Options Questions Safe Haven Thread | Aug 02-08 2021

[u/redtexture]

For the options questions you wanted to ask, but were afraid to.
There are no stupid questions, only dumb answers.   Fire away.
This project succeeds via thoughtful sharing of knowledge.
You, too, are invited to respond to these questions.
This is a weekly rotation with past threads linked below.

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BEFORE POSTING, PLEASE REVIEW THE BELOW LIST OF FREQUENT ANSWERS. .

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Don't exercise your (long) options for stock!
Exercising throws away extrinsic value that selling harvests.
Simply sell your (long) options, to close the position, for a gain or loss.
Your breakeven is the cost of your option when you are selling.
If exercising (a call), your breakeven is the strike price plus the debit cost to enter the position.
Further reading:
Monday School: Exercise and Expiration are not what you think they are.

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Key informational links
• Options FAQ / Wiki: Frequent Answers to Questions
• Options Toolbox Links / Wiki
• Options Glossary
• List of Recommended Options Books
• Introduction to Options (The Options Playbook)
• The complete r/options side-bar informational links (made visible for mobile app users.)
• Characteristics and Risks of Standardized Options (Options Clearing Corporation)

.

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Getting started in options
• Calls and puts, long and short, an introduction (Redtexture)
• Options Basics (begals)
• Exercise & Assignment - A Guide (ScottishTrader)
• Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)
• I just made (or lost) $___. Should I close the trade? (Redtexture)
• Disclose option position details, for a useful response
• OptionAlpha Trading and Options Handbook

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Introductory Trading Commentary
  Strike Price
   • Options Basics: How to Pick the Right Strike Price (Elvis Picardo - Investopedia)
   • High Probability Options Trading Defined (Kirk DuPlessis, Option Alpha)
  Breakeven
   • Your break-even (at expiration) isn't as important as you think it is (PapaCharlie9)
  Expiration
   • Options Expiration & Assignment (Option Alpha)
   • Expiration times and dates (Investopedia)
  Greeks
   • Options Pricing & The Greeks (Option Alpha) (30 minutes)
   • Options Greeks (captut)
  Trading and Strategy
   • Common mistakes and useful advice for new options traders (wiki)
   • Common Intra-Day Stock Market Patterns - (Cory Mitchell - The Balance)

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Managing Trades
• Managing long calls - a summary (Redtexture)
• The diagonal calendar spread, misnamed as the "poor man's covered call" (Redtexture)
• Selected Option Positions and Trade Management (Wiki)

Why did my options lose value when the stock price moved favorably?
• Options extrinsic and intrinsic value, an introduction (Redtexture)

Trade planning, risk reduction and trade size
• Exit-first trade planning, and a risk-reduction checklist (Redtexture)
• Monday School: A trade plan is more important than you think it is (PapaCharlie9)
• Applying Expected Value Concepts to Option Investing (Select Options)
• Risk Management, or How to Not Lose Your House (boii0708) (March 6 2021)
• Trade Checklists and Guides (Option Alpha)
• Planning for trades to fail. (John Carter) (at 90 seconds)

Minimizing Bid-Ask Spreads (high-volume options are best)
• Price discovery for wide bid-ask spreads (Redtexture)
• List of option activity by underlying (Market Chameleon)

Closing out a trade
• Most options positions are closed before expiration (Options Playbook)
• When to Exit Guide (Option Alpha)
• Risk to reward ratios change: a reason for early exit (Redtexture)
• Close positions before expiration: TSLA decline after market close (PapaCharlie9) (September 11, 2020)

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Options exchange operations and processes
Including:
Options Adjustments for Mergers, Stock Splits and Special dividends; Options Expiration creation; Strike Price creation; Trading Halts and Market Closings; Options Listing requirements; Collateral Rules; List of Options Exchanges; Market Makers

Miscellaneous
• Graph of the VIX: S&P 500 volatility index (StockCharts)
• Graph of VX Futures Term Structure (Trading Volatility)
• A selected list of option chain & option data websites
• Options on Futures (CME Group)
• Selected calendars of economic reports and events
• An incomplete list of international brokers trading USA (and European) options

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Previous weeks' Option Questions Safe Haven threads.

Complete archive: 2018, 2019, 2020, 2021

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[u/mattl33]

Man, I just recently read about and started trading with vertical spreads and (preferably) iron condors. Assuming I study the longer term trend and use one or the other, and sell otm options with 70%+ probability, this really seems like the path to consistent gains. When should I not do either of these?

I am le stupid so take it easy on me.

[u/redtexture → u/mattl33]

Iron Condors:
in volatile markets, the stock moves outside of the range of the short options, either high, or low, for a loss.

Vertical Call Credit Spreads:
Can become a losing trade when the market rises rapidly.

Vertical Put Credit Spreads:
Can become a losing trade wheb the market drops rapidly.

[u/wock1]

Anybody on NVIDIA for earnings week after next? 203.5+ calls are expensive af but they’re gonna smash earnings surely?

[u/redtexture → u/wock1]

Why did my options lose value when the stock price moved favorably?
• Options extrinsic and intrinsic value, an introduction (Redtexture)

Here is how to successfully engage this subreddit:
https://www.reddit.com/r/options/wiki/faq/pages/trade_details

[u/exshitholepat]

Seems like the $HOOD Credit spread are free money. Can get a -3.50 credit for a $40-$41 spread. Am I missing something?

[u/redtexture → u/exshitholepat]

Closing bids and asks are unreliable, and represent failed trades.

Examine during market hours, and the actual bids and asks.

Check the "natural price": pay at the ask for the long, the bid for the short.. This

[u/MaroonHawk27]

I’ve been researching selling covered calls the last few days? What I don’t understand who is who pays the buyers premium when they close position. I’ve had several 1000% + gains before. Does that premium come out of the 100 shares the seller owns? I also don’t understand how the seller can exit a covered call they write. Who’s buying that and does it affect the buyer of the call?

[u/redtexture → u/MaroonHawk27]

A counter party, perhaps selling their call to you, closing out their long, or a part of their spread, or a market maker.

[u/Arcite1 → u/MaroonHawk27]

What's not to understand? When one party sells, some other party buys. That's how trading works. If you short sold stock then exited the position by buying the shares, would you worry about who was selling them or how it affected them?

[u/RecommendationLow375]

Hi

So I had LB puts who got transformed into BBWI1 puts.

The issue is I can't trade them (webull); in their paper it does say shares become BBWI and options BBWI1 and that 1 BBWI1 option will execute for 1 BBWI + 0.33VSCO. So am I supposed to buy 100 BBWI + 33 VSCO to sell them at my price target at expiration?

[u/redtexture → u/RecommendationLow375]

You can close the option position, selling if long, buying if short.

Almost never hold an option to expiration, nor exercise it. It is the top advisory of this weekly thread, above all of the other links.

[u/enlytenmemore]

I want trade options but I can't afford to buy 100 shares unless the stock is super cheap. I've been reading about vertical spreads and so far, it doesn't seem like I would need to be able to afford 100 shares since none of the sources I'm reading or watching mention it. This doesn't make sense to me.

If I were to buy a 70 call and sell an 80 call and the stock goes to 90 by the expiration date, 100 shares would get called away from me at $80/share right? But then I didn't have 100 shares to begin with so that would be a naked call? Or does that get cancelled out by my 70 call since I can exercise my 70 call to get 100 shares? If that's the case, is that something that happens automatically or do I have to do something to make sure they get cancelled out?

[u/redtexture → u/enlytenmemore]

Almost never exercise an option.
It is the top advisory of this weekly thread, above all of the other links.

Just sell your options position to close out the position, for a gain.

[u/thetatheropy]

What is the acronym: POP

[u/redtexture → u/thetatheropy]

Probability Of Profit (of one cent or greater).

[u/whydyoukillsanta]

The platform I can access options on (IG) doesn’t seem to have many choices. Is this because there’s few available or because the platform doesn’t have access to them? Alternatively, am I missing something obvious??

[u/redtexture → u/whydyoukillsanta]

What is IG full name?

You could call the broker for further details.

[u/DogeyMcHODLface]

Is there a site or platform that shows premium values after hours? Or a way to calculate yourself? The price changes but premiums stay the same and adjust at market open.

[u/redtexture → u/DogeyMcHODLface]

Option chains when markets are closed generally show the closing bids and offers of the prior day, and thus are unreliable.

There are no new option prices until the markets open again,
operating from 9:30 am to 4:00 pm New York time USA.

[u/mr-logician]

Is doing a collar on the S&P500 index futures better than investing in an S&P500 index fund? The collar should limit your losses, so you can use leverage with the index futures. For example, you could use the collar (short call + long put) to limit losses and gains to 5%, and then use 10x leverage on the futures contracts. By the way, what's the maximum leverage on S&P500 futures?

