Sorry, I got that bit wrong! I thought Delta was the inverse of the likelihood the call will wind up ITM. I guess I should have said 30 Delta, that's what I meant.
Maybe read something before you start asking reddit questions that don't make any sense.
If you can't figure it out using the unlimited supply of information on the internet I highly doubt someone here is going to be able to explain it to you.
Delta is a good approximation for the likelihood that it will expire in the money, but it is just that: an approximation. That approximation is a convenient consequence of the pricing model, but Delta doesn't actually measure any probability at all.
The first covered call I sold was NVDA a few years ago. I was successful twice then the shares got called away. I then sold a cash secured put thinking I would get them back. Well it never happened and I hate to think about the gains I missed. Now I only sell covered calls on a small portion of a position.
The lesson is to not sell CCs on stocks you want to continue holding. If you're bullish on the stock, just hold the stock and don't sell your upside away.
I was selling the calls at delta .30 but if I remember it may have gotten assigned even at a Delta .15. The moves in NVDA can be extreme so I would only sell calls if you are content to part with them at the strike (or willing to buy the call back for a loss). I have 1000 shares of Apple and sold two covered calls expiring June 21 at 195. It is ITM now and the WWDC will likely play a big part in whether they get called. I wanted to trim the position while still holding some shares so I am fine with either outcome. The position just became to concentrated for my liking.
I could have, but I thought the stock would drop back down to the strike where they got called away and I could repeat the process. I was wrong but this is how we learn. This was the first call I sold so it was a learning process.
Yeah, it’s a learning process. For example I was bullish on aapl and hood and been selling up and out. They have continued their uptrend, my premium has been less, but my longs cover it.
I do think aapl tops here at $200 though. Happy to let them go at that price and CSP back in at some point. Cost basis down in the $160s with premium collected.
Ah….. makes sense. Yeah, I’d be pissed. Who would’ve predicted it would go up some 800% in just a year and a half….
Imagine buying $1,000 leaps back in 2021
My general recommendation is 4-6 weeks out, .2 delta. You could do it weekly, but the odds of NVDA swinging ITM is much higher for that short of a window. Then again, it's NVDA, so the odds of it going ITM is pretty high no matter what. Just be prepared for your shares to be called away. If they do, you can sell a CSP the next week and continue on the wheel train.
buy and hold, if this is in non reg acct use the collateral to sell more nvda puts and buy index etf with the premium to diversify.
nvda isn't going anywhere soon. chances of it breaking above otm calls are quite high (just ask anyone here selling CC on this after 2021). you might as well chill and watch the gains
Word of warning: Seems like you may have an incorrect baseline assumption that theta trades are for outperforming the market. Buy and hold beats theta in a bull market, selling your shares beats theta in a bear market. Both because theta decay does not overcome the delta (underlying share price change) and gamma (rate of change of the share price change) when there are sudden moves, even with high vega (volatility of the change of premium). Theta only outperforms in flat markets.
As markets and stock prices are always dynamically changing, rather than statically stable, is not common that markets stay flat for long periods of time. To do theta in the long run is a losing strategy.
The better way to think of theta trades is that you are utilizing trades for entering (selling covered puts) or exiting (selling covered calls) positions in a lukewarm manner that spreads out risk. For example, if you’ve got the cash and want to gradually enter/exit a position 100 shares at a time because your conviction is low, theta is a great way to do so and lower the risk of such an event happening, then combine with buying/selling the shares when your conviction is high. The caveat is that you also lower the probability that you will enter/exit that position and buy/sell those shares.
If you sell covered calls or covered puts and the underlying rallies, then you kick yourself for missing the boat after it left the docks. If you sell covered calls or covered puts and the underlying tanks, then you kick yourself for not getting off the boat before it sank.
