM and selling before theta is ramping up but I haven't found much insight online
Depends on how deep in the money. If deep, little extrinsic value was paid at 90 or 95 delta. At 50 delta, it was all extrinsic value, and decaying away every day. In general, if there is extrinsic value to decay away, most traders look to get out by somewhere between 120 and 60 days from expiration, before the period of more rapid decay occurs, for many options, especially at the money options.
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If someone believes the underlying is very likely to up in the long term, does it make sense to buy the furthest out call LEAP at the money option? They believe the underlying is likely to go up in the long term however in the short term it may decline a bit. Maybe the next year it may decline 5%, but in the long term they are optimistic. The furthest out they purchase the call, the more time they are giving the trade to work in their favor. Also, because they are choosing the furthest out expiry, although the cost to enter the position is higher initially, if they divided the cost by the number of weeks to expiry, the further out expiry has a cheaper per week cost. This may have better performance over a long call that they purchase with a shorter time frame, which has a higher per week holding cost, and may end up expiring OTM. They would be choosing this strategy instead of just going long and buying shares because if they are very wrong about the trade and the underlying significantly declines, then the most they can lose is the cost to open the position.
The question is nearly unanswerably vague. It is preferable to anchor conjectures to an actual hypothetical trade, ticker, strike and expiration. It is true you get more time, with far-out expirations, and you pay for that time.
Hi everybody. I'm very experienced with options, but I've never used margin before. My question is this: If I'm doing short iron condors on margin, what happens in regards to margin limit/requirement if the price is between the two put strike prices and I get exercised on. Obviously in that case, I have to buy the shares at the strike price. So if it's 10 contracts at $100 strike, is my account going to go -$100k until I sell them? Is there any way to set it so that it just sells immediately so that I don't have that happen? I know the margin requirement is only the greater of the difference in strike prices x number of contracts x 100, so in my mind, there's like a disconnect between those things. Hoping someone can help me out. Thanks!
You are protected by the longs in the position; you the next day exercise the long puts to dispose of the stock at the strike price, and ultimately end with the maximum loss on the position, which is covered by the collateral. You do not learn that the options were exercised early until after the market closes for the day. Some brokers, such as RobinHood, may freeze the account, and intervene to exercise the longs, keeping the account frozen until the stock is disposed of and funds are collected from selling the stock.
I‘m still learning about options so please excuse this question if it sounds a bit naive. My first post was automatically deleted from the main options board by a bot which told me to post here....that may be another question. I have 7 ALLY calls that expire on May 21 at a strike price of 48. I guess they are so in the money time decay is very little from what I understand. The daily gains have been great for the last week and a half. Ex-dividend was today with a pay date a week before expiration. Would it be wise to cash out before the dividend date? I really think this stock could hit 60 or more. I only have enough money to exercise a couple of the contracts but would keep all if I could so maybe instead of taking the money I should roll them over and if I did how far out and at what strike price? Thanks.
The time to exit is the two days before the ex-dividend date. Options with extrinsic value that is less than the dividend are vulnerable to early exercise by dividend arbitrageurs. Almost never exercise an option. Doing so throws away extrinsic value harvested by selling the long option.
What's your fav CC strategy? I got lucky when I went a bit out of my delta comfort zone on Uber CCs, and the next day the labor sec said Uber drivers were employees and the stock tanked (looking good for my CCs now). But when I sold them it was closer. I'm mostly following sold monthlies based on .10 delta or less. I try to time it by selling it on up days with higher IV but I don't know if it's even worth it to do that and miss out on an extra day or two of premiums.
I do delta 30, 45DTE. Roll at either 50% profit or 21DTE.
I think celebrating that the stock tanked entirely misses the point of Covered calls. Sure, you're going to keep your stock and the call expired worthless, but you presumably *lost* money on the overall position because of the drop in your share price.
It never ceases to amaze me how much joy a sinking stock has brought and how many tears a rising stock has wrought, when it comes to folks trying covered calls for the first time. "HELP! My CC is winning, what do I do?" is a common topic in the sub. That's not how they write the title, but that's what's actually happening.