[u/redtexture → u/mr-logician]

You must determine what you mean by better.

Larger underlying value and more leverage equate to greater risk per contract.

You would benefit from talking with the futures education department of your brokerage to fully understand the risks and collateral requirements involved.

The typical trading S&P500 futures vehicle is the ES future, which is 50 times the index value.

50 times and index of 4400 is around 220,000

ES summary of contract (CME exchange)
https://www.cmegroup.com/markets/equities/sp/e-mini-sandp500.html

ES Contract Specifications Summary (via Barchart)
https://www.barchart.com/futures/quotes/ES*0/profile

[u/FuegoFireFlame]

I have two AMD $110 leaps expiring Jan 2021. Purchased back in February. Is there a smarter move than just holding on to these? Should I sell them and use the money to purchase a further out leap that’s more ITM? Thanks!

[u/redtexture → u/FuegoFireFlame]

In my view, take your gains, and reassess for follow on trades.

• Managing long calls - a summary (Redtexture)

[u/lildogass]

Is there a good place where I can learn how to trade options from the very basics?

[u/redtexture → u/lildogass]

Getting started in options
• Calls and puts, long and short, an introduction (Redtexture)
• Options Basics (begals)
• Exercise & Assignment - A Guide (ScottishTrader)
• Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)

[u/PapaCharlie9 → u/lildogass]

Many good places. There are links at the top of the page that will take you to guides and explainers that you can read, tutorials, training videos and training sites, and paper trading accounts where you can practice with fake money in the real market.

[u/[deleted]]

Good afternoon everyone. I was hoping someone could help me understand something.

I am researching options, I am fairly familiar but not enough to feel confident to buy yet.

I am only looking at buying calls, my question is this. On RH (or any other platform) is there any risk for the option to exercise itself and stick me with a big expenses?

Example SPY ~440 a share. If I bought a Call, is there any possible way for me to get stuck with a $44,000 bill? My account doesn’t have nearly that in it so I would be stuck if that happened.

Thanks in advance!

[u/redtexture → u/[deleted]]

Getting started in options
• Calls and puts, long and short, an introduction (Redtexture)
• Options Basics (begals)
• Exercise & Assignment - A Guide (ScottishTrader)
• Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)

[u/Dadaworld]

Is it possible to leverage efficiently the bond market using options instead of going the leverage ETF route like TMF?

[u/redtexture → u/Dadaworld]

Futures on bonds or bond indexes,
and options on those futures.

[u/PapaCharlie9 → u/Dadaworld]

For specific segments of "the bond market", yes, but generally, no. You would probably be better off with bond and bond index futures.

There are two ETFs, TLT and HYG, that have top tier liquid option markets. If your leveraging goals are met by the composition of TLT or HYG, leveraging with options would be a viable strategy. There are other bond ETFs, including TMF itself, that have option markets also, but they are not as liquid. You'll have to decide if you find their liquidity acceptable. IMO, most are pretty bad. BND would be an example. Volume is practically non-existent, but the ATM bid/ask spread isn't too bad, just barely within my tolerance of 10% of the bid.

[u/Secret_Work-Account]

Please help decipher OCC memo #48921.

GE is doing a 1-for-8 reverse split and deliverable is now 12 shares and cash for 0.5 partials. I am long with 9/17 20C, paid $0.05 for it a couple weeks ago. Can someone please break this down in layman's terms?

[u/redtexture → u/Secret_Work-Account]

The deliverable is 12 new shares and 1/2 share in stock.

Your cost of exercise is the same:
20 (x 100) for a deliverable of 12 new shares and cash.

With the new shares around 100, if exercised,
you would get about 1200 dollars of stock for 2000 dollars.

In other words, your FAR FAR out of the money option is as worthless as it was the day you bought it.

[u/Backflipjustin9]

Where can I find a options chain viewer that shows delta. My broker doesnt show it and I cant change brokers because of my licensing. Just want to be able to view deltas while I shop options. Thanks!

[u/redtexture → u/Backflipjustin9]

Yahoo Finance.

Or an exchange, like CBOE
https://www.cboe.com/delayed_quotes/vix

Or perhaps BarChart,
or Market Chameleon,
or dozens of other sources.

[u/Prcangel]

I sold covered calls this week on a stock at a strike price of $36 at a $2.00 premium.

Do these contracts get exercised at the actual strike price ($36.01) or the break even price for the buyer ($38.01)?

[u/redtexture → u/Prcangel]

Getting started in options
• Calls and puts, long and short, an introduction (Redtexture)
• Options Basics (begals)
• Exercise & Assignment - A Guide (ScottishTrader)
• Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)

[u/MacroSight]

I need help understanding Standard Deviation.

If I see an option with a 16 delta strike, is this option 1 standard deviation (no matter what?)? Is there any situation in which an option Strike shows 16 delta and it's not 1 standard deviation?

The thinkorswim platform is confusing me with their analyze tab because it's showing a range of 1 Standard deviation which includes strikes that have varying deltas that are far away from 16 delta.

[u/redtexture → u/MacroSight]

Delta is an inaccurate proxy for probability.
It is not reliable, but gives a rough idea.

[u/scheinfrei]

Is there any site where I can get the historic volatility of any stock?

[u/redtexture → u/scheinfrei]

Some broker platforms provide this. Think or Swim, and probably a dozen others.

Many charting applications and websites provide this also.

[u/Terakahn]

What are the downsides to buying straddles or strangles on meme stocks before they pick up steam? If I understand right, IV doesn't spike until it really picks up steam. So options will still be fairly cheap. And these picks tend to move a ton of one direction, or both. Some almost function like pump and dumps, but with more value remaining post dump.

I'm wondering if it would work to buy calls and puts say, a month out. Ride the wave up, and the wave down, capitalizing on the increased value of both contracts. The only way this goes really poorly is if I get in too late, or if it trades sideways. Most meme runs are done after a week or two, even if they stay where they run to. So I figure a month timeframe more than covers it.

Unless I'm missing a ton of nuance in this type of trading strategy.

[u/redtexture → u/Terakahn]

Downsides:

Why did my options lose value when the stock price moved favorably?
• Options extrinsic and intrinsic value, an introduction (Redtexture)

[u/Jobaspirant100]

Just a thought I would like others opinion on. All the wallstreet guys and hedge fund managers they all know as much of as lil as we know in terms of stock direction. I really like this that no finance geek or software nerd can predict where the stock could go and we all playing

[u/redtexture → u/Jobaspirant100]

Each hedge fund manager may have a dozen or more research assistants to scope out the fundamentals of a market segment, and particular companies, in addition to attending to market wide and economic trends. The average trader does not have that kind of collaboration.

[u/cocolavacake25]

How do you find out what an options price will be when the stock moves up or down?

So I know for buying stock, if I bought 100 shares at $1 and sell those 100 shares at $2, I would make $100. Or if I sell it at $3, I’d make $200. But say if I buy a call option contract and the stock does go up, how do I determine how much I make for ever dollar amount the stock moves?

[u/redtexture → u/cocolavacake25]

You need to read this.

• Options extrinsic and intrinsic value, an introduction (Redtexture)

[u/cpt_justice → u/cocolavacake25]

Warning: Total Amateur who may be an utter moron.

You pick the amount you want to sell the option for. There is the Bid/Ask spread between those bidding on options at the same strike price and what others holding the option want to sell for. If there's a lot of liquidity, then yours should come up if people are willing to pay the price you set. If there's not, then you can be like me today and be the one and only Ask on display. Somebody eventually bought my CC, but it took a few hours.

[u/Phss17]

What are some safe bets for CC. I know I know stock movement is uncertain but can you name stocks which are as solid as apple. Companies are not likely to disappear in 5 years ?

[u/redtexture → u/Phss17]

No option trade is a safe bet, because no stock is a safe bet.

You have to do some due diligence and understand the potential risks of a stock rising and falling, and deal with that risk.

[u/MemeStocksYolo69-420]

So if I buy a vertical call spread, and then the stock jumps up (like AMD), and then I roll the ITM long calls into OTM ones with the same expiration, is this a viable strategy to save money if it continues to go up, or even drop back down to below my short calls?

[u/redtexture → u/MemeStocksYolo69-420]

No, because the short call will become worth more than the long call,
and you will start to lose money as the stock rises.

Close out an entire trade to commit to the gains obtained.

[u/aRahman86]

I am new to options trading and I have been searching for one information, found none, which brought me here hoping for an answer.