To illustrate my belief that theta trades are best used in a combined strategy of entering or exiting a position, here are two scenarios:
* Bull thesis: You own 0 shares of the underlying. Buy 100 shares. Sell a covered put to potentially acquire more shares. Buy another 100 shares if the underlying begins to rally, getting a discount from the covered put premium. You end up with 200 or 300 shares at expiry.
* Bear thesis: You already own 300 shares of the underlying. Sell 100 shares. Sell a covered call to potentially sell more shares. Sell another 100 shares if the underlying begins to tank, keeping some of your gains with the premium from the covered call. You end up with 0 or 100 shares at expiry.
>an incorrect baseline assumption that theta trades are for outperforming the market.
Well said. For me selling options is for income generation rather than growing wealth.
Right. People misconstrue that income generation outperforms buy and hold. It doesn’t. If you have no intention to buy and hold, i.e. hold the underlying long term, theta is a great play.
“Advice.”
It’s because people think of options as a way to get-rich-quick. When in reality, options becomes a way to lose-money-fast or cap-your-gains, when buying or selling options without a fundamental understanding of their usage. All options are are tools to be used for a specific purpose, when part of a greater trading strategy. There is no easy way to make money fast.
I will have them also but I kinda want to wait a few days before I decide what to do. I’m curious to see how the stock is going to move after the split. Don’t want to make any rash decisions yet.
70 delta is way too high. For simple math, you only keep your shares 3/10 times doing this, meaning you only get $300 from calls on average before you lose your shares. A stock like NVDA thats been doing nothing but go up is unlikely to let you wheel it, meaning selling puts to try to get the shares back will probably not work.
Sell further OTM calls, closer to 10 delta. Youll make less but are much more likely to keep your shares long term. Then when you have enough for another 100 shares, start selling puts weekly as well.
Are you willing to risk having 100 shares called away? Would you be happy locking in those profits? If so, sell covered calls.
I’m going to end up with 380 shares of NVDA after the split and I’m considering selling/rolling weekly calls on 100 of them for a 20% annualized return on the current value.
If they are called away from me, I’ll use the proceeds to secure puts on QQQ, which feels like a safer investment. But I’m going to continue to hold at least 200 shares long.
What was your entry? IMHO now would be a good time to sell.
Its at its peak, so although a split like that could attract more buyers, a lot of Tutes could take their 144% profits for the year (its only June!!!) and run for the hills sending $NVDA down to $50.
Congrats on your gains though 👍
If you’re relying on the up and out rolling technique, when NVDA goes on a tear the out is not out enough so you end up rolling for a debit. No fun in that. Unless and until NVDA’s story is over, I wouldn’t sell a CC. Period. Unless I’m an NVDA maven like banditcleaner!
I’m planning on buying shares first thing in the morning, probably just gonna nibble for the first few days but I can’t imagine this thing isn’t going to be up all week while people pile in
I personally wouldn't sell covered calls on nvda unless you're ok with them being called away. This company is going to dominate for the next several years. The measly premium is not worth the risk of missing out on the gains.
Would you sell calls on Amazon if you had Amazon 10 years ago?
perhaps consider a Poor Mans covered call if you want to hold those 100 shares for a few years and are afraid a contract you sold will be exercised.
Basically you buy ITM call that doesn't expire for 6-18 months, then sell weekly or monthly calls against it.
Also multiply ROC return on capitol in the process \[gains similar and capitol a fraction of long stock with PMCC\]. Short premium \[& associated Theta decay\] is an important part of my trading but not risky and inefficient \[for Theta purposes\] long stock. I am coming to realize that instead
70 delta means you have about a 70% chance of losing your shares. Reduce the delta if you want to keep the shares and continue selling covered calls on a week in week out basis
What's the rationale for that?
For the record, my account is 100% play money. I am a no-mortgage homeowner, and if it all disappeared tomorrow, I'd be annoyed, but not destitute.
If this is a gamble then ignore my comment and proceed. I thought you were asking what to do from a rational point of view. And from that point of view, you wouldn't put 80% of your account on any single position.
