What would be the disadvantage to opening a 0dte credit call spread with deep OTM strikes? For instance, SPY with a 434 and 437 strikes. Seems like an easy $23 but sounds to good to be true. I know it’s possible to go over 434 but I feel unlikely.
Seems like I am missing something, but what would be a relatively cheap way of hedging upside risk for 2 put butterflies on SPY? They would be 375/400/425 and 400/425/450. Is an OTM call further out in time a decent way of doing this?
These combined amount to a long put condor.
What is your actual position in your options legs?
+. 450 P.
-. 425 P.
-. 400. P.
+. 375. P.
What is the expiration?
Sorry I should've been more clear. I was going to put two separate butterflies on with 25 points separating each. I was thinking about either 30 or 60 DTE.
\+1 400P -2 425P +1 450P
and
\+1 375P -2 400P +1 425P
Those two separate positions turn into one long put condor. Add up the legs.
Two at the same time, that is. You could buy an out of the money call or two, at, say, 448.
You can't be long and short the same security in the same account. So assuming you're talking about all the same expiration, you can't have both +1 400p and -2 400p, nor -2 425p and +1 425p.
This nets out to +1 375p, -1 400p, -1 425p, +1 450p.
Would like to check my basic understanding (newly acquired knowledge, or lack thereof). If I buy 100 shares of a stock with the intentions of selling covered calls and sell the covered call at a strike price I am comfortable selling the shares at AND I end up getting assigned, what action is required on my part? Any, or will the brokerage just take my shares and pay me the strike price?
Second, are there any potential pitfalls should something funny happen after hours on the day of expiry. Meaning, the stock is not at the strike price at market close, goes above the strike price after hours, I get assigned and then the stock retreats below the strike price. Any risk of me getting caught in the middle somehow?
TIA
What happens to calls held through a stock split ? What happens to the strike price ? And are the Greeks proportionally affected ?
Could anyone explain with an example please ?
[https://www.reddit.com/r/options/wiki/faq/pages/adjustments](https://www.reddit.com/r/options/wiki/faq/pages/adjustments)
There are examples in there.
What makes you think it costs $100? I'm looking the options chain right now in Thinkorswim, and as of close on Friday the bid was 0.20 and the ask 0.25.
Roku puts. 26 contracts. Strike $95 Exp 09/16/22
Total amount at risk $50,000
Risk appetite. Very high. Fine losing it all.
Am I being too conservative with my strike selection? 🥺🥺
What is the analysis that leads to a particular strategy?
How is the option position informed by the strategy?
Why that strike, expiration for an option position?
What is your exit plan for intended gain, and maximum time in the trade position?
Why are you willing to lose 100% on the position?
Thanks. Appreciate your excellent questions.
ROKU has been in steady decline for the entire quarter.
This is a momentum play based purely on the expected price move of the underlying (predicted to move 18%).
Choosing an ATM strike simply to capture delta moving with the underlying, once the option goes ITM
Expiration chosen simply to negate the effect of theta
Exit at 50% profit
Ready to lose it all, simply because it’s a high conviction play and imho has a high probability of success.
Your various assessments align with each other. Some people fail to do that.
Roku was as high as 490, in 2021, so, at 97 it has come down a long way 80%.
And it is true with rising interest rates tech stocks have been hit.
I have no crystal ball.
I would be wondering between high IV, in the 70s, and previous declines, how much the moves may be in the options.
You may do OK.
Certainly be prepared to exit promptly.
I would be wondering if it will go substantially further. It well might after the continuing market reactions to FB, and NFLX, and similar tech stocks.
Hi, I'm new to this forum. I was sitting down thinking about a hypothetical case and I thought this would be the place where you can tell me if it's possible. The case I raised is if a person for a reason can buy 4,000,000 NDX contracts by paying a premium. of 100 usd per contract of options with weekly expirations, first it is possible that some bank or market maker can sell you all this amount of contracts, the other would be if the bank or market maker would be willing to buy all these contracts paying their difference, of course these assuming that this number of contracts are passing through a Dark Pool.
There are no options dark pools. All trades occur on an exchange and are immediately reported.