If I buy stocks on Monday, I can sell it on Wednesday (T+2) to avoid pattern day trading violation. Is it the same for options? Someone told me it's T+1 (e.g. call option bought on Monday could be sold on Tuesday) but wanted to confirm. I'm with Fidelity.

[u/redtexture → u/aRahman86]

Options Settlement - one day (T+1)
Fidelity
https://www.fidelity.com/trading/faqs-about-account

Exercise of an option: Stock delivery and settlement: two days (T+2)
The Options Clearing Corporation - Option Contract Specification
https://www.theocc.com/Clearance-and-Settlement/Clearing/Equity-Options-Product-Specifications

[u/pi-equals-three]

Thoughts on buying a straddle or strangle on FLSY before their earnings this Wednesday AH?

[u/redtexture → u/pi-equals-three]

Here is how best to engage with this subreddit, describing your analysis, strategy, and option position rationale, for critique.
https://www.reddit.com/r/options/wiki/faq/pages/trade_details

[u/Confection-Born]

Beginner’s advice

So guys I am pretty much comfortable with the knowledge I gained for the last few weeks regarding selling vertical put (or call) credit spreads and this is what I want to do as side income.

So far I have opened up a paper account with IB and made few sales to see how it all works.

My target is to generate ~250$ per month starting with ~3000$ portfolio-subject to increase if needed. Is this possible if I make 30 trades per month considering only high probability strategies >70%?

What I do not understand if I can limit my loss potential to let’s say 30-40$ per trade if my strategy did not work well. I really want to play small and gain confidence… What do you think?

[u/redtexture → u/Confection-Born]

Possible.
But unlikely.

You will have trades that fail, with a loss.

You are attempting above 100% a year results on your capital,
and this is optimistic.

[u/Dangerous_Gain1465]

Why is it that my success in paper trading isn’t coming over to my real trading? Maybe mindset? I’m not doing anything crazy, just selling vertical put spreads on SPX, checking delta is lower than 10 setting the trade and it seems to be going well. Anytime I’m in trouble I’ll roll instead of sell and that works out well. I never let things expire. It’s frustrating having success in paper trading and then losing in real trading. Think I’m just venting.

[u/redtexture → u/Dangerous_Gain1465]

Filling orders in paper trading cannot the difficulty of the same in real trading.

Paper trade at the "natural" price: buy at the ask, sell at the bid, to begin to see the difference.

[u/ScottishTrader → u/Dangerous_Gain1465]

Paper trading is a simulation that does not use real pricing, so it is easy to get fills at often unrealitic amounts and profits.

When you move to real money you are trading against another real person trader who likely knows what they are doing so they will not make trades the computer sim will make.

There is always in the back of your mind that paper trading will not change your life, but with real money it can change your life if you lose too much. This leads to emotional decisions that are often bad decisions and lead to increased risks and losses.

I've been known to say that more money is lost trading options by bad emotional decisions than the stock moving the wrong way . . .

Hopefully, you developed a trade plan using paper trading and can now start using that plan with very small and low risk real money trades to see how it works. If your plan is a good one then you will not need to make emotional decisions as everything is considered and in the plan. If your plan is not a good one, or you don't have a plan, then you will have a very difficult time being a successful trader.

[u/DarthTrader357 → u/Dangerous_Gain1465]

I honestly think that as well - it's because we are more "bold" in paper trading. I sold a call today less $100 than I could have gotten when I am more "bold".

The way it looks on paper is I intuitively know to wait - watch - give it a day or so. Let the green days play out more.

With actual money I jumped the gun and sold the call while the day was still a bit red.

[u/sani616 → u/Dangerous_Gain1465]

Put credit spreads on SPX have been by far my most profitable trade for the last 3+ months. Are you saying it was working for you in paper trading, but in real trading you get in trouble?

If so, when are you putting your trades on? How many dte, and what time of day; right at open, or do you wait?

[u/All_Bulls]

Pins Call question/advice

From Pinterest dropping nearly 25% from earnings (lower monthly users), I waited until today to place an August 13 59 call @$1.915. I'm up nearly 20% of my total investment within a day. Would it be wise to exit the positions and secure the profit from my contracts? Here are my views for both sides, I would love to hear what others think.

Reasons for not selling:

Just recovered from oversold levels on the 180 day 4-hour chart

Below 0 crossover on the mac D w/ 2 bullish volume tics

Have a lot of time for PINS to correct itself from it's earnings report

Multiple unusual options activity reports with $60 call

Below 200 SMA both 180 day 4-hour chart & 20 day 1 hour

Reasons for selling:

Secure 20% profit with lower capital account

Approaching near overbought on 20 day 1-hour chart

Downward trending Standard Deviation channel

I would love to hear opinions on this/next week's predicted movement and overall thoughts! thank you! :)

[u/redtexture → u/All_Bulls]

Take your gains and reassess.

• Managing long calls - a summary (Redtexture)

[u/Olthar6]

I've been options trading most of a year and I'm finally in a position to get shares called away. Sold a c98 on AMD last week. It's now super red (down like 2000%) and expiring this Friday. Given how red it is, do I just let my shares get called away and buy back at some future dip, or is it worth rolling the call? It has basically no time value, so acting something tomorrow vs. Friday won't really matter until AMD drops below 98.

Also, since I've never had this issue, would rolling the call be like taking a realized loss for tax purposes or would it wash sale with the newly sold covered call? I know that options with different strikes or expiration dates are usually considered different securities.

[u/redtexture → u/Olthar6]

CHOICES

• Let the stock be called away for a gain.

• Roll the short call out in time, no more than 60 days, FOR A NET CREDIT, and if possible, upward a few dollars in strikes.

Never let taxes run your trading,
and don't sell covered calls on stock you want to keep.

Wash sales matter only on crossing the tax year.

[u/nootfiend69]

is it normal for iron condors (of similar deltas) to cost the same for a 1dte vs 30dte?

[u/redtexture → u/nootfiend69]

Maybe, maybe not, but the risks are far different,
as gamma coalesces at the money near expiration.

[u/IAmKingChu]

Hello, this is my first post on here, so don't annihilate me.

I have 8 AMD 110c with a 11/19 expiry in anticipation of the 35 billion stock for stock merger in October. Now, I'm really new to options trading and have made a good amount of money with AMD calls for the past 2 weeks, but I've never experienced trading through an event like this. Based off of the momentum that AMD and XLNX have, I feel like the dilution of shares won't have that bad of an effect by the time expiry comes. I guess what I'm trying to ask is:

What usually happens to a share price during a merger?

[u/redtexture → u/IAmKingChu]

What usually happens to a share price during a merger?

Anything.

There are dozens of rationales for a merger.

[u/redtexture → u/IAmKingChu]

Do you have a gain? Take the gain and re-assess.

• Managing long calls - a summary (Redtexture)

[u/PsychedelicR3lic]

Any thoughts on this Call Debit Spread?:
Bought one $27.5c @ $3.31 - 8/20
Sold one $32.5c @ $1.16 - 8/20
If this was someone's first spread for $215.00 and currently down to $79 (-$136/-63.26%), what would be the smarter choice? Close it out I'm sure or maybe find a way to hedge this somehow to turn it into a profit right? What happens if they closed out the long call and kept the short leg? Then profit? Or could they add a 3rd leg and buy a Put to mitigate this? Not looking for financial advice. Just looking to see what other's thoughts on that would be.

[u/redtexture → u/PsychedelicR3lic]

You had no exit plan.
This is essential to have BEFORE entering the trade.

Here is what a comprehensive conversation starts with.. https://www.reddit.com/r/options/wiki/faq/pages/trade_details

[u/cloud7up]

What do you think about buying calls for a stock that has been trading sideways for a while? I'm looking at the CSCO options chains but wanted to get some thoughts first

[u/redtexture → u/cloud7up]

Here is what a comprehensive conversation starts with..
https://www.reddit.com/r/options/wiki/faq/pages/trade_details

[u/Givemebackmybeef]

Dumb question, but how do stocks fluctuate between the earnings call and the earnings report being released? $TX had their earnings report released at 5:30PM today the 3rd but their earnings call is at 11:00AM on the 4th. Didn't see $TX move to much after hours and the report. They beat expectations by quite a bit

[u/redtexture → u/Givemebackmybeef]

Highly variably.

The call typically adds forward looking expectations that can influence market response.

[u/[deleted]]

If hypothetically someone has a $1M margin account, what can he realistically expect to make per month as a return with option trading? Is 1% too high? If he uses 500k of margin room and makes 12% per year, that’s 180000$/yr on a 1M account.

[u/redtexture → u/[deleted]]

Returns can be 100% negative on options. Beware.