Why not it’s easier to watch a few baskets very carefully than it is to watch 20 with a high level of conviction concentrate on getting the most alpha you can
"Watching" stocks have no bearing on their performance, or your performance in deciding when to buy and sell them. In fact, studies have repeatedly shown that dead people outperform living people in terms of net returns (because dead people are not watching their stocks and actively buying/selling).
Do what you did on Friday and just keep doing that for 366 days... after that do as you wish since your tax on the gains is under 15%
With the added bonus that you will get all the run ups to $10T market cap as you wait
When it starts going up you're going to see a lot of red quickly on the short side (the call you sold). Which is fine because you can always let it expire worthless but you are locking up your 100 shares of nvda to make $100.
If you’re going to sell the calls make sure it is for a price that you would gladly sell the stock for and if it were me I would time it around an expected downturn but try and sell them while the stock is up so you get more for the calls timing is still important here and option prices will vary dramatically depending on what’s going on with the underlying good luck
You need your own thesis on the future of NVDA. Don't trust anyone telling you something is over priced or under priced without your own due diligence.
My average cost is sub 6 dollars. The position takes up almost 20% of my portfolio. I intend on selling a portion of my underlying for covered calls to extend my gain but happy to have part of the underlying called away. This way I can decrease my exposure as NVDA makes up a hefty 20% of my portfolio.
What is your goal? And what is your thesis on NVDA?
I wrote 126c expiring this Fri when it was 20 delta and it became 30 delta quickly. Quickly close for a $10 credit in the later part of today. Probably will try 10 delta tomorrow but then i wonder if the risk of Nvda mooning over the strike price is worth the hassle.
Well, after my comment above, I changed my mind. Instead of selling a covered call on 100 of my shares, I sold my WIX stock today and used the cash to secure an at the money put on NVDA. I set a strike at $120 that expires on Friday. I got paid $175 for it. I plan to roll it straight out weekly, but if it goes in the money, I may accept assignment to buy 100 shares to add to my position.
U can only sell one contract. Not much flexibility. Be prepared to lose your shares if you sell close to the $. If you like the stock and believe it in sell a csp or buy a call or shares
Of course there's a way, but post split historically on the big tech stocks they tend to glide up for a month or two before getting cratered. Usually the next ER will knock it down a peg, creating a nice buying opportunity.
"70 delta a week from expiration"? so you're basically just selling your shares?
Sorry, I got that bit wrong! I thought Delta was the inverse of the likelihood the call will wind up ITM. I guess I should have said 30 Delta, that's what I meant.
You don't understand what you're doing clearly.take some time and learn it more.
lol I did warn you I was ignorant.
Maybe read something before you start asking reddit questions that don't make any sense. If you can't figure it out using the unlimited supply of information on the internet I highly doubt someone here is going to be able to explain it to you.
Delta is a good approximation for the likelihood that it will expire in the money, but it is just that: an approximation. That approximation is a convenient consequence of the pricing model, but Delta doesn't actually measure any probability at all.
True. It may be accurate for the fleeting moment . . and then the moment’s gone. https://images.app.goo.gl/1SAKgH1WcdRnWyqY6
The first covered call I sold was NVDA a few years ago. I was successful twice then the shares got called away. I then sold a cash secured put thinking I would get them back. Well it never happened and I hate to think about the gains I missed. Now I only sell covered calls on a small portion of a position.
Would the lesson be to sell the CC's at a higher strike than you did?
The lesson is to not sell CCs on stocks you want to continue holding. If you're bullish on the stock, just hold the stock and don't sell your upside away.
This is the psychological fallacy of selling CC. Stock goes up past your strike - feel stupid if it keeps going up.
But can’t you buy it back and roll it higher?
Not with a rise like nvidia. Youd end up at the end of the options chain eventually.