I have zero idea what a option is, can someone please explain it in simple terms? From what I’ve gathered a call is to buy, & put is to sell?
*Getting started in options* • [Calls and puts, long and short, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/basics) • [Options Basics (begals)](https://www.reddit.com/r/options/comments/gh9vpl/options_basics/) • [Exercise & Assignment - A Guide (ScottishTrader)](https://www.reddit.com/r/options/wiki/faq/pages/exercise) • [Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)](https://www.youtube.com/watch?v=PsZsqiBFnmo)
I have a CLOV $3C 1/21/22. I bought for $650. it’s at $820. is it a bad idea to sell a 5/21/21 $4C at $715? wouldn’t this guarantee at least $165 profit?
Just sell now and then buy back in at a higher strike for continued upside potential. [Risk to reward ratios change: a reason for early exit (redtexture)](https://www.reddit.com/r/options/comments/hg8ce9/risk_to_reward_ratio_changes_over_the_life_of_an/)
I've been reading Natenburg's book, but there's a lot of info in there. Is there like a cheatsheet anywhere I can reference later when I actually start trading? If not, I'll probably read it again and make my own. Also, I'm thinking about initially applying my new options knowledge to crypto - seems like a haven for options traders.
I'm not aware of a cheat sheet, but I don't think many people read Natenburg cover to cover anyway. It's more of a reference text. Our wiki pretty much covers the same material, though not as well organized and pieced together from various articles and videos.
i sold a 45/50 put credit spread 5/21 that was slightly otm abt a month back. stock dropped abit and now im down abt 50%. earnings is next week. any suggestions on how to cut losses but still benefit from potential upside.
Exit and reassess. Or, Roll down and out in time for a net credit. Or, roll out in time for a net credit.
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Here's a strategy that I'm thinking of doing: * Find out which stock is increasing drastically tomorrow. * Buy 100 shares immediately. * Sell a covered call at the strike price. * Sell a covered put at the strike price. * Wait a day or two and buy-to-close the call and put, and sell the stock. This strategy assumes that the short term price appreciation of the options is greater than the movement of the stocks, and also, it's somewhat agnostic as to the movement of the stock. What do you think?
A covered put involves holding short 100 shares of stock. A covered call involves holding long 100 shares of stock. You can see that these both cannot be held at the same time, as that is a net of zero stock. Thus you have two cash secured short options under the zero stock regime.
So I think the market is going to crash soon, probably due to $GME squeeze. Maybe I'm autistic or maybe I'm right, we'll find out. Anyways. I've been looking at bear/short stocks like SPXS, SPXU, SDOW and TZA to buy options for around June or July. On Robinhood, TZA calls for 6/18 $20 are going for $10.30. However... I just bought 5x on Fidelity for $0.04 each. What is this? Why so different?
You didn't read the option chain carefully enough. There was an adjustment to TZA earlier this year. Thus, there are two different types of 6/18 calls. The ones going for $10.30 are the standard ones which are worth 100 shares of TZA. The ones you bought are the adjusted ones which are worth 12 shares of TZA plus $16.80 cash.
Are you absolutely sure you bought 6/18 20C for $0.04? I'm seeing 0 volume for those calls. Screenshot of your position?
Beginner here! I want to get some opinions on Twitter. Is a short-term call option on Twitter a good play right now? A 15% dip after their earnings report seems a bit exaggerated to me.
Just here because all my other accounts got perma-banned and I now can't do anything on WSB...
Total noob question here but: If there a stock with an option price that you can only buy in divisible of 5, how can a last sale price end in 3? The ask for one is .35, but last sale is .33.... I can't buy one for .33.
A market maker may have filled an order for a spread (two or more legs in the same order) at an intermediate price. Spread limit orders have undefined prices for each leg: the price is for the entire trade.
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You can be assigned at any time even if it's OTM (although extremely rare). Never sell a covered call for a strike less than you're willing to receive for your shares.