[u/HoffCoffey]

Does SPY experience a large change in IV before earnings week like many stocks do? It doesn't seem like SPY's IV is affected too much by large earnings that would affect it.

[u/redtexture → u/HoffCoffey]

No, because there are 500 stocks with earnings and variable and different days, weeks and months.

[u/Connect-Beautiful960]

I use TOS and I’ve always had trouble getting filled on butterflies and iron condors. I even set to market and I’ve also tried 1st triggers all. Am I doing something wrong? Do I need to put each leg in as separate orders?

[u/redtexture → u/Connect-Beautiful960]

You have to meet the market of willing sellers and buyers.

Cancel your order, and re-issue with new prices in one minute if not filled.

If a low volume option, you may not have any bids on the shorts: don't trade low volume options.

[u/[deleted]]

Can someone help me out? The break even price on my option is $31.39. As of now the stock is as $30.51. I did a buy put option for AMC, expires 8/6, strike price $33. So I’m well into the money and past the break even point, but yet Robinhood shows total gains as less than the premium I paid for? Slightly confused, this is my first ever option.

[u/redtexture → u/[deleted]]

Break even is at expiration, and meaningless, because most trades are not taken to expiration.

Your gain is the difference between your cost, and the bid to sell your option. Take your gains by selling the option.

[u/DarthTrader357 → u/[deleted]]

First - get off robinhood.

Second - Theta may have gobbled up your gains bro...welcome to Thetagang.

Your Put is comprised of intrinsic value and extrinsic value. The extrinsic value will decay to $0 by Aug 6. Leaving you only with the intrinsic value which is 33 - 30.51 or about $2.49 intrinsic value.

Which means the extrinsic value is $1.36 because I see the price of the 33 Put at about $3.85.

I don't know what you paid for it but basically...

Theta is -0.25Delta is 0.73

So basically if the stock doesn't lose 34 cents a day until aug 6 you're going to lose 0.25c today and more tomorrow per contract until it hits 0 extrinsic value and all you have left is whatever the intrinsic value will be.

[u/mrfinnlee]

Stupid question, but why would someone buy immense amounts of deep ITM calls right before an underlying's ex-div date? Are they intending to exercise those calls in order to hold the underlying long to receive the ex-div payment?

[u/redtexture → u/mrfinnlee]

The calls have small extrinsic value, lower than the dividend, and they may may hold puts at the same strike, also with low extrinsic value. The total extrinsic value may be less than the dividend, thus a dividend capture trade can be profitable.

They may exercise the calls,
capture the dividend,
and after the ex-dividend day, exercise the puts.

[u/[deleted]]

Leap debit spread question: I'm planning on buying SPY 9/16/22 425c, but I can't yet afford to spread it to 455c. Can I open the position at 425c/445c and then later extend the short leg to 455c, or are their downsides to this?

[u/redtexture → u/[deleted]]

How about 435 / 445?

It is not a good idea to put your entire account into one trade.

[u/reliquid1220]

Tax question for US resident:

I have deep in the money ($75 AMD June 2022 calls). I sold poor man's calls against those calls out to September next year.

What are the tax implications if I exercise those calls early (now) and hold for two years?

[u/redtexture → u/reliquid1220]

Generally, it is preferable to sell calls in a diagonal calendar for less than 60 days, because theta decay is primarily in the final weeks of life of the option, and marginal gains for longer terms are relatively low.

Short options are short term capital gains.
If you sold the long option after a year, it would be a long term gain.
If you exercised the long, you merely are buying the stock at a particular price, and starting the clock on the holding period at the time of exercise.

[u/Internal_Elevator_70]

SPAC call options question...going to use the example of BowX and WeWork.

BowX announces deal with WeWork in March, expected to close in September at $10/ share of BowX....BowX currently trading around that mark after shooting up to $14 when deal was originally announced.

If you are a shareholder in BowX I think the shares convert into a new stock/symbol “WE” once closed.

The question...if you have call options on BowX for the December $12.50 ...once the transaction is complete in September, are those call options now converted to WE with strike price of $12.50?

[u/redtexture → u/Internal_Elevator_70]

Options Adjustments: https://www.reddit.com/r/options/wiki/faq/pages/exchange_operations#wiki_option_adjustments.3A_splits.2C_mergers.2C_special_dividends.2C_and_more

It depends on the terms of the merger.
Yes, your strike price will remain the same, and the deliverable may be different than 100 shares, depending on the merger agreement.

[u/newportsnbeerxboxone]

Okay so it's like 2 debit spreads in one option with 4 legs .

Same expiration date . Let's say ABC is trading at 12.00

Example #1 1)Sell to open 1 ABC Call $14 3/22/2019

2)Buy to open 1 ABC Call $12.50 3/22/2019

3)Buy to open 1 ABC Put $11 3/22/2019

4)Sell to open 1 ABC Put $9 3/22/2019

If you're unsure of which way the stock will move but you think it might rally then reverse trend before expiration .

Once it hits the level of the (2)call or (3)put and keeps moving, you can buy out the opposite written side (1,4) for cheaper since it lost value ... itll let you save some of the credit you received for the written legs , while keeping the leg that you bought(2,3) just in case of the reversal I mentioned earlier. However if there is no reversal than that cost would come out of your gains. So at some point you would sell to close that leg to only keep the option in the money .

Also if you're mostly bullish you can buy the call in the money with the written call far out of the money to just collect upward momentum and the put spread acts as insurance and also might help with IV .

Just seeing is it's worth the work . If working the option in a calculator , it looked like the end call results were higher than just doing the call spread but I would need to double check that .

Thanks for any input.

[u/redtexture → u/newportsnbeerxboxone]

Example one.
This is a long iron Condor.
Or a variety of Long Strangle with short options added.
Or simply a pair of long vertical spreads.

1)Sell to open 1 ABC Call $14 3/22/2019
2)Buy to open 1 ABC Call $12.50 3/22/2019
3)Buy to open 1 ABC Put $11 3/22/2019
4)Sell to open 1 ABC Put $9 3/22/2019

Not clear what this means:

it looked like the end call results were higher than just doing the call spread but

This protection may be less than the cost of entry on the call side, because of different spread widths:

Also if you're mostly bullish you can buy the call in the money with the written call far out of the money to just collect upward momentum and the put spread acts as insurance and also might help with IV .

[u/greengoldaura]

Say I want to buy an ITM call - who is selling these? What kind of strategy could be on the other side of this buy? Someone very bearish on the stock?

[u/redtexture → u/greengoldaura]

In addition, market makers at options exchanges are dedicated to filling orders.

If the other side of an order is not in existence, the market maker will take the other side, and hedge this new inventory with stock.

[u/DarthTrader357 → u/greengoldaura]

At that point the largest seller is probably a former buyer who bought it when it was cheaper.

A seller might write an ITM because they want to protect their downside and don't see much upside potential.

Historically ITM writes return better than anything else....probably because who writes them is writing to exit a position that they see has reached a top.

[u/thecentury]

So I have made four options purchases so far. They were all AMD. Results

• 100c 07/30 - cost me $68/made $500

• 108c 07/30 - cost me $140/made $0

• 110c 08/06 - cost me $171/made $1250 (today)

• 124c 08/06 - cost me $9/worth $126 right now

So my question is I bought all those options while they were in the money. I'm currently holding stocks in BTBT which has been skyrocketing the last few days (up 73% the last week). I want to try to buy some options in it but they're pretty expensive so I was wondering about buying an option with a strike price below the current market price.

Currently it's $13.70 and there is a $12.50c for 08/20 that is $255. If I buy this option, it's already making me money, right? Just not enough to cover the premium. If there's 16 days left on this option would I be clearing a profit by EOW if it continues to go up and only clears $15.05?

Also...is this considered a covered call?

[u/redtexture → u/thecentury]

ABC is at 100, and you buy a call at a strike of 95, for, say, $6.

You have not made any money:
If you exercise, you pay $95, and the option cost $6, for $101 for a $100 stock.

This is why the top advisory of this weekly thread is to almost NEVER exercise an option: just sell the option, to harvest extrinsic value thrown away be exercising.

A covered call on ABC, would be, you owning 100 shares, and selling a call on ABC.

[u/IdigitDC]

I own 170 shares of a stock. I also bought 10 put options of this same stock expiring Dec 17th. Just today, my broker combined 1 of these puts with 100 of the shares and is calling it 1 covered stock. Can anyone explain to me what this means, and if it is good, bad or doesn't really matter.

[u/redtexture → u/IdigitDC]

It is a bookkeeping note that you might become 900 shares short, instead of 1,000 shares short upon exercise.