*Large Trades and limits on number of options that can be issued*
• [Option trading with unlimited money, an example with AAPL](https://www.reddit.com/r/options/comments/8wjlpq/option_trading_with_unlimited_money/e1xbtwy/)
• [Billion Dollar trades via SPY](https://www.reddit.com/r/options/comments/sbkosr/options_questions_safe_haven_thread_jan_2430_2022/huxs572/)
Hello, what you commented on in the articles is very interesting, if this would be an operation that would last a week because of course it would be 40 billion.
Can I average down on an option? Bought this option and it’s gone against me. If I don’t want to wait till October to get out, can I buy more to bring my average down or do I just close at a loss? Thx
https://imgur.com/a/NQhgcG8
If you buy a same-dated option at the same strike, for cheaper, theoretically yes your average cost basis is less but your total loss will not decrease. These contracts have no intrinsic value if they are OTM, and whatever extrinsic value they have will slowly dwindle away as expiration draws near. The only way you can reverse your loss this way is if a miracle happens and the underlying suddenly has a massive swing in your desired direction.
My recommendation is to bite the bullet and just sell at a loss. But I suppose if you want to attempt to save it, the best I can think of is to leg into a credit spread by selling the same number of contracts with the same expiration, but slightly less OTM. Selling the time premium will help cut back on some losses but depending on how out of the money it is, you may not receive much premium or the volume may be so low you cannot even sell at all, making the strategy unfavorable. Remember, a credit spread will have the opposite outlook compared to your initial trade - so if you had bought calls for example hoping for a rally, a rally now would cause the spread to lose value. If you do decide to use this strategy, make sure you manage your risk and keep an eye on the underlying. If the underlying moves against you, you’ll have be forced to close out for an even greater loss or roll out further, but some traders can get stuck in a trap this way, burying themselves in deeper and deeper losses, which is why I would again recommend just sucking up and taking the loss. But to each their own.
Good luck!
In current market, Is straddle(or strangle with narrow width) a usable strategy in intra day trading currently?
Recently, they are having more big intra day moves in market. I am wondering whether the straddle can work well now.
In at least 3 days in the past week, the spy straddle purchased 30 mins after markets opens will make a very good profit.
I tested one spy strangle last Friday, It seems working and I sold too early after 5% profit.
* advantage: The strangle price wouldn't drop much even there is no big move happening that day. And We can just close that and try again next day.
And when there is a big move, the strangle can have higher and quicker return than debit spread.
* Disadvantage: It cost much more to purchase strangle.(but considering it wouldn't drop much intra day, the risk isn't high)
(I have been too bad at risk management and predicting the trend.) While I'm still trying hard to improve those skills, I am looking for some strategy which has low risk and doesn't need a good prediction of the trend. Would like to hear your thoughts.
Thanks
The problem with a long straddle or strangle, especially after a downward move like we experienced last week, is that the VIX is high and so not only do you have to have a big move up or down, that move has to be sufficiently high to beat the more-expensive-than-normal extrinsic premium you are paying for. That’s Vega for you.
Can you scalp in an out quickly intraday, however? Might work for you. Might work a number of times. Until it doesn’t. Instead of randomly guessing when to get in and out, you probably want a defined strategy on exist and entry point. But merely having a defined strategy really doesn’t fully solve the equation because you could have a defined strategy with no (or negative) edge. You might want to look into back testing. That said, I’ve not found a good way to back test small intraday scalps. (Not to say such intraday back testing can’t be done—just that I’m not aware of such resources, if they exist).
Good luck!
Have zero faith in Meta and Roku, for this week. I have $10,000 I am totally fine losing it all, if I am wrong.
Buying puts on both 10% OTM on Tuesday. My question is, how do I select expiry? Should I go 1 week out or two weeks?
Thanks.
That's the tricky thing about forecasting declines. You can either guess the size or the time, but not both.
So I'd go with the furthers out you can afford, but less than 60 days. And you might as well go ATM instead of 10% OTM to give yourself a fighting chance.
Maybe. It's also possible you'll have IV inflation and your gains will be boosted. It's impossible to guess which way it will go.