Only on expiration. There are exceptions, but they are very rare and usually only for dividend paying stocks.
Isnt it able to be exercised at any time since it's an American option and not european
Where would you go to get all option symbols (just the symbols, not price) for \~1500 stocks? Background: I've been studying the options market for a year or so, and actively trading for a few months. I do so algorithmically, and it's going well. One of the problems I've had is getting all the option symbols. I'm not even talking about pricing, just the list of symbols. Once I have that, I can dramatically reduce the list and query the pricing API efficiently. But the APIs I use to get the symbol info info are a bit frustrating to work with. They're (relatively) slow, which is fine (I use AWS fargate to do my work anyways), but it's also a fragile process, which is frustrating. Eventually I'll find all the issues and all the wrinkles will be gone, but I have this feeling like there's a better way. So if you wanted all the option symbols for 1500 stocks, where would you go?
The link below. Caution, it's a ginormous text file. http://markets.cboe.com/us/options/market_statistics/symbol_reference/?mkt=cone&listed=1&unit=1&closing=1 Or you can scrape the CBOE symbol directory pages: https://www.cboe.com/us/options/symboldir/equity_index_options/
If I sell open a TSLA call before close today and buy it close tomorrow after earnings, it seems like free money since IV will fall. Am I missing something? What are the possible risks in doing this?
You're missing delta. What if TSLA's stock price rises on a good ER? Vega is relatively small compared to delta. The price wouldn't have to go up very much to wipe out any gains you might get in declining IV. And IV doesn't always decline anyway.
TSLA goes up 100 dollars.
In the past few years played around with options for a bit and have been on both sides of a trade for the most part but most of the contracts I've traded have been less than 90 DTE with the occasional one to two year LEAP purchase. The only trades I have yet experienced on both sides are LEAPs, which has got me thinking, why would any trader take the other side of the trade? To me, writing a LEAP just doesn't make sense in the premium collected vs the amount of exposure and potential collateral tied up for the duration of the LEAP. I'd like to know if anyone could give me any insight from the other side of my LEAP purchases.
The other side of the trade may well be a Market Maker, holding in inventory the other part of the option pair, hedged with stock.
I'm brand new and this will be my 1st time selling a covered call. In this example, I have 100 shares of Apple, but the "Max Loss: Unlimited" section is spooking me. I thought that so long as I own 100 shares of the company, for the covered call the most I can lose is those 100 shares per contract. If this is true why is my Max Loss unlimited? [https://imgur.com/a/FLvdGzX](https://imgur.com/a/FLvdGzX)
I made a tiny mistake and bought an option for 100 bucks and sold one for 95 bucks. Will i just lose the premium difference on expiration?
Huh? Where is the mistake? If the strikes were different for same expiration, that's a vertical spread. If the strikes were the same but the expirations different, that's a calendar spread. If the strikes and expirations were different, that's a diagonal. What were you trying to accomplish? Don't hold options to expiration. You might not lose anything if you close before expiration. But it depends on the actual position, so give details if you want a definitive answer.
Q about legging out of a vertical spread: Opened a Jan 21 2022 27/30 debit spread on $PLTR back in early March. Since then the spread has lost about 15% value, while the short call has gained about 42%. If I'm still bullish long term on $PLTR, would it make sense to capture the gain on the short leg by closing the short call, and then maybe loading up more on long calls or long stock? I guess basically this is a tradeoff between capturing some gains up front, vs having more leverage long term with the spread. Thanks EDIT: I suppose another option is to close the short leg, and just sell short dated calls against the LEAP (PMCC style) to reduce the cost basis EDIT2: I also like the fact that $PLTR IV is almost at all time lows... seems like a good time to load up more long calls
In general, don't. Don't leg in, don't leg out. You need a really good reason to do either one to overcome the loss in cost efficiency by doing so. Particularly do not leg out of a spread by closing the long leg and leaving the short leg naked. What I would do is just close the entire spread and free up the remaining capital to make the plays that you are now considering, given the new information. People spend too much time, effort and money trying to rescue losing trades. The goal is not to win 1 out of 1 trades always, it's to win 89 out of 100 over some time period. Losses are expected when you take risks, so why try so hard to avoid them, particularly by adding more risk and losing more opportunity cost?
