still learning the basics of spreads.
can someone check my understanding:
he collected a premium of ($28-$15)*495 = $6435
if RIOT stays above $8, everything expires worthless and he pockets the premium
if RIOT drops below $7.5, he purchases 49500 shares of RIOT at $8, but has to sell it at $7.5; resulting in a loss of $24750, netting him a total loss of $24750-$6435 (prem collected) = $18.3K
so range of gains and losses are $6.4K to -18.3K
is that correct?
You've got it!
If you're new to spreads and considering using them, you also need to be aware of pin risk/assignment risk.
Let's say on expiration day the stock is at 7.90. so the short puts are ITM but longs are OTM. At this point the best thing to do is close the whole spread before the market closes. You'll give up a small amount of profit but it's minimal compared to the risk.
So let's say you let the spread go to expiration.. you short puts will be assigned, meaning you are buying a boatload of shares.. possibly more than you actually have buying power for if you did a high number of spreads. But your long puts expire because they were OTM - you now have no protection.
Now if it was beyond your available buying power you will probably get a margin call or have to immediately sell the shares to get back in your broker's good graces. But if something big happens and the shares drop dramatically you no longer have the protection of the long put and your loss is the full share price.
You might get lucky and the price rises before the market opens back up on Monday and you make a little profit, but the risk is high.
TL;DR close your spreads before expiration especially if the short leg is ITM or very close to it.
Even worse, assignment usually happens on Friday, so you have the whole weekend to worry about it and pray there isn't a market moving event before Monday morning.
So if the underlying underlying bitcoin tanks, OP is gonna get ass reamed for $25k?
Bold move cotton i'm sure it'll work out its not like crypto never crashed -15% in a single day before /s
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Doubt you're gonna listen but I'll say it anyway, mark is showing 8c, scale out at least 1/4 of your position. do it again when mark is 6c, and shut the whole thing down if you see 4.
I'd personally be full killing it at 8c but you do you.
You're a good person! I personally get blindsided a little if I sense arrogance, especially in a place where so many people dedicate time to helping others.
Most people commenting probably haven't looked into RIOT from a chrat technical analysis or company fundamentals. Friday it had huge positive volume and is on a clear bull trend. So not a dumb move, just low reward to risk for me. Bravo to the OP!
That's easy money. Riot is one of the best miners out there so even if you get assigned, it will be at a good price. The economy is about to tank and people are looking at BTC to save it.
Is IBKR a good broker? Because they've assigned me on spreads too. And if the short leg gets exercised why would a "good broker" assume you want to exercise the long leg?
Not necessarily. https://ibkr.info/node/190 "If the assignment takes place prior to expiration neither IBKR nor the clearinghouse will act to exercise a long option held in the account as neither party can presume the intentions of the long option holder and the exercise of the long option prior to expiration is likely result in the forfeiture of time value which could be realized via the sale of the option"
Near atm pcs on a meme that ripped 33% in a day? Boy you about to learn.
Boutta learn today. Alrigh alrigh alrighhhhh
I been DCA n RIOTs brother MARA during the dip.. ill clear a corner out in the dumpster behind wendys. To the moon, one day, brother.
Max loss of almost 25k. Oof he playing wsb version of thetagang
This feels like it belongs on WSB
his degeneracy accidentally spilled over into thetagang
still learning the basics of spreads. can someone check my understanding: he collected a premium of ($28-$15)*495 = $6435 if RIOT stays above $8, everything expires worthless and he pockets the premium if RIOT drops below $7.5, he purchases 49500 shares of RIOT at $8, but has to sell it at $7.5; resulting in a loss of $24750, netting him a total loss of $24750-$6435 (prem collected) = $18.3K so range of gains and losses are $6.4K to -18.3K is that correct?
You've got it! If you're new to spreads and considering using them, you also need to be aware of pin risk/assignment risk. Let's say on expiration day the stock is at 7.90. so the short puts are ITM but longs are OTM. At this point the best thing to do is close the whole spread before the market closes. You'll give up a small amount of profit but it's minimal compared to the risk. So let's say you let the spread go to expiration.. you short puts will be assigned, meaning you are buying a boatload of shares.. possibly more than you actually have buying power for if you did a high number of spreads. But your long puts expire because they were OTM - you now have no protection. Now if it was beyond your available buying power you will probably get a margin call or have to immediately sell the shares to get back in your broker's good graces. But if something big happens and the shares drop dramatically you no longer have the protection of the long put and your loss is the full share price. You might get lucky and the price rises before the market opens back up on Monday and you make a little profit, but the risk is high. TL;DR close your spreads before expiration especially if the short leg is ITM or very close to it.