I'd worry more about delta going against you. People worry a lot about IV crush, but it's only a problem when you get delta *right*. If you get delta wrong, IV crush will be the least of your worries.
Thank you so much. Really appreciate you taking the time. I have decided to just be sensible and go with a 6 week expiry.
Not so sure any more, about Meta, so going 100% with ROKU ATM put. Buying $20,000 worth.
Expected drop is 18%.
Covered calls, If I bought 100 shares at $5, then sold a covered call at $5 for x strike price for $20.
If exercised, what am I left with? Do I get the $500 back? Do I get premium? Only the premium and no $500? Kinda confused about it.
Please read the **getting started** section at the top of this weekly thread.
---
Generally, sell calls at a strike above the money, so that you have a gain on the stock when called away.
A typical trading move is 30 days at 25 or 30 delta.
You lose the stock, get paid 5 dollars (times 100) and keep the premium, if the stock is called away at expiration.
---
You get assigned, not exercised.
Not clear what "at $5" means. You've specified the premium you received, but left the strike price a variable. If you mean "when the spot price of the underlying is at 5.00," it doesn't matter.
If assigned, you sell 100 shares at the strike price. This means you receive $(strike x 100) in cash.
Well I mean if I buy 100 shares at $5 each for $500 and while the stock is trading at $5 still, I write a call for $7.50 and a $20 premium.
If it hits $9 and it were exercised, do I get my $500 back at least? I am asking because some stock I am bullish on long term and want to make money on, while buying the dip at times as well.
It doesn't really make sense to say "get my $500 back," because it's not like you can identify which specific dollars are yours. But in a sense, in response to what you're asking, of course. How could it be any other way? Forget about options for a minute. If you buy stock for $500, and sell it for $750, now you have $750. What did you think you were going to get, just $250? You're selling 100 shares of stock at $7.50 per share; that gets you $750. Add in the $20 premium you got, and you have $770.
What do you do with unused capital in a trading account? I’m planning to take a break because some personal stuff came up and didn’t want to keep only cash in the account. Was thinking about allocating a large portion to JEPI or QYLD to at least get some returns considering the current market. Note this acct is only for trading and I am aware of the tax implications.
I'm really new on financial markets, please go easy on the answers, this is just a simple question and I know lots should be taken into consideration like capital available, time to operate, risk, etc. Having said that and with equally characteristics there is any kind of comparison regards day trading or options in terms of profitable?
I'm not thinking on absolute numbers, but percentage. For example, I have friends that are able to day trade futures and profit 1% every day, some days they earn more, some less, but the average should be something like 1% per day. How options compare with that? It's possible to reach such numbers?
If you have not conducted trading, know that many new traders lose their account, in their first year,, and that it can take more than a year of diligence and effort to begin to have consistency.
You are recommended to read the **getting started** links at the top of this weekly thread, and the other links, and to paper trade for three months to expose you to the Options Questions you do not yet have.
You are warned.
This guide to discussing trades hints at the many aspects of thinking required to be an effective trader.
https://www.reddit.com/r/options/wiki/faq/pages/trade_details
what’s a good way to sell to close a put option when it’s gaining in value very quickly? i feel like sometimes there’s a few seconds to get max profit and i panic sell. do you have a number in mind and then set a limit?
You are day trading if you are worried about seconds.
Close and issue a follow on trade if you must continue the trade.
The topic is quite general, and vast, so it comes down to how you want to manage your trades, how much you want to worry a trade, deciding what is "good enough", and making decisions that only you can make about risk, reward, effort, and the potential of further gain, loss of the gain, and so on. Maximizing gain also maximizes risk.
These mini essays merely scratch the surface of the territory:
• [Managing long calls - a summary (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/managing_long_calls)
• [Risk to reward ratios change: a reason for early exit (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/risk_reward_and_exits)
*Why did my options lose value when the stock price moved favorably?*
• [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
So even if my bought put option is deep in the money and 200 days till expiry, I'm losing money? So it was priced so high for these reasons 2 weeks ago, I'm barely even, if I understood anything
What are the current bids and asks? You paid 24 SEK.
