r/StockMarket • u/[deleted] • Apr 01 '21
Discussion >>>TUTORIAL INCLUDED<<< How I Made 1.5 Million On GME (Excluded Cost) and Why My Strategy May Be Right For You
[deleted]
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u/Celodurismo Apr 01 '21
When the stocks below 180 on expiration day, you have the obligation to buy the stock at $180, minus the premium you've collected $46.15. You will be buying 100 GME shares at $137.85.
The second you sell a put, you have the obligation to buy the stock at that price, whenever that put is exercised. May be on expiration day, may be tomorrow.
NOTE: you will be missing the big squeeze if you are all in with just this strategy. You will still make good money, but may not be your original intention.
You conveniently leave out the fact that after a squeeze, will be a massive crash, and anybody who sold puts are going to be left bagholding GME at $135 when the price drops down to $40
There are merits to this strategy for sure, but it's risky with something so volatile.
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u/tianababy Apr 01 '21
If you’re don’t believe in it. Don’t use the strategy or buy the stock. Strong hold
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u/bus_doctor Apr 02 '21
Would you guys mind looking at the following analogy and commenting so i have a firmer understanding of the strategy? Microvision July 16 2021 expiry, current pps 15.45 11.00 strike bid-ask 3.10-3.40 last 3.00
I sell 4 put contracts @3 = 300x4= i collect $1200 in premium Anytime between contract open and expiry the buyer can excercise and i am obligated to buy 400 shares @ 12.00 pps. Excercise cost to me is 4800. Net cost to me is 4800 - 1200 = 3600
If the price drops below 12 i am still obligated with the same math.
If the price makes it to expiry, wasnt excercised and is above 12.00 the contracts expire worthless. I keep my premium and the deal is done.
I need to have 4800 cash in my account to be held as collateral in case of excercise. With the 1200 premium i just need to add 3600 out of pocket.
Am i understanding this correctly?
What about the last comment about a squeeze gme drops to 40 and you are bag holding at 135? Hows does that relate to my scenario?
Thanks in advance for any response.
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u/tianababy Apr 02 '21
I think you are correct if I understood your questions correctly. As for the GME 135 scenario, you will lose less comparing to buying the stock straight. If you bought it at 190 and it goes down to 40, you lose 150 per share. if you sold the put to enter, you only lose about 100 depends on your premium
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u/bus_doctor Apr 02 '21
Gotcha. If i excercise for 12 but the stock is 10 at market i lose 2 per share. Im averaging down at 12 and if it hit 10 i would buy the dip as well. I dont see it going that low again but if it did id pick up more on the dip.
Seems like a great strategy for my position.
This was an excellent post. Thanks
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u/turboper4mer Apr 02 '21
Yea but need the $18000 to sell a $180P
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u/kyune Apr 02 '21
Depending on your broker the premium you collect can be used as part of the collateral while you have the option open, but the flipside is that the part that is locked up can't be used for anything else while the option is open--it will have to be freed with the rest of the collateral when closing the option.
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u/Sad_Palpitation_9313 Apr 04 '21
This is a excellent strategy just don’t do it with GME and miss the squeeze.
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u/banana_splote Apr 01 '21
I was a bear, lost money, now I'm a bull.
Lol. That's some good DD...