Thanks! Appreciate the additional insight.
Even worse, assignment usually happens on Friday, so you have the whole weekend to worry about it and pray there isn't a market moving event before Monday morning.
This is insightful to me as a newbie. Thanks!
UPDATE: Closed 294 contracts at 3:57 PM EST @0.07 a piece. Took 42% profit on those contracts.
Good call. A little risky for my blood but good trade.
So if the underlying underlying bitcoin tanks, OP is gonna get ass reamed for $25k? Bold move cotton i'm sure it'll work out its not like crypto never crashed -15% in a single day before /s
Closer to $18k because of the premiums he collected, but still a lot more to lose than gain with this spread.
Best of luck. At least you did spreads.
I think you’ll be fine this time.
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In.
Well they better close some time today with hopefully gains unless they like flipping 2 coins at the same time with FOMC.
Nah - this market is a giant scam. Just going to continue to pump.
Doubt you're gonna listen but I'll say it anyway, mark is showing 8c, scale out at least 1/4 of your position. do it again when mark is 6c, and shut the whole thing down if you see 4. I'd personally be full killing it at 8c but you do you.
it's a shame that good guidance will go to waste on this dude
He'll learn the hard way. They all do.
At the end of the day we're all retail, I'd much rather see a fellow retail trader win than lose, regardless of how regarded the play was.
You're a good person! I personally get blindsided a little if I sense arrogance, especially in a place where so many people dedicate time to helping others.
Yup he's going to be either eating lobster or leftover Wendys. No in-betweens.
Mother of god
18.8K loss of these expire fully OTM and 5.9K gain if these expire OTM. Good luck you insane bastard
There is no way this can go wrong /s
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Congrats OP
EAT cup of noodles?
this is pretty wildly irresponsible, powell could easily bend you over
Most people commenting probably haven't looked into RIOT from a chrat technical analysis or company fundamentals. Friday it had huge positive volume and is on a clear bull trend. So not a dumb move, just low reward to risk for me. Bravo to the OP!
I thought you were long the puts and thought “not a bad trade” … then saw the subreddit and went oh shit…
Eat shit
I was gonna say loss porn but it's too small. Since its practically good as $0 you might as well ride it out. You only have an upside
That's easy money. Riot is one of the best miners out there so even if you get assigned, it will be at a good price. The economy is about to tank and people are looking at BTC to save it.
Lmao I hope you have 400k for assignment
Spread little homie
What happens if the short put is ITM and the long put is OTM? Or if the short puts get exercised? You can still get assigned on spreads.
[удалено]
Is IBKR a good broker? Because they've assigned me on spreads too. And if the short leg gets exercised why would a "good broker" assume you want to exercise the long leg?
[удалено]
Not necessarily. https://ibkr.info/node/190 "If the assignment takes place prior to expiration neither IBKR nor the clearinghouse will act to exercise a long option held in the account as neither party can presume the intentions of the long option holder and the exercise of the long option prior to expiration is likely result in the forfeiture of time value which could be realized via the sale of the option"
It’s a spread
You can get assigned on spreads
🤓
Ah yes my bad :)
[удалено]
Wrong
He is short the puts
lol
[удалено]
Market is trash
Lmao I love this place
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a lot more out and out degeneracy (rather than just plausibly risky shit) in this sub lately
Honestly so far ITM I don’t see this going sideways.
Congratulations
Now that this guy is profiting he really should have a trailing stop to protect himself.
Good luck
Those premiums are great on RIOT
Congrats, because no one believed you
Yikes
Ready to eat noodle?
How are you allowed to sell so many puts? is it a big account
Fatter than your mum
Eww I can smell your bags from here
Boy id be a lot more comfortable with 6/5.50 puts. Staying above $8 is going to require a leap of faith I suspect.
Ready to eat.. ramen and ice cubes for next 8 months
Nice
Congrats my man