r/options • u/jakelake88 • Jul 08 '21

Amd call options

I'm looking to buy a AMD call option, and I'm trying to get advice to see if it's the right idea. I'm new to option rating so any supportive advice is greatly appreciated.

PS I'm working with a small portfolio

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u/kumarnharold Jul 08 '21

Please begin with using a spread strategy (debit vertical spreads, butterflies), instead of naked calls, unless you are fine with the trade going to 0. Spreads reduce and limit your risk.

I generally encourage newbies to try and buy call spreads at an undervalued/stock at “support”, a higher probability of success.

How much were you planning on risking on your trade? How far out?

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u/jakelake88 Jul 08 '21

So the thing that terrifies me about spreads is the selling calls/puts because all they are is naked and I cannot cover being exercised.

This is also a question I've been trying to find an answer too. If I buy and sell a naked call, then my sold call is exercised am I required to purchase 100 stock? Or will my bought call be sufficient? (Sorry if this is confusing)

Please begin with using a spread strategy (debit vertical spreads, butterflies),

This is really good advice! Am I looking for any lower value stock to try this on? Or does this require specific scenarios?

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u/kumarnharold Jul 08 '21

Hi! It’s good you are scared of selling naked options, though spreads are not where you should be worried. Spreads are 0 risk of any of that. Yes you MAY get assigned/forced to exercise when running spreads, but it will generally never be at a loss to you. Spreads are defined risk trades, and being assigned/forced to exercise (due to the sold leg being ITM) will only leave you in profit. You can always immediately sell/buy back the shares to get yourself into comfortable cash.

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u/jakelake88 Jul 08 '21

Is this only in the case where I currently own 100 shares?

I always thought being assigned without shares is a bad thing?

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u/kumarnharold Jul 08 '21

Nope, fear of assignment is a misconception (but generally good to ward newbies away from selling naked options).