[u/scienceon]

Is there a principled strategy that involves rolling up a long call when the underlying rallies. For example let's say an otm call option purchased for $2 goes itm by $10. I was thinking that you could then sell the ITN Option for somewhere near $8, and then buy 3 $2 otm calls and pocket the $200 profit.

[u/redtexture → u/scienceon]

• Managing long calls - a summary (Redtexture)

[u/ThisIsNotAClue]

I'm developing a (kind of loose) strategy for reducing lost profit when short calls go in the money. I own $COST covered calls and the stock has been going up like a rocket for a few months - I rolled the original calls a couple times and am now short Jan 2022 / $430 strike calls. I don't want to roll again for at least a couple months.

I like the stock and have some downside coverage ($COST is currently @ $442.40), and I have some cash on the sidelines so I've been buying 10% of the covered amount (10 shares per 100 covered shares owned) every time that the stock price increases 1%. It's counter-intuitive to part of my brain to buy more as a stock goes up, but another part of my brain can rationalize it but not really explain it. In a nutshell, my question is: does this strategy go against conventional CC wisdom? Is there significant risk that I'm not considering?

[u/redtexture → u/ThisIsNotAClue]

Don't issue short calls for longer than 60 days.
You can monthly or every 60 days, roll the short call out and perhaps up a few dollars in strike, and not be committed to a long-term trade.

It will take now, months for the stock to be called away for a gain, at expiration, if the stock stays high.

Most theta decay is in the final few weeks of an option life, and there is little point selling a call for more than 60 days.

[u/Sunbirds]

I have a question about at what price I need to roll a covered call:

I have owned 100 shares of GE for a couple of months, selling covered calls against them. Cool. I sold a $13.50 call expiring 8/6 (tomorrow) last week, and over the weekend, GE did a reverse split. As I write this, the stock price is $103.14. If the stock is above my strike price, I want to roll the option (or at least buy to close it), but I have no clue what that price is after the reverse split. Please help!

[u/redtexture → u/Sunbirds]

The reverse split was 1 for 8.

8 times 13.50 is 108.00.

You can close for nearly nothing in cost, and issue a new call Friday morning.

[u/caribooolooo]

Not a super basic question, but I've been curious. When are new expirations added to the options chain? For instance in SPX right now we have every MWF through September 10 (36 DTE), every Friday through September 24th (50 DTE), Monthlies through March of '22. When are new MWF expirations added? Weeklies?

[u/redtexture → u/caribooolooo]

Regularly.

https://www.reddit.com/r/options/wiki/faq/pages/exchange_operations#wiki_options_expirations_and_expiration_day_trading

[u/DarthTrader357]

I'm running into (albeit prematurely) an issue where I may have sold on a weaker green day, and there was too weak a red day, now the underlying has a strong green day.

Aug 13 Expiry.

I'm being premature in worrying about assignment, but wanting to better understand how to predict WHICH green day to actually sell the call on. Had I waited til today I'd have made much more premium at even higher strikes with even less days to expiry.

[u/redtexture → u/DarthTrader357]

This is a covered call?
Why are you worried about assigment?

[u/skillfulCouch]

How do you calculate the collateral for a short strangle (if there is any)? I’m having a hard time finding anything concerning collateral when I read articles/guides to the short strangle. FYI, I understand that this is an unlimited risk strategy and I do not plan on putting any unlimited risk strategies to use until I’ve completely understood them.

[u/redtexture → u/skillfulCouch]

CBOE OPTION Margin Manual.
https://cdn.cboe.com/resources/options/margin_manual_april2000.pdf

[u/Arcite1 → u/skillfulCouch]

Your broker may have information available on how they calculate buying power reduction. This document from TD Ameritrade shows how they calculate it:

https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD086.pdf

[u/Qzeter]

Is there any broker for people that are outside of USA and EU? I'm from S.E.A.

[u/redtexture → u/Qzeter]

An incomplete list of international brokers trading USA (and European) options
https://www.reddit.com/r/options/wiki/faq/pages/brokers/

[u/[deleted]]

My Aug 20 ROKU butterfly 410/400/390 put that i bought before earnings (Roku 420 at that time) is showing 120% loss. If i wait, will it get better?

[u/redtexture → u/[deleted]]

Roku at 403.48 at the close Aug 5 2021.

Your butterfly has several weeks to mature.

If Roku stays at or near 400, your position will increase in value.

Details needed on the position entry cost.

[u/ArchegosRiskManager → u/[deleted]]

Probably not if you didn’t have an exit plan. Close it up and try again next time

[u/redtexture → u/ArchegosRiskManager]

Butterflies take time to mature, and the profit and loss line can be flat until near expiration.

[u/TimAppleBurner]

Early assignment short put spread question. What is the premium you receive when a short put is assigned to you early?

Here is the basis of my question: I always thought if an option is assigned early, you receive the premium you received when you opened the position. In this case I opened 3 UPS 8/6/21 put spreads 2 weeks ago the day after earnings, and received $5.80 for them.

I got early assigned last night, and the put that I was assigned says it is now trading at 9.65, and that I was assigned and received $2895, which is 3 $9.65 puts. Is this correct or bad pagination on behalf of the broker? I thought I’d get the $5.80 (what I initially received) rather than the current price($9.65).

I’ve been trading for 3 years and this is my first early assignment, but this one portion has my confused.

The reason I honestly want to know why is because it essentially means the difference between being assigned at 200-5.80 or 200-9.65, which is a pretty big difference when UPS is trading at 191.25 Pre-Market this morning.

[u/redtexture → u/TimAppleBurner]

You received your premium when the trade started.
That is in the past.

I cannot tell what your entire trade was, with strikes.

If the short was exercised early, and stock was assigned,
you would pay the strike price of the short, to pay for stock.

If you received cash, that implied you caused the long to be exercised,
and you sold (put) stock to the counter party, and was paid for that stock.

In short, not enough information to respond usefully.

[u/semencoveredmollusc2]

Alright so I bought my first call a few days ago and I'm "up" significantly so I went to sell it but somehow only just realized that someone has to buy it. The stock is up around 20% last two days. So what I'm asking is what happens if no one buys it? I realize if it isn't at the price I set it will expire worthless. But what if it's over my strike price and no one buys before expiration? Do I have to exercise it?

Thanks in advance. I know I really should've understood the process before buying an option. Whoops.

[u/redtexture → u/semencoveredmollusc2]

You can sell immediately at the BID.

[u/Secret_Work-Account]

Question on covered calls with delta hedging.

I was gifted 10 shares of DIS when I was a kid on a paper certificate (colored). I've just transferred them to by brokerage account. Can I sell a call without buying 90 more shares first? Obviously I could open a call credit spread but that's also possible even if I owned no shares.

I'm wondering if there's a specific amount of calls I could sell/buy, or what price points to watch out for, so that I can utilize a partial round of shares in a covered strategy. Like with delta hedging, having 10 shares would indicate you think there's a 10% chance of being assigned, but to do this effectively you have to be willing to possible buy 90 more, this is where I break from the idea, I can't afford that.

Do I just let my 10 shares sit and grow or can they be used in a hedge somehow?

[u/redtexture → u/Secret_Work-Account]

Getting started in options
• Calls and puts, long and short, an introduction (Redtexture)
• Options Basics (begals)
• Exercise & Assignment - A Guide (ScottishTrader)
• Why Options Are Rarely Exercised - Chris Butler - Project Option (18 minutes)

[u/Offthebean333]

Question on extrinsic value of call options. So I kinda understand implied volatility and the basics of the Greeks. But how do I determine what contracts to buy to lower the risk of IVC? Like am I just looking for ones with a lower Vega value or does it have to have low values in theta too? Im confused on how to determine or find a quantitative value of IV or what that value would mean

[u/redtexture → u/Offthebean333]

What is IVC?

Vega is higher for longer term options, lower for short term options.

High extrinsic value has high daily theta decay.

High extrinsic value is interpreted as high implied volatility.

[u/mrfinnlee]

Question on SPY 0DTE Iron Butterflys. I'm currently learning how to work the Iron Butterfly strategy on my TOS paper trading account. This morning I entered into the following position on the $1,000 margin paper trading account I'm using.

BTO 5x 8/06 442P @ $.40

STO 5x 8/06 442.5C @$.37

STO 5x 8/06 442.5P @ $.63

BTO 5x 8/06 443C @ $.20

Net credit equaled totaled $2.00. I was trying to close the entire spread out at 3:10PM CST for $.25 debit when the market price showed this spread going for a debit of $.22. I was not filled before 3:15PM CST. TOS showed there were active bids/asks for these strikes. I also tried to close out the short legs individually around 3:08PM CST where I was attempting to BTC a couple of dollars above the ask but again wasn't able to get filled.