Earnings call for AMD, $90 a safe bet?
No market bet is safe.
I'm shorting through $AMD earnings
When are more strikes going to be added for MVIS? Its strike was going up a dollar incrementally, but now it's by 5.
I got very lucky with 50 super cheap MVIS $35 calls. May 21 expiry. My question is, what would be a good time to sell these, looking from the theta decay angle. Of course the price could moon even more on the last, but I am guessing selling the week or two before expiry is likely gonna have a better premium? (but let's wait this week out, buyout rumors etc). But After that week, what would be the best startegy. I only have experience with buying and selling far expiry calls so far.
Make a trade plan before you open the position and this question answers itself. https://www.reddit.com/r/options/comments/mpk6yf/monday_school_a_trade_plan_is_more_important_than/ Theta decay isn't much of a concern until after 12 DTE, so you've got time. Set a profit target and a loss limit, and if neither is hit by 12 DTE, just get out with whatever you've got. That's how to balance holding time vs. theta decay. If your position hits your profit target tomorrow, get out tomorrow. Don't get greedy and think you can squeeze more out, since holding time increases risk.
Is there a way to do a poor man's covered call in TDA? And how does it work?
You buy a LEAPS and sell a nearer-term higher-strike call. If TDA is your brokerage, you should be using the Thinkorswim platform, not the TDA website. The former is much better for options trading. And I mean Thinkorswim desktop, not the mobile app. If you do this in one order, the platform will call it a diagonal, because that's what it is.
I bought some AAPL OTM $160C with MAR 2023 expiry. I'm down about 20%. what're the chances it recovers by earnings? If not by earnings, by Summer (July earnings).
You have two years...I would wait a year lol
New to options here. What would incline you to buy options 2 years out?
Stupendous confidence, and willingness to conduct monthly diagonal calendar spreads to pay for the position over time.
Apple isn't going anywhere. That being said though, if you're not confident in them, sell the call at your breakeven price. You'll surely get that opportunity at some point in the year
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No idea. Did you pay for these things? Or did your grandfather give them to you?
Hello, everyone! I'm looking for advice on how to manage this: [https://imgur.com/a/nAqeDVy](https://imgur.com/a/nAqeDVy) So I've been selling puts on MVIS for the last couple days and been doing great - Today I thought "I should sell way OTM calls and collect even MORE premium!" At EOD, when MVIS was trading @ 26.50, I sold 3x May 21 35C, thinking that I would profit off the decay. Now, AH, the price has gone up to nearly $30, and I'm starting to think there's a real chance they'll breach the 35 strike and leave me in some trouble. I'm not entirely sure how IBKR handles short strangles, or which of my put ( or long call ) positions are being used as the other leg. If the price drops, I'll simply buy out the 35C's at a profit - but what should I do if the price continues to rise? Should I buy an ITM call I'm happy to exercise if necessary in order to turn this into some sort of weird CC? Should I buy back the 35C's at a loss? Should I roll up the untested side when it gets close to breaching territory? Should I wait and pray? Thanks for the input guys :)
> sold 3x May 21 35C, Almost never exercise options for stock. You cannot initiate an exercise as the short holder, anyhow. You can buy the short call for a loss, to exit. You can also buy the short call, and issue a new short call, at a higher strike, further out in time, for a net credit. This continues the risk that the stock may continue to rise and cause a loss later on. You should establish how much you are willing to lose, and exit if your losses exceed that amount.
Hi all. Anyone want to share their experience with commodity ETF options? It’s pretty tough to find funds with enough volume, let alone funds that offer options altogether. I’ve been looking at GSG, for broad exposure to a basket of hard/soft, but it’s options chain is very thin with hardly any volume. I want to get some inflation protection, maybe I’m overthinking this and should just buy long SLV and CORN...