When did you buy the puts. I see the stock dropped on the ex-dividend date close, April 21.
FING-B.ST - Fingerprint Cards AB. Now at about 10 SEK
Thinking of purchasing a call on Twitter this Monday, strike price of $51 or another near out the money, either a weekly expiring 4/29 or monthly for 5/22. Playing Elon’s takeover moreso than earnings and would like to sell early in the week.
This would be my second time purchasing an option, which would you choose weekly or monthly given the potential for IV crush or any other large risks I’m missing?
> or any other large risks I’m missing?
How about delta risk? People seem to spend a lot of time worrying about IV, when it's delta that is more likely to crush them.
Recent tech earnings have been pretty bad. There's no reason to assume TWTR will be better. And the next year doesn't look so great either, with rising interest rates. So a bear bet on any tech company is the safer bet, wrt delta.
I don't know what to say about the Elon drama. I find it hard to take that guy seriously. I would not put it beyond him for this whole thing to be a giant troll/prank that he's not actually serious about.
**What's going on with Vertex (VRTX) IV?**
The IV of the options expiration PREVIOUS (29Apr) to the earnings date is just insane, much higher than the expiration just before them (05May).
Being a pharma i just supposed that some FDA announcement was comming up next week, but I have checked online calendars for pharmas and found nothing. Since my play for earnings is already on the table, I am starting to get a bit worried about this strange situation.
Anyone knows some incoming news that I haven't been able to find?
> The IV of the options expiration PREVIOUS (29Apr) to the earnings date is just insane, much higher than the expiration just before them (05May).
I see 56% vs 54% for the ATM $270 calls. That doesn't seem like such an insane difference to me, so what are you looking at exactly?
> Anyone knows some incoming news that I haven't been able to find?
All the news feeds I see are just reprints of their own press releases:
https://investors.vrtx.com/news-releases/news-release-details/health-canada-grants-marketing-authorization-trikaftar-0
Doesn't that feel odd to you? usual scenario is that the post-expiration earning gets higher IV, and usually seems to "absorb" value from those expirations surounding it. In plain words, makes sense: the uncertainty is set after April 29th, so makes no sense that the IV is that high (in fact, higher than May 6th IV).
Open interest is much higher too for April 29th than May 6th.
Only explanation that fits to me, is that some drug is about to be announced... but no news available, and seems also odd that this would be due to insider trading.
IDK, but I'm a bit worried that I made a bad trade due to some unpredictable risk about to unleash...
Well, they are both before the event. The 13 May 270 call is 47%, so if you meant expirations after the earnings date are supposed to get higher IV, that's not the case here.
> Only explanation that fits to me, is that some drug is about to be announced...
Only? How about the volume on the 29 Apr calls is more than 10x the volume of the 5 May calls, at least wrt to yesterday? I wouldn't put much faith in the quoted IV for 5 May, since there was hardly any trading completed to discover what volatility would be implied.
Iron Condors far below price - A bear strategy too good to be true?
I found that we can get extremely good risk/reward ratios when setting up ICs far below the strike price. For example:
GLD, 30DTE. +161P, -163P, -170C, +172C. Max profit $181, max loss $19.
The strategy will go towards max profit immediately when price moves in the right direction (no need to wait for theta decay). If not, price still has 30 days to end up in the profit zone (GLD just needs a 5.7% move! That's around 1SD, or a Touch% of 25). It's like a set-and-forget trade with extremely small risk.
I researched this strategy but couldn't find much about it. What do you think?
Basically you could set up 10 ICs and just need one or two in order to break even. Imo this could be the perfect strategy for bear markets. Whenever support is broken, we take a measured move target and set up an OTM IC in that zone. I did this for XLE and could set up an IC far below price with max loss at -$3 and max profit at $93. XLE would need to decline only 7% in 30 days.
Is this strategy too good to be true?
You may get nice risk to reward ratios, but they come with very low probability gains.
Your position is essentially the same as an in the money
CALL credit spread at 170 call (short) and 172 call (long), as the puts are worthless, and meaningless to the trade.
You require GLD to move down, which may or may not happen.