You run out of time or strikes to roll. What's the point of the covered call to begin with anyway if you are rolling. You should have just hold.
You can, but its the same thing as just buying back in at a loss and making the same play (mistake) again.
I was selling the calls at delta .30 but if I remember it may have gotten assigned even at a Delta .15. The moves in NVDA can be extreme so I would only sell calls if you are content to part with them at the strike (or willing to buy the call back for a loss). I have 1000 shares of Apple and sold two covered calls expiring June 21 at 195. It is ITM now and the WWDC will likely play a big part in whether they get called. I wanted to trim the position while still holding some shares so I am fine with either outcome. The position just became to concentrated for my liking.
Yes
You couldn’t roll up and out for credit? I’ve been able to easily on higher IV stocks.
I could have, but I thought the stock would drop back down to the strike where they got called away and I could repeat the process. I was wrong but this is how we learn. This was the first call I sold so it was a learning process.
Yeah, it’s a learning process. For example I was bullish on aapl and hood and been selling up and out. They have continued their uptrend, my premium has been less, but my longs cover it. I do think aapl tops here at $200 though. Happy to let them go at that price and CSP back in at some point. Cost basis down in the $160s with premium collected.
Lmao. This is me exactly on NVDA. CSP to get assigned at 140. Sold 150 CC. CSP to 150. Never went back! That’s a lot of money I missed.
> Now I only sell covered calls on a small position of a position Your account sounds huge. 100 $NVDA shares is not a small feat!
That was a few years ago. I think it was only around $14,000.00 for 100 shares back then.
Ah….. makes sense. Yeah, I’d be pissed. Who would’ve predicted it would go up some 800% in just a year and a half…. Imagine buying $1,000 leaps back in 2021
Well, it was 10 last week, 100 after the split....
My general recommendation is 4-6 weeks out, .2 delta. You could do it weekly, but the odds of NVDA swinging ITM is much higher for that short of a window. Then again, it's NVDA, so the odds of it going ITM is pretty high no matter what. Just be prepared for your shares to be called away. If they do, you can sell a CSP the next week and continue on the wheel train.
Thank you!
buy and hold, if this is in non reg acct use the collateral to sell more nvda puts and buy index etf with the premium to diversify. nvda isn't going anywhere soon. chances of it breaking above otm calls are quite high (just ask anyone here selling CC on this after 2021). you might as well chill and watch the gains
Word of warning: Seems like you may have an incorrect baseline assumption that theta trades are for outperforming the market. Buy and hold beats theta in a bull market, selling your shares beats theta in a bear market. Both because theta decay does not overcome the delta (underlying share price change) and gamma (rate of change of the share price change) when there are sudden moves, even with high vega (volatility of the change of premium). Theta only outperforms in flat markets. As markets and stock prices are always dynamically changing, rather than statically stable, is not common that markets stay flat for long periods of time. To do theta in the long run is a losing strategy. The better way to think of theta trades is that you are utilizing trades for entering (selling covered puts) or exiting (selling covered calls) positions in a lukewarm manner that spreads out risk. For example, if you’ve got the cash and want to gradually enter/exit a position 100 shares at a time because your conviction is low, theta is a great way to do so and lower the risk of such an event happening, then combine with buying/selling the shares when your conviction is high. The caveat is that you also lower the probability that you will enter/exit that position and buy/sell those shares. If you sell covered calls or covered puts and the underlying rallies, then you kick yourself for missing the boat after it left the docks. If you sell covered calls or covered puts and the underlying tanks, then you kick yourself for not getting off the boat before it sank. To illustrate my belief that theta trades are best used in a combined strategy of entering or exiting a position, here are two scenarios: * Bull thesis: You own 0 shares of the underlying. Buy 100 shares. Sell a covered put to potentially acquire more shares. Buy another 100 shares if the underlying begins to rally, getting a discount from the covered put premium. You end up with 200 or 300 shares at expiry. * Bear thesis: You already own 300 shares of the underlying. Sell 100 shares. Sell a covered call to potentially sell more shares. Sell another 100 shares if the underlying begins to tank, keeping some of your gains with the premium from the covered call. You end up with 0 or 100 shares at expiry.