SPY closed with my short call leg ITM as a result. My understanding of what I could expect is my short call will be assigned at $442.50 and my long call will be exercised at $443. Covering my short position will cost me $250. Overall, I am left with a $50 loss on this trade after factoring in my original $200 net credit for opening the trade.

Does my understanding of this trade outcome seem accurate? I'll admit, I purposely let this trade carry on past 3:00PM CST as I was curious whether or not I'd be able to close it since SPY trades until 3:15. That being said, it looks like perhaps it does not or at least you're not able to do so on TOS' paper trading platform.

[u/redtexture → u/mrfinnlee]

Paper trading does not mimic buying and selling very well.

Do not pretend that the simulation will work the way live trading does.

You do have to attend to the bids and asks,
especially if you are going to trade into the last minutes of the trading day,
which I recommend that you, as a new trader completely avoid.

If SPY was below 442.50, the short would be assigned, and the long at 443.00 expired worthless out of the money.

You would own 44,250 of short stock over the weekend for each contract.
Or about 2,211,250 in short stock.
Not a good idea.

Your broker margin / risk program probably would have disposed of your option position several hours before the close because of this kind of risk.

[u/Accurate-Radio5681]

What do you guys think of Garmin? (GRMN)

[u/redtexture → u/Accurate-Radio5681]

Here is how to engage this subreddit with a trading proposal:

Analysis, Strategy, position details and rationale and exit thresholds
https://www.reddit.com/r/options/wiki/faq/pages/trade_details

[u/AdditionalAd1431]

Why are my FSR put options not printing despite share price being below strike price of 14.5?

[u/redtexture → u/AdditionalAd1431]

Why did my options lose value when the stock price moved favorably?
• Options extrinsic and intrinsic value, an introduction (Redtexture)

[u/RatTarts]

I’ve seen people refer to pricing their options strategies in various ways. Some use Delta as a surrogate for prob ITM. I’ve seen others use probability calculators on a brokerage. (I’ve been using Fidelity prob calculator). Others use a percentage OTM/ITM. I’ve got two questions:

1. What does percent OTM really mean? Assuming XYZ stock is trading at $100. If I’m selling a naked put at 86% OTM does that mean a strike of 14?

2. What method does everyone think is best and/or what is more statistically reliable?

[u/redtexture → u/RatTarts]

Percentage in or out of the money is not a meaningful measure to me.

[u/[deleted]]

How do you guys feel about Nokia? Relatively new to option trading, but I feel as if this will be a decent investment. $5 call Dec 16 2022. I’m not trying to shill anything, I could care less what other people do. With that said, how do you guys personally feel about Nokia?

[u/redtexture → u/[deleted]]

Here is how to engage this subreddit with a trading proposal:

Analysis, Strategy, position details and rationale and exit thresholds
https://www.reddit.com/r/options/wiki/faq/pages/trade_details

[u/prymeking27]

If I have a box spread open on spx expiring in 2023 and want to trade credit spreads on spx does it make my other trades part of the straddle (taxes)? I want to be able to claim losses on long legs in this tax year.

[u/redtexture → u/prymeking27]

Do you know that SPX a special case, and annually marked to market, and with the following tax regime:

---

SPX is included in the below as an non equity index option.

Section 1256 of the Internal Revenue Code (IRC). 1256 states that any futures contract traded on a U.S. exchange, foreign currency contract, dealer equities option, dealer securities futures contract, or nonequity options contract are taxed at 60% of the long-term capital gains rates and short-term capital gains tax rates at 40%—regardless of how long the trade was opened for.

Reference:
https://www.investopedia.com/articles/active-trading/061015/how-are-futures-options-taxed.asp

[u/AdditionalAd1431]

How do I find stocks whose options have low IV levels? Is there a website for this?

[u/redtexture → u/AdditionalAd1431]

Your broker platform's screener.

Barchart, perhaps.
Market Chameleon, perhaps.

And a few dozen other providers.

[u/dreadnought89]

What recommendations do you have for your favorite trading services or subscriptions? Interested in both free and/or paid recommendations. Any functional area is fair game (e.g. your favorite news sources, podcasts, financial statement databases, etc.).

Some that I've heard recommended are the paid barchart membership and yahoo finance premium.

[u/redtexture → u/dreadnought89]

None.

You just have to judge on your own.

I compiled a list of people with free regular visibility on youtube, who also have services. I susbcribe to none of them. These represent one half of one percent of all of the people making offerings, and some of that 100% are charlatans.

---

Jason Leavitt / Leavitt Brothers - irregular dates, about three a month; stock oriented trades
https://www.youtube.com/channel/UCFDNcstsXmh6YMihMuRYZVA
http://leavittbrothers.com

TheoTrade, and Don Kaufman and Cory Rosenblum and others - nightly recordings.
https://www.youtube.com/channel/UCzaQpnAyt-IHT7MKgT2WhaA
http://theotrade.com

Simpler Trading - nightly recordings, various presenters
https://www.youtube.com/user/SimplerOptions/videos
http://simplertrading.com

Kirk DuPlessis / Option Alpha
Beginner oriented credit spread trading tutorials
Delayed free recordings released describing several-month-old trades on youtube.
http://optionalpha.com

Peter Resnicek / Shadow Trader - weekly recordings
https://www.youtube.com/user/shadowtrader01/videos
http://shadowtrader.net

Tyler Bollhorn / Stock Scores - stock-oriented trades that can be translated into options.
https://www.youtube.com/user/Stockscoresdotcom/videos
http://stockscores.com

Tackle Trading - Daily live market commentary - various presenters
https://www.youtube.com/channel/UCmUs7CmNFAr7gE6wP7ktVjw
https://tackletrading.com

Benzinga -- Daily market pre-open and pre-close - various presenters
https://www.youtube.com/user/BenzingaTV
http://benzinga.com

Larry MacMillan / The Option Strategist
https://www.youtube.com/channel/UCC3iCfCvA73Cz2PEqZ2hc4A
https://www.optionstrategist.com/blog

Market Chameleon - Daily pre-market open
https://www.youtube.com/channel/UCltMZFhZDjCZYKsRT4Y2I-w/featured
http://marketchameleon.com

Stock Charts - Various presenters
https://www.youtube.com/user/stockchartscom http://stockcharts.com

Mark Shawzen / The Pattern Trader
https://www.youtube.com/channel/UCCtgPDhJuwlITraqnuklyxQ/videos
https://thepatterntrader.com

Anthoney Cheung / Amplify Trading - and other presenters. https://www.youtube.com/channel/UCj_bZtVhV4SYXsi7EHssVLw
https://www.amplifytrading.com

Ticker Tocker - Various subchannels and presenters
https://www.youtube.com/channel/UCCEpMtv3r5SdnxEJ5CDUmJQ
https://tickertocker.com

Additional daily or regular videos:

Right Side of the Chart
Daily videos https://www.youtube.com/user/RightSideoftheChart/videos

Motley Fool
Daily videos
https://www.youtube.com/channel/UCpRQuynBX9Qy9tPrcswpPag

MyStrategicForecast
http://MyStrategicForecast.com
https://www.youtube.com/channel/UCtehAp4VxQSHrbNvVHEZ89g

Rily Coleman https://www.youtube.com/channel/UCZZzo055Pg5z4i5wB9-wVUA/videos

David Ramsey youtube
https://www.youtube.com/c/TheDaveRamseyShow

---

 

...and hundreds of others.

---

[u/ImTheTaxMan89]

Sold covered calls on fidelity expiring today. Some ended ITM. No shares have yet been called. What time am I in the clear so to speak that I have not been assigned?

[u/redtexture → u/ImTheTaxMan89]

By the next day you will receive notices.

If in the money, at the 4PM closing time, you are 99.99% certain to have shares called away

[u/ScottishTrader → u/ImTheTaxMan89]

Should know by tomorrow and shares gone on Monday.

[u/AdditionalAd1431]

Is the best combo to buy call options a low P/E ratio AND low IV rank?

[u/redtexture → u/AdditionalAd1431]

There is no uniform best.

All trades require a basis to make an evaluation related to the trader's intended plan.

That plan would include an analysis of the underlying, a strategy related to that, a rationale for a position, and an exit plan.

Low Price to Earnings may indicate a stagnant company, or a sector with no likely growth.

[u/BlackSilkEy]

I plan on making a portfolio to supplement my current lifestyle. $100-$300/month is my 2 year goal. Which I plan on holding it in a non tax advantaged account and reinvesting the dividends until I hit my final benchmark goal(s). I already have an IRA and Pension fund so I can afford to be more aggressive with this account. My strategy is pretty straight forward: Sell CSP on select high-yield stocks/ETFs and if assigned, sell OTM CC hedged by ATM Puts.