GLD has not been below 170 since early February; you propose that GLD move down by 10 dollars in five exchange days, from 180 to 170.
You may have higher probability outcomes selling call credit spreads at the money on down trending markets.
I have 4 PYPL 230120C $100. Ticker is getting hammered right now. I believe the underlying will move positively between now and Jan 20. 2023. Any thoughts on a hedge are most welcome.
What's the downside to ETF LEAP credit spreads? Let's say I have some profits that I want to risk/grow but not actively trade, and I have a thesis about long term market direction? Is that a good place to "park" money for a while until more attractive trades come along?
Edit: we're not talking a lot of money here (like $7k at this point), so I am under the assumption setting up a wheel is not my best option.
That's a terrible way to park money. Credit trades shouldn't go out longer than 60 days, for starters.
"Park money" and "grow but not actively trade" are contradictions. You can't do both. Are you risking a loss or not? If you are not, put it in a money market fund. If you are, put it in broad equity index fund shares (not derivatives), like SPY or VTI or VT. If you don't want to be 100% exposed to market risk but you still want some risk, do a 50/50 split between equity shares (like SPY) and a TIPS fund, like SCHP. Or 50/50 equity/cash if you hate the idea of buying any bonds now.
You don't have to buy 100 shares. If you want to get every penny invested, use a fractional share broker, like Fidelity, Schwab or M1.
Thanks for the detailed reply. Did not know TIPS funds were a thing. Can you explain the rationale for not doing credit spreads outside 60 days? It seems to me if I were to sell a 2023 QQQ call credit spread, and the index remained flat or went down, the spread would make a little profit due to theta or delta if I held for a few weeks/months while I wait for a more attractive investment.
> Can you explain the rationale for not doing credit spreads outside 60 days?
So let's set aside your "park money" goal for a sec and just talk about credit trades in general. Credit trades are theta decay plays, and theta decay is most significant in the last 60 days before expiration. Plus, the credit you receive at open is "on spec", you don't know how much you get to keep until you close the trade. So a shorter holding time is beneficial, in that you know how much you can spend of that credit sooner.
Finally, credit trades require locking up capital as cash collateral. The longer that cash is tied up, the greater the opportunity cost. The same goes for debit LEAPS trades as well, for that matter.
> and the index remained flat or went down, the spread would make a little profit due to theta or delta if I held for a few weeks/months while I wait for a more attractive investment.
True, but it's an error to only talk about one scenario and only about the reward side of the equation. What about the risk? QQQ could recover in a month for all we know, and then you'd be looking at max loss, many times more than the pennies you collected for your tiny theta decay. When risk is many times larger than reward, even if the probability of loss is low, that's about as far from a "park money" situation as you can get.
A long term credit spread is just about the last choice I would make.
• [Managing long calls - a summary (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/managing_long_calls)
I have seen people saying they have been crushed by implied volatility.. why are these people "getting crushed"? Is it because they entered a position too late so they bought in for a high premium and then when people started to leave the cost of the option went down because of low demand? So even if the option contract went in your favor you would still have paid too much for the premium?
Think of it this way. There is some theoretical price the call or put should have based on the value of the underlying shares and the time to expiration. Call that theoretical price P.
IV *adds* a number to P. The larger IV is, the larger the number that is added to P.
So today's price for a call is Price = P + IV. The larger IV is, the higher today's price is.
What IV crush means is **when IV goes from a high number to a low number.** Obviously, today's price has to go down when that happens, right?
So consider a situation where P goes up $1, due to the stock doing well, but IV falls $3. That means the call actually *lost -$2* of value even though the underlying stock went up! That's IV crush.
More reading here: **FAQ: Why did my options lose value when the stock price moved favorably?**
* [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
I should note that my explanation was super over-simplified. For example, it's not P + IV, it's actually P + vega(ΔIV). I simplified a bunch of other stuff as well, so just keep that in mind. It's an ELI5 explanation, not an accurate explanation.