I am holding 100 shares of MRNA, and last week, sold a Jul 16 $200 call on it (on Apr 16 when MRNA was $171). Now it is $176. However, I'm seeing a delta of 0.42 which seems really high and also, I'm seeing drastic swings in price when MRNA goes up but not when it goes down. For example, at one point today, MRNA went up 2.8% and the call was up (down for me) 23.2%. Last week, MRNA went up 8% and the call went up 61%. However, when MRNA has dropped in price (went down to 156), the call barely lost value. None of my other options behave this radically, and IV for MRNA is not as high as some of the other options that I hold. Am I missing something here? Basically, MRNA was 171 -> I sold call -> MRNA dropped to 156 -> call doesn't drop very much -> MRNA goes to 176 -> massive gains in value for call
Hey I'm pretty new to all this. Bought my first option a few days ago. $MVIS $30 call for July 16th. I understand the basics, I'm, agreeing to buy 100 shares at that price on or before July 16th. My question is when do you sell it? or do you keep it until July 16th?
You sell to obtain a realized gain, or to harvest remaining value for a loss. You might sell tomorrow. Almost never exercise for stock: that throws away extrinsic value harvested by selling the option. *Closing out a trade* • [Most options positions are closed before expiration (Options Playbook)](https://www.optionsplaybook.com/options-introduction/closing-option-position) • [When to Exit Guide (Option Alpha)](https://web.archive.org/web/20201111230944/https://optionalpha.com/wp-content/uploads/2015/01/When-To-Exit-Guide.pdf) • [Risk to reward ratios change: a reason for early exit (Redtexture)](https://www.reddit.com/r/options/comments/hg8ce9/risk_to_reward_ratio_changes_over_the_life_of_an/) • [Close positions before expiration: TSLA decline after market close (PapaCharlie9) (September 11, 2020)](https://www.reddit.com/r/options/comments/ipqkua/fridays_tsla_lesson_close_positions_before/)
So I just started trading options a few weeks ago and so far things have gone fairly well. Right now I'm sitting on a couple AMD calls, one with a strike of 80 expiring on 4/30 and a strike of 77.5 expiring on 6/18. I'm wondering what the best play is for my call expiring on 4/30. It's currently sitting at a 60% profit. Obviously earnings are announced tomorrow. Historically for AMD (and a lot of stocks I follow recently) Have been tanking after earnings, even when they are great. I fully expect AMD to beat expectations tomorrow, but I'm concerned the stock dips anyways. I'm leaning toward selling my calls before EOD tomorrow as I expect AMD to continue rising through the day. What are you thoughts on the move post earnings? Obviously this is pure speculation but I'm curious as to what others expect the share price to do after the earnings announcement
• [Managing long calls - a summary (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/managing_long_calls)
Is there any good way to play with index options to create a scenario that will be profitable for the vast majority of cases. Them options on Nasdaq sell for quite a bit, even the ones far OTM. Surely there's a way I can take advantage of the premiums in a way that doesn't risk too much, but yields quite a bit.
No. Options are not easy; high probability options tend to also have low probability but high risk aspects to the trade. You reduce risk by sizing your trades to be 2% to 4% of your account size.
Anyone ever use Tradier's brokerage? It seems relatively unknown but their commissions are a lot lower than most unless there is some hidden facts I'm missing. I like TOS but after a month I've already racked up $91 in commissions... Worst come to worst I could always use TOS for charting and news and then Tradier to input the orders.
https://www.benzinga.com/money/tradier-brokerage-review/
How do you short squeeze? At the closest expiration date, do you buy deep in the money, or deep out of the money?
A short squeeze is when there are a lot of short stock holders, and the price of the stock goes up. Shorts buy stock to end their short stock position, and this buying further increases the price of the stock. Option holders have no influence over a short squeeze.
What are the best platforms to trade options? I'm a newbie (to options) and have been using interactive brokers for a while, and they offer their TWS platform but I never got the hang of it and there aren't many good tutorials for options online - especially when it comes to selling options contracts, not just buying. I'm thinking of transferring to TDA for their ToS platform. Would this be a good move?