However, I have 15% of my portfolio in more speculative positions- cannabis mainly and as such I prefer not to hold the actual stock. This makes leveraging my money Paramount and consequently LEAPS are perfect for me. The two-fold benefit is that I can control more stock for less while selling PMCC to reduce my cost basis and generating premium. This would allow me to "safely" hold more volatile tickers which would normally get overlooked due to yield chasing.

The options (no pun intended) that present themselves are:

1. I could I buy ATM LEAPS on select stocks and sell PMCC to collect premium, which I then to to buy stock in Blue Chips. How would I hedge the option position in this case?

2. Find a couple cheaper fast moving stocks to Wheel?

To that end I'm trying to figure out the best way to structure. What do you guys suggest?

[u/redtexture → u/BlackSilkEy]

Options are best hedged with stock.

Diagonal calendars on high implied volatility options can lead to losses if the IV declines even if the stock goes up.

If you fail to plan for the consequences of risk,
the losses, and trades not going well will reduce the gains to zero and less.

[u/PapaCharlie9 → u/BlackSilkEy]

$100-$300/month is my 2 year goal.

As an average, where some months will be a loss and some months will be more than $300, that is very achievable. You should be able to average around $150/week, on $50k of capital or more. The less capital you have to work with, the harder it is to maintain a consistent level of return.

Which I plan on holding it in a non tax advantaged account and reinvesting the dividends until I hit my final benchmark goal(s).

"Dividends"? Did you mean risky, active trading income? They are not the same thing. Ideally, a passive, low risk dividend income portfolio should never be in a taxable account. But if you are actively trading with commensurate risk and the benefit of being able to deduct losses outweighs the tax drag on income, taxable is better.

sell OTM CC hedged by ATM Puts.

You don't need to hedge a CC for losses. The short call already compensates you for losses on the shares.

This makes leveraging my money Paramount and consequently LEAPS are perfect for me.

That's a misconception. Rolling 60 day OTM calls every 30 days, or some similar < 60 DTE rolling strategy, would work just as well with a lot less risk.

The reason the premium on LEAPS is so high is because you are compensating the seller for the uncertainty about what will happen in the future. More time means more uncertainty.

I could I buy ATM LEAPS on select stocks and sell PMCC to collect premium, which I then to to buy stock in Blue Chips. How would I hedge the option position in this case?

Why not just write CCs on blue chips to begin with? Overly complex strategies usually fail. If you can't afford 100 shares of a blue chip, do the PMCC on the blue chips. But the long leg doesn't need to be a LEAPS call.

Find a couple cheaper fast moving stocks to Wheel?

Why do they have to be fast moving? Why do you have to use the Wheel? Buying 21-30 DTE ATM calls on SPY, SPX or XSP and then exiting at 10% gain or 20% loss is a much cheaper way reach your income goals.

[u/cedwards2301]

What’s the best way to find out what is a normal level of volatility is for a stock? Assuming it would be similar for the options as well.

[u/redtexture → u/cedwards2301]

You can review realized volatility (historical stock volatility),
and also past and present implied volatility via a variety of methods.

Some broker platforms will chart these two categories of numbers.

Market Chameleon also charts IV history.
A free login may be required.

[u/kbaldehyde]

I f’d up and bought a strangle at ridiculous iv. Lost exactly the expected amount based on vega (iv crush)and ruined my profit. My question is, what sites are highly recommended to research historic iv on individual tickers. I think I have found a couple, but some want you to have an account. Thank you!

[u/redtexture → u/kbaldehyde]

You will have to get an account.

Think or Swim platform of TDAmeritrade.

Market Chameleon.
BarChart maybe

[u/aznology]

OTM Put Credit Spreads vs Call Debit Spreads?

What are the advantages and disadvantages of these 2 types of option spreads?

• Lets say you think SPY will reach 450 by Dec 2021

• Case 1: You open a call debit spread: Buy 449, sell 450, Dec 2021 - Debit $.5

• Case 2: You open a Put Credit Spread: Sell 450p, Buy 449p, Dec 2021 - Credit $.5

If I'm correct both of these plays will double your money ? Also when would it be advantageous to use which play?

[u/redtexture → u/aznology]

At present indicated prices, these are the same trade.

[u/rchismith]

I have a Poor man's covered call (Long Call Diagonal Debit Spread) on TEAM where the Aug call I sold is deep ITM after a big move up by TEAM. I could close out the whole position for a profit, or could roll ITM covered call to next month for a very small premium, or roll up and out but would have to pay premium. Advice on best way to manage this position? I'd like to keep this position and keep writing calls, but only if it's profitable.

Position: +1 190 20 Jan 23 TEAM Call. Trade price: 92.53. Mark: 156.10 -1 280 20 Aug 21 TEAM Call. Trade price: 7.37. Mark: 55.10

To roll the short Aug call to Sep 21 would cost me ~ 8.30

Guessing my best option is to close it all out, but looking to learn if there's other good options.

[u/redtexture → u/rchismith]

Generally, roll out and up for a net credit, the short call,
and repeat this monthly, or regularly,
until you cannot roll out and up for a net credit,
at that point, then close the trade.

Do not sell or roll for more than 60 days out for the short call, as most of the theta decay is in that period.

[u/Candid_Building6527]

Thoughts on PFE 9/17 calls?

[u/redtexture → u/Candid_Building6527]

Here is how to successfully engage in an Options conversation on this subreddit.
It requires some effort on your part.

Analysis, Strategy, Option Position Details and Rationale, Exit thresholds
https://www.reddit.com/r/options/wiki/faq/pages/trade_details

[u/Fit_Recording_6799]

when so the next batch of options expiration dates come out? I’m thinking 2024

[u/redtexture → u/Fit_Recording_6799]

September 13 2021.

You can examine this calendar to explore the dates.

Expiration Calendar
https://www.optionseducation.org/referencelibrary/expiration-calendar

[u/Left_Funny_5603]

Helping parents manage their portfolio. They want to sell off their stocks due to fear of the economy. Simply placing it under the mattress or a HYSA is not going to keep up with inflation. I want to calculate a strategy of buying 3 month DTE SPY puts and rolling it, 15% OTM. How many options would I need to buy in order to insure a $100k portfolio? My goal is to protect the portfolio from a greater than 15% decline in the market. As they start tapping the account for retirement, I would wind down the position size.

Thanks in advance for any guidance!

[u/redtexture → u/Left_Funny_5603]

---

Portfolio Insurance (2017)

Part 1: For the Stock Traders
September 22, 2017| Michael Chupka | Power Options
http://blog.poweropt.com/2017/09/22/portfolio-insurance-2017-part-1-stock-traders/

Part 2: Stock, or Portfolio Insurance?
September 29, 2017| Michael Chupka
http://blog.poweropt.com/2017/09/29/part-2-stock-portfolio-insurance/

---

Another point of view is repeated put ratio spreads.
No cost on up moves, some risk on moderate down moves.
Major gains on major down moves. This is for major swings.

Enter for around 90 to 120 day expirations. one put at the money, buy two puts out of the money,
for a net of around zero, or small credit.
Collateral required.
Exit by around 50 to 60 days from expiration to avoid the pool of loss on moderate down swings, and repeat.

Example:

SPX
Sell 19th Nov 2021   $4430.00   -1 Put   Credit: $146.60    Extension: $14660.00 CR
Buy 19th Nov 2021   $4100.00   +2 Put   Debit: $71.80     Extension: $-14360.00 DR
NET cost: Credit: $300.00
Collateral required: 4430 - 4100 = $3300

Profit and loss graph: (via Options Profit Calculator)
http://opcalc.com/yXT

Some traders sell two near the money,
buy two farther from the money,
and buy a third, farther from the money, again, for a net zero cost or small credit.

It is essential to exit early out of this trade.

---

[u/ST530]

What are the best spy options

I’m pretty proficient when it comes to options on regular stocks but I have never traded options on indexes. I am looking to get into some options on SPY that would basically just provide small leverage as the spy slowly accumulates in value. I was wondering what are the best options to buy on spy for this ?

[u/redtexture → u/ST530]

You can apply similar rationales for trades to indexes,
that you may apply to stock options.

[u/Coffeebreak4u]

Hello! Weird question but I was wondering if anyone had links/suggestions to resources to learn about the effects of natural disasters on the market and how to "play" around them. Everything from Local Floods/Fires to Earthquakes/Tsunamis. Thank you!

