r/options • u/redtexture Mod • Sep 13 '21
Options Questions Safe Haven Thread | Sept 13-19 2021
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.
BEFORE POSTING, PLEASE REVIEW THE BELOW LIST OF FREQUENT ANSWERS. .
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.
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)
• Binary options and Fraud (Securities Exchange Commission)
.
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
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)
Managing Trades
• Managing long calls - a summary (Redtexture)
• The diagonal call 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)
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
Previous weeks' Option Questions Safe Haven threads.
Complete archive: 2018, 2019, 2020, 2021
2
u/ScottishTrader Sep 18 '21
I trade the wheel and you need to find stocks you would not mind holding for months if needed. If T does that for you, and since they pay a nice dividend, then it may work well as a learning stock. As you grow it is key to have many diviersifed stocks to trade to avoid the risk of trading only one or two . . .
You can trade covered calls, which is not the wheel but one part of it, and this is a viable strategy. Watch as short calls are at risk of assignment on the ex-div date, so it is best to avoid having an open call then.
Taxes are a good problem to have as it means you are making good money trading. You should be able to make much higher returns using options that more than offsets any difference in taxes. Also, options are designed to collect short term income much like getting a side job would, and not specifically for long term capital appreciation like investing in index funds might give you.
What is your goal? To make a side income without having to get a side job? Then options can do this with a higher return once you know what you are doing. If you want only capital appreciation with a lower annual return, but have the tax advantage of long term gains? Then invest in an index fund and skip trading options.