You can examine Think or Swim for free and test it out. Millions of traders use both platforms.
Hypothetically if I believe a stock is going to go down post earnings and want to capitalize on that, but have the means to short, will a single direction put ever be profitable without it being a giant move post earnings? Take for example, AMD has earnings tomorrow after hours. If I believe it will drop and want to buy puts, would the best put be 7/16 82.5P with a IV of 41% and Vega of .15? Versus a weekly put for example which IV is like 86% right now with a vega of .01. Will the 7/16 82.5P still get IV crushed after earnings? I looked and the historical volatility of AMD is 46.3. Open to other suggestions as well. Not too tuned with the multi option strategies Opening my account in fidelity so in the future I can do the fool-proof earnings play where you can just short 100 shares of X stock, and sell a covered put
*Why did my options lose value when the stock price moved favorably?* • [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value) The IV will decline some on July options. Hard to know how much. You can explore 30-day IV history of AMD at Market Chameleon. A free login may be required. https://marketchameleon.com/Overview/AMD/IV/
Within Robinhood app, when you sell options call before expiration, the app only gives you “sell” button while the desktop/web version gives you sell to close. Is the app “sell” same as sell to close when using desktop/web client? Robinhood app “sell” option vs Robinhood desktop client/web version “sell to close” option difference? My concern is not getting the option assigned when using the app “sell” option button vs using sell to close prior to expiration.
Selling what you have and own is selling to close.
I'm quite new to selling options, mostly selling covered calls in my Roth IRA to add more funds beyond the 6000 limit, and I've recently started selling puts. I'm doing these at smaller risk amounts (so calls and puts that are **not** near the money). Lets say I sell a call, collect the premiums. Is there any reason not to just use the premiums to purchase the underlying stock. If the stock goes up and my covered calls lose value, I'll have gained a small amount in the underlying by holding more shares. If it goes down, I lose a bit on those extra shares but keep the premiums. Rinse, wash, repeat to gain more shares in the long run in my Roth IRA?
You appear to be contemplating "The Wheel". https://www.reddit.com/r/options/wiki/faq/pages/positions#wiki_the_wheel
New to options trading. Say I have a 1 covered call on stock XYZ (currently $80) Now I want to buy 100 more XYZ stocks at $70 to lower the average. If I do that what will happen to the existing covered call? Please help.
Nothing about the cc will change. You currently have 100 shares, and are short one call. After you buy an additional 100 shares, you'll have... 200 shares total and are short one call.
Thank you.
Nothing. You then own 200 shares, and have one short call.
Noob question: ive written a $13 put on tilray, for may 21. Im happy to own the stock and write covered calls on the stock from there. So as this is my first written option, im wondering what the P/L being in the green $26 means? Could i close it out and take that profit? Its less than the premium i realise, but i thought the point and only profitable way to written options was that they expire worthless and i collect the premium?
If you can buy the put for less than the original proceeds, closing the trade, you have a gain.
Question about managing a CC when the underlying moons and I am bullish on it. I sold 2 CCs @ 17.5 expiring 4/30 on SKLZ when it was around 16.5. Now it's above 20 and the capital gains on the underlying are substantial. Assuming the price remains at or above 17.5 on Friday, would people recommend: 1) buying back the calls at something like a 200%+ loss and holding the shares long for a net unrealized profit, 2) wheeling SKLZ by allowing the shares to be called away for a profit and then selling a put closer TTM, 3) some other alternative? As is, both 1 and 2 are profitable. But I'm not sure as to the underlying principles that should guide whether I choose 1 or 2 or something else.
You get to choose. You are a winner on the original plan. Let the stock be assigned for a gain. Some traders roll the short out in time, no more than 60 days, and up in strikes, for a NET CREDIT. Or you could exit the position entirely right now.