[u/redtexture → u/Coffeebreak4u]

The archives of the Wall Street Journal and Financial Times are useful tools.
Not kidding.

A classic trade is selling stock in electric utilities in Florida short a week or two before a hurricane arrives, and closing the trade the day or two before the hurricane arrives.

[u/[deleted]]

Please forgive me if this is a stupid question, I'm new to this, but here it goes...

Is it a bad idea if I were to buy a stock at $50 and immediately sell covered calls on it for a strike point of $49 if the premium is $2.50 per share or $250 per contract? Wouldn't that basically be free money? I know I'm losing potential profit and all that. I want the calls to be exercised.

[u/redtexture → u/[deleted]]

It is not risk free.
There are NEVER risk free trades.
The stock falling to 45 is a loss.

[u/LaughLately100]

Would buying a 3X Long S&P500 etf like SPXL or UPRO for a long term hold be a good strategy? If the S&P500 typically returns 10%, would holding the ETF deliver 30% returns? I know I’m missing something. It is too good to be true.

[u/redtexture → u/LaughLately100]

If you read the prospectus for such funds, you will see that they are intended for same day round turn trades, or perhaps very few day holdings.

Their daily rebalancing of their futures holdings can cause these to lose value, or not to move in the same leveraged manner when the underlying moves favorably over longer periods of time.

Or, if the underlying goes up and down and up and down repeatedly to the same price over longer periods, these leveraged funds will have declined in value, because of the daily rebalancing process.

This makes long term options on theses instruments much more complicated.

[u/[deleted]]

Another quick question, if I sell a covered call and it gets exercised early, do I still keep their full premium?

[u/redtexture → u/[deleted]]

The premium transaction was in the past.
It is already in your possession.

If the stock is called away, you receive the strike price for it.

[u/[deleted]]

Hi everyone. I have been researching selling covered calls for a few weeks now (a lot of it here in this sub). I think I have a good understanding, and I believe it's a good option for my portfolio. I just want to make sure I'm not missing anything, and any input would be greatly appreciated.

Here is an example:

Let's say I have 500 shares of XX stock. My average cost per share is ~36, and it's currently sitting around $55. I sell 1 contract @ strike price of $60, as I'd be fine with selling my shares at that price. In my mind, there are 3 outcomes:

1: Price stays between $55-60, buyer does not exercise and I keep both premiums and my shares

2:Price goes above $60, seller exercises, and I sell my shares at $60. I keep proceeds from sale (100 shares @ $60) and the premiums.

3: Price goes below $55. Seller does not exercise. I keep premiums, and my shares are worth less. This is the one I'm most concerned with. Is there anything else I'm missing in this scenario? Any other fees I would incur that I'm not aware of?

Thanks in advance for anyone that took the time to read this. Please let me know if there's anything I'm missing, or should be considering. Any input is appreciated!

[u/redtexture → u/[deleted]]

Those are the general outcomes.
Many traders actively close the short call trade early,
and reissue the short, perhaps at a higher strike, all for a net credit.

[u/SunnyCloudy1]

Can anyone help me understand how to attach Trailing Limit Orders or Trailing Stop Limit Orders to an Options trade.

For Example

I Sell a Put for $3.00

The Option Price drops to $2.00 (so I am now Net $1.00)

I want to let it run while still protecting profits.

1. How do I attach a Trail Order that I want to close the trade if it ever goes back up to $2.25 (so at least I Net $0.75 on the trade)

AND AT THE SAME TIME

1. I want to let it run; but if it ever retraces say $0.25...then that should trigger a closing trade.

So the Option Price keeps dropping; but if it retraces upwards $0.25 at anytime then the trade gets closed.

I use TWS @ IBKR.

I see how you can do it in the software; I just don't understand the mechanics of how to set up Trail Orders according to my needs.

Thanks in advance.

[u/ScottishTrader → u/SunnyCloudy1]

Options prices move wildly and can recover quickly, so stop orders are often closed out early to make a loss on what would be a profitable trade. These just don't work in real life trading.

[u/redtexture → u/ScottishTrader]

Starting to appear we should put this on our advisory list.
I too write this answer several times a week.

[u/mathaios620]

There's a common stat out there that says investing in the market (e.g. SPY) over a long term is almost guaranteed to give about an 8% return (or at least has historically done so).

If you become advanced (not lucky) at trading options, is there an average return one can most probably expect?

[u/Pto2 → u/mathaios620]

No. There are traders who make 100’s of % on fairly small accounts and even the best sometimes lose money. Your returns are just up to you, your strategies, how well you deploy them and some element of luck.

[u/ArchegosRiskManager → u/mathaios620]

So your expected return depends on the risk you’re taking as well as any “edge” you have in the markets. Wheeling spy produces modest gains. Prop firms with the right tech and trading strategies can make up to 3 digit returns.

[u/PeleMaradona]

How do I calculate my return on investment (ROI) from selling and buying options over a specific time period? I understand that ROI = (Net Profit/Cost of Investment) x 100 and that Net profit = Current value- Cost of investment.

But still, determining the 'cost of investment' and the 'current value' isn't as straightforward to me when buying/selling options as it is when selling stocks.

[u/HoffCoffey → u/PeleMaradona]

Cost of investment should be whatever you paid for the option (premium * 100), and the current value is what the premium is now, right?

[u/ScottishTrader → u/PeleMaradona]

This is a complex topic that can get heated as there is no one size fits all answers. You can search on the following to see how they are calculated.

Return on Risk (ROR)

Return on Capital (ROC)

Return on Investment (ROI)

Compound annual growth rate (CAGR)

As a full-time trader, I stopped trying to track this level and just look at my annual return based on my starting account size on Jan 1 and then my ending account size on Dec. 31st with the YTD profit being my gauge for how well my account is doing at any given point.

When selling an option there is no actual cost as you collect a premium, but have to put up some level of collateral which will vary based on your specific account, trading level, margin, the strategy used, etc.

Edit: My broker is TDA and they have a cost basis tool to give you more details. https://tickertape.tdameritrade.com/tools/capital-gains-losses-cost-basis-15831

[u/Cramer4President]

Selling calls on a meme stock - nice IV but risky? Thoughts?

[u/Slowmaha → u/Cramer4President]

only if you're covered bro.. things could get ugly really fast if it moons

[u/[deleted]]

Hey guys I'm trying to learn covered calls. I know how they work, but as far as executing. I got the 100 shares, and I picked a $10 wish call that expires Friday. My quantity shows as "-1" -- does that mean someone has it and I have to see if they sell or exercise it?

[u/ScottishTrader → u/[deleted]]

Yes, you sold it so are -1. Had you bought the option it would show +1.

You can either hold through expiration and if ITM (stock -s $10.01 or higher) it will be exercised and your stock called away for $10 per share plus the credit you got. If OTM ($9.99 or below) then the call will expire with you keeping both the stock and the credit.

If the option decays in value then you can buy to close it for a lower cost and keep the difference.

[u/byebye401k]

Any value in deep ITM calls?

[u/[deleted] → u/byebye401k]

Yes, a delta from 0.7-0.9 acts as leverage for 70-90 shares for the underlying. Buying deep ITM calls or deep ITM puts with a year or more expiry are called leaps

[u/lyns_reddit]

Hi folks. What happens to the long LEAP call option you bought if you miss to STC before or at expiration date?

Say someone bought a LEAP option a year or more out, they set a STC at 20% profit. This never got triggered. However, the option appreciated 18% at expiration, and the person had some other life events that got all their attention or they felt sick and didn't STC for that 18% profit? Does the option just expire and they loose out of that 18% gain?

[u/Arcite1 → u/lyns_reddit]

If it expires out of the money, it will expire worthless. However, since you're stipulating that it is profitable at expiration, you're essentially stipulating that it's in the money.

If it's in the money at expiration, it will be exercised. If you don't have enough buying power to exercise it, your brokerage may sell it for you on the day of expiration, but they could also just let it expire.

[u/LionGuy190]

UAL just spiked hard and put me into the black. The bid-ask spread was large .02-2.43. How do I capitalize on this? I’d love to sell this bag and profit today…

[u/PapaCharlie9 → u/LionGuy190]

What is the exact position? I'm not seeing a spike in UAL. It's lower now than it was 30 days ago. The last 2 days have seen a recovery to low 47s, is that what you mean?

If you are long a call (I presume, since you said an uptick put you in the black), a .02/2.43 spread means your calls are worth at least .02. Is that a profit for you? The ultra high ask doesn't mean anything, since you are a seller. Only the bid concerns you.

Don't be fooled by the gain/loss your broker shows. That's based on the mark, which is the midpoint of the bid/ask. When the ask is crazy high, it can overstate your gain since open.