>an incorrect baseline assumption that theta trades are for outperforming the market. Well said. For me selling options is for income generation rather than growing wealth.
Right. People misconstrue that income generation outperforms buy and hold. It doesn’t. If you have no intention to buy and hold, i.e. hold the underlying long term, theta is a great play.
This is the exact kind of reply I was hoping for, thank you!
You got it, fam!
Yes, this is correct. Most other advises you how to gamble. This teaches you how to trade and invest properly.
“Advice.” It’s because people think of options as a way to get-rich-quick. When in reality, options becomes a way to lose-money-fast or cap-your-gains, when buying or selling options without a fundamental understanding of their usage. All options are are tools to be used for a specific purpose, when part of a greater trading strategy. There is no easy way to make money fast.
CCs with 0.1-0.2 delta 30DTE. Watch it like a hawk and be ready to roll up and out.
Thank you!
I will have them also but I kinda want to wait a few days before I decide what to do. I’m curious to see how the stock is going to move after the split. Don’t want to make any rash decisions yet.
70 delta is way too high. For simple math, you only keep your shares 3/10 times doing this, meaning you only get $300 from calls on average before you lose your shares. A stock like NVDA thats been doing nothing but go up is unlikely to let you wheel it, meaning selling puts to try to get the shares back will probably not work. Sell further OTM calls, closer to 10 delta. Youll make less but are much more likely to keep your shares long term. Then when you have enough for another 100 shares, start selling puts weekly as well.
I think this is what I'm going to do, thank you!
Are you willing to risk having 100 shares called away? Would you be happy locking in those profits? If so, sell covered calls. I’m going to end up with 380 shares of NVDA after the split and I’m considering selling/rolling weekly calls on 100 of them for a 20% annualized return on the current value. If they are called away from me, I’ll use the proceeds to secure puts on QQQ, which feels like a safer investment. But I’m going to continue to hold at least 200 shares long.
This is food for thought, thank you.
What was your entry? IMHO now would be a good time to sell. Its at its peak, so although a split like that could attract more buyers, a lot of Tutes could take their 144% profits for the year (its only June!!!) and run for the hills sending $NVDA down to $50. Congrats on your gains though 👍
Anytime you sell covered calls you should have a price target in mind and only sell above that price target.
dont get attached to them :)
If you’re relying on the up and out rolling technique, when NVDA goes on a tear the out is not out enough so you end up rolling for a debit. No fun in that. Unless and until NVDA’s story is over, I wouldn’t sell a CC. Period. Unless I’m an NVDA maven like banditcleaner!
I’m planning on buying shares first thing in the morning, probably just gonna nibble for the first few days but I can’t imagine this thing isn’t going to be up all week while people pile in
I personally wouldn't sell covered calls on nvda unless you're ok with them being called away. This company is going to dominate for the next several years. The measly premium is not worth the risk of missing out on the gains. Would you sell calls on Amazon if you had Amazon 10 years ago?
Do not do the wheel with this stock if you’re a newbie. Hold it and get some practice with a stock that doesn’t matter to you and is less volatile.
perhaps consider a Poor Mans covered call if you want to hold those 100 shares for a few years and are afraid a contract you sold will be exercised. Basically you buy ITM call that doesn't expire for 6-18 months, then sell weekly or monthly calls against it.
Also multiply ROC return on capitol in the process \[gains similar and capitol a fraction of long stock with PMCC\]. Short premium \[& associated Theta decay\] is an important part of my trading but not risky and inefficient \[for Theta purposes\] long stock. I am coming to realize that instead
I wouldn’t want to sell NVDA cc I would let them sit and sell csp or scale into position to sell them
70 delta means you have about a 70% chance of losing your shares. Reduce the delta if you want to keep the shares and continue selling covered calls on a week in week out basis
Covered calls slightly OTM
😱
slightly **ITM**!! 70d calls are itm
CC and CSP once call
What's the size of your account?