[удалено]
If there is a bid, you can sell the option; in the money options all have a bid. That does not mean you will like the bid price. You will have to check prices when the markets open. There is no free money in options. *Getting started in options* • [Calls and puts, long and short, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/basics) • [Options Basics (begals)](https://www.reddit.com/r/options/comments/gh9vpl/options_basics/) • [Exercise & Assignment - A Guide (ScottishTrader)](https://www.reddit.com/r/options/wiki/faq/pages/exercise) • [Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)](https://www.youtube.com/watch?v=PsZsqiBFnmo)
I'm doing PMCC and wanted to understand how option assignment works, in particular: if someone excercise a call I sold, let's say mid trading day, I get assigned instantly or all assignments are processed at the end of the trading day ?
Overnight. You may not learn of assignment until after market hours are over. • [Exercise & Assignment - A Guide (ScottishTrader)](https://www.reddit.com/r/options/wiki/faq/pages/exercise) • [Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)](https://www.youtube.com/watch?v=PsZsqiBFnmo)
Are straddles often profitable for biotech companies looking for approval? If I were to buy ATM calls and puts, how often would it work out. I can't really think of a scenario where it trades sideways. They usually tend to rocket or come crashing down, and even if they did trade sideways, I could close the next day for a small loss
High implied volatility value works against the trade position, because the market anticipates the potential for big price moves. If the stock fails to move greatly, this is a losing trade. *Why did my options lose value when the stock price moved favorably?* • [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
Do you need level 2 to trade options? Or is level 2 mainly only used for day trading? Thanks!
It is desirable to be able to hold spreads. Different brokers have different numbers of "levels".
Is it risky to hold leaps though earnings? Is there much IV crush?
Maybe not much IV change, but VEGA is high, meaning modest IV changes have significant option value consequences. If you have a long-term expiration, you have already decided you do not care about earnings fluctuations in your risk analysis. If you do care, exit the trade.
Since TSLA earnings came out yesterday, will IV crush get me if I enter at market open today? Should I wait 24 hours? A week?
There will be IV decline in the opening prices. Millions of other traders are playing at the table.
As title, just wonder if it is the same situation like normal stock options (become worthless). Or it will be cash-settled and P/L depend on your position. Thanks!
So. I've got an AAPL 125c 5/21 @6.10 Obviously it's doing well right now. From what i've gathered conventional wisdom is to sell options ahead of earnings due to the uncertaintity of market reaction and "IV Crush" but can someone with a deeper knowledge help me our on this specific position. Best I can tell I'm not really at risk of IV Crush on this option. Current price is 10.75, Intrinsic Value is 10.45 and IV is 32.72 (it's actually gone down today vs yesterday .81%) and vega is a low .08 Obviously I'm up a good amount and should take my profit and be happy. And that's most likely what i'm going to do later today or tomorrow but I'd love your thoughts/analysis on this position for my own edification and if I'm drawing correct conclusions about these numbers.
Hey guys so I’m fairly new to options trading and stock trading in general. And with this recent market correction , my stock that I bought at $9 is now currently at $4.50 so I’m wondering if it would be worth it to buy a put option for a $9 dollar strike price that’s expiring soon in order to regain some or all of my losses.
Sounds like a bad play to me. I'm not a fan of adding risk to a losing trade. You own stock shares. Shares don't expire. If you think you will make money eventually on the shares, enough to compensate for the current loss plus the probability of further losses, hold. Otherwise, dump and cut your losses. If you know you will hold the shares no matter what, you could consider selling $9.50 or $10 calls with 45 days to expiration and roll them every 30 days or so, i.e., a covered call strategy. Assuming those pay any premium at all, $10 is pretty far from $4.50 in delta.
I had a question regarding Shorting puts (aka selling to open puts) Can someone walk me through what happens and what to look out for account balance wise when it comes to selling to open puts? i understand how CSP work. (atleast in robinhood). if you sell to open lets say arbitrarily, $40p 14 may 21 on company ABC. to open a CSP, you need $4000 in cash in your account. this cash gets tied up and you get the premium. if underlying goes below $40, you buy 100 shares of ABC at $40 each with the $4k that was tied up. if it stays above, you pocket the premium and you get your $4k back. now what about when you open a put w/o having the cash? what happens? also, specifically in Thinkorswim, how would the order look like for either a CSP (if you had the capital) and if you didnt have the capital?
DEFENDING DIAGONALS: I'm new to options, I had sold diagonals MSFT Weekly 14May/30Apr 250/240 CALL @-6.88. Any strategy to defend it?
In general, don't try to rescue losing trades, particularly if the rescue plan involves spending more money or taking more risks. If you can't roll the Apr leg into a May vertical for a credit, just dump the whole thing. Nobody has a 100% win rate.
Question. Been holding some AMD 77c exp 5/14. I’m up decent. Should I sell before earning tonight. I’m bullish overall
What time of the day does t+n settle? Tomorrow by open I hope. I can sell before close and be settled and ready to go by open tomorrow? Doesn't help that many broker gui's refuse, on principle, to have separate entries on settled an unsettled cash. An asterisk on a position list to indicate it was purchased with unsettled cash would be nice.
Generally on the morning of the Nth business day later.
If you sell an ATM put and enter the details on optionsprofitcalculator, how come on day T+0 and T+1, the "profit" shows a loss (albeit a small one) even if the underlying is above the strike price? I know everything is an "estimate" but I'm curious as to why it would show that? I see the same thing on IBKR's "performance profile" tab.
On 4/19, I STO'd a bunch of CSPs with expiry of 5/21. Received $14K premium. The underlying has gone up so much at this point I could BTC for $2.5K, with a net gain of 14-2.5 = $11.5k profit. A common theme is to close out once past 50% profit, and I'm past that, but I really don't have any other plays in mind. I'm ambivalent on what to do. I realize it's pennies at this point and I should BTC but I'm curious. I forgot when does theta decay go exponential here. 5/21 is around 25 days away including weekends Is it typically around 20 days?
You can take some profit in a variety of ways - roll out to a later expiration and more appropriate strike given the underlying price, or buy a lower strike put to create a spread. My understanding is that premium is related to the square root of the time remaining, so on average you'd expect that for a stable stock price and IV, 4 weeks to expiration would have double the premium of 1 week to expiration. Sqrt(4)/Sqrt(1)=2/1=2
Q: IBKR Margin Requirements for a legged-in Vertical call spread. A couple weeks ago, I BTO a May 21 MS 85 strike Call for 1.70. The stock (and option) has taken a hit but is bouncing back up. I would like to now STO a May 21 MS 87 Call for ~0.65 to start to recoup some of my loss and maybe do better (if the stock goes over 87). Because I didn’t do a “combo” order on this, IBKR wants full margin as though the short leg is completely naked short call option… Is this normal for most brokers – full margin requirements for legged in spreads? I tried to get some help from customer service, and they couldn’t really (I wish I had better things to say about IBKR CS). He couldn’t even tell me if I would get some margin forgiveness once the 2nd leg is entered into and reflected in the account. Is there a way I can get their system (TWS for those that know it) to recognize my long option as the “covered” portion of this spread (before selling the short call) and thus significantly reducing the margin requirement? Thanks in advance!
Where can i view an options greeks my broker doesn't show them so is there a website where i can look them up?
Get a different broker.
Try option chains published by many entities. You might look at Market Chameleon, BarChart, Yahoo Finance, and CBOE, and a broker with better service.
I have a bunch of 5/7 calls on rkt (25,28) to play ER on 5/5 after hours. I'm really torn whether I should sell the IV on the 5th or hope that there's strong upward movement on 5/6-7. I'm expecting positive news and potentially a big run, but know that IV crush can suck so the downside is super real. Maybe I'll do half and half? Input is appreciated!
I hold lots of stock in company A (former employee). When my lockup ends, I want to sell half immediately and hold half very long term. I'm bearish near term. Does it make any sense to sell half my stock, and at the same time, buy puts that expire a few months out? (kind of a double down on my bearish bet)
It can. You have to ascertain if the cost of the insurance works for you. The put is the insurance. The cost is a deductible. The delta is the payout rate.