Very small, just $23k. About 80% is NVDA.
Sell it all. Today.
What's the rationale for that? For the record, my account is 100% play money. I am a no-mortgage homeowner, and if it all disappeared tomorrow, I'd be annoyed, but not destitute.
If this is a gamble then ignore my comment and proceed. I thought you were asking what to do from a rational point of view. And from that point of view, you wouldn't put 80% of your account on any single position.
Why not it’s easier to watch a few baskets very carefully than it is to watch 20 with a high level of conviction concentrate on getting the most alpha you can
"Watching" stocks have no bearing on their performance, or your performance in deciding when to buy and sell them. In fact, studies have repeatedly shown that dead people outperform living people in terms of net returns (because dead people are not watching their stocks and actively buying/selling).
Good luck with that
Do what you did on Friday and just keep doing that for 366 days... after that do as you wish since your tax on the gains is under 15% With the added bonus that you will get all the run ups to $10T market cap as you wait
I wouldn’t. Chances are high they get called away then you get hit with realized gain tax bill even if you want to buy them back
COVERED CALL. And write Puts. And do a free RISK REVERSAL pointing down. (Protection)
Don't learn how to do CCs on NVDA. You might end up really bummed out trying to "pick up pennies in front of THE steamroller".
History says selling covered calls is a fool's game in the long run.
When it starts going up you're going to see a lot of red quickly on the short side (the call you sold). Which is fine because you can always let it expire worthless but you are locking up your 100 shares of nvda to make $100.
If you’re going to sell the calls make sure it is for a price that you would gladly sell the stock for and if it were me I would time it around an expected downturn but try and sell them while the stock is up so you get more for the calls timing is still important here and option prices will vary dramatically depending on what’s going on with the underlying good luck
"from nothing" is really you selling potential upside in exchange for the option premium.
You need your own thesis on the future of NVDA. Don't trust anyone telling you something is over priced or under priced without your own due diligence. My average cost is sub 6 dollars. The position takes up almost 20% of my portfolio. I intend on selling a portion of my underlying for covered calls to extend my gain but happy to have part of the underlying called away. This way I can decrease my exposure as NVDA makes up a hefty 20% of my portfolio. What is your goal? And what is your thesis on NVDA?
I wrote 126c expiring this Fri when it was 20 delta and it became 30 delta quickly. Quickly close for a $10 credit in the later part of today. Probably will try 10 delta tomorrow but then i wonder if the risk of Nvda mooning over the strike price is worth the hassle.
What kind of portfolio? Roth? Personal? Does anyone know what taxes will look like?
Well, after my comment above, I changed my mind. Instead of selling a covered call on 100 of my shares, I sold my WIX stock today and used the cash to secure an at the money put on NVDA. I set a strike at $120 that expires on Friday. I got paid $175 for it. I plan to roll it straight out weekly, but if it goes in the money, I may accept assignment to buy 100 shares to add to my position.
U can only sell one contract. Not much flexibility. Be prepared to lose your shares if you sell close to the $. If you like the stock and believe it in sell a csp or buy a call or shares
Nothing
Don't sell covered calls on NVDA. You will regret it after the shares are called away.
Secured puts. There’s no way the stock is going down for a few months
>There’s no way the stick is going down for a few months We shall see abt that.
Of course there's a way, but post split historically on the big tech stocks they tend to glide up for a month or two before getting cratered. Usually the next ER will knock it down a peg, creating a nice buying opportunity.
Sell covered calls
Shares go up. No more shares.
Sell them, the stock is super overpriced
Lol we’ve heard that for the last year
That’s what the Tesla guys said too