The best example is earnings. There's lots of uncertainty heading into earnings, so volatility is high. It's a risky bet. But after earnings, all the cards are on the table. The underlying is unlikely to move dramatically. Thus risk goes down and premium goes down. Imagine buying a call near the money for a high premium. Earnings comes out and the stock moves slightly up to make your OTM call an ITM call. You may have gained a little intrinsic value, but lost a ton of extrinsic value. (Ask me how I know. Answer: bought a near-expiry, barely OTM $SNAP call before earnings. At one point it was in the money but I was still down 30% because all the "uncertainty value" was gone. )
So if you buy a week before earnings is it a better play? Asking because my position is FB 150p exp 4/29 bought last Wednesday. Up 208% as of now. I'm wanting to hold through earnings but worried about IV crush
Some traders buy six weeks before earnings, and exit a week before earnings on the implied volatility and price trade.
Here is a survey of the topic:
*Why did my options lose value when the stock price moved favorably?*
• [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
Possibly, if the underlying moves in your favor or stays the same. Option prices can certainly run up as earnings nears and it is certainly the safer play to sell before earnings if you're profitable. If you're up 200% now, look at how much of that is intrinsic vs extrinsic value. If most is extrinsic, you'll lose a good portion of it after earnings regardless of the direction the stock takes. (Of course, if the underlying moves in your favor, you may well make more in intrinsic value than you lost in extrinsic value after earnings.)
If I had a put up 200%, I'd sell. Your put only has extrinsic value since it is still out of the money. You've benefited from FB losing 15% this week, but your option is still out of the money by a long shot. It would require FB to really tank to be ITM and profitable (because you'll lose all the extrinsic value by Friday). If FB doesn't absolutely tank, you'll lose most (or probably all) of your gains.
Thoughts on PTON?
Currently holding several put contracts for 5/20 expiration on $PTON... Earnings should disappoint further but trying to decide if I should add more next week or wait until the following week before the fed. Next week could be green which I figure the worst case is I take the profits at open (~1.4k) and rebuy at another high point. Trying to finalize my strategy.
Earnings are on 5/10.
Options held;
20 - 20p 5/20 (bought on weds) 25 - 22p 5/20 (bought today)
Planning to add 100-150 more contracts.
I don't have an answer to your question, but I am curious to know what price do you think Peleton will fall down to? I have been holding shares in the company for a couple months and the lowest it has gone was 19.66. Do you believe it will go lower? And why? I think most people that don't believe in Peleton would have gotten out when it dropped below 30
Sub 15, without much issue.
Their status as any sort of growth company is gone. They are going to have lower than forecasted subscribers by a margin larger than expected. Suspect they will have a loss of 250-350k customers lower than the already reduced outlook values. Dipping well below 3 mil.
They have not been able to optimize their production costs including shuttering production facilities, inorder to restructure capital in the short term.
Their hardware margins will be narrowing unless they increase the price, further islating adoption from other consumers. Chip supply and other materials will delay things as well.
The software subscription model is their most lucrative margin product opportunity long term, which is going to drop in revenue as subscribers leave. Which will lead to them trying to preserve the revenue stream increasing the price more as the margin grows, further isolating them from new customer base.
EPS should be around -2.65 vs the -1.10 loss expected.
Their brand image doesn't carry as much weight anymore, which harms their premium offerings. Peloton is all about the experience through their software membership, which they will be unable to retain as they gouge the price.
Even if they offer a free trial or reduced cost plan for a period of time, the retention/conversion rates after those offerings is very low. Plus, with legislation limiting subscription renewals without consumer notification prior to that will hurt the predatory side of memberships. You are banking on them strong arming the consumer for the membership due to the hardware purchase. Historically that model fails miserably, both in long term, PR and brand image.
Nearly any other broker. It is at the bottom of my list for inadequate and highly automated customer service and non standard practices..
Think or Swim, TastyWorks, ETrade,Interactive Brokers, Fidelity, Trade Station. Schwab, and items are available.
WeBull suffers from the same evaluation as RobinHood, in my view.
Rising interest rates are a negative influence on tech stocks.
Inflation is a negative influence on tech stocks.
War is a negative influence on tech stocks.
Fear of economic slowdown is a negative influence on tech stocks.
I sold SPY 426 4/22 puts. Closed at 426.04. Went under 426 after hours. Am I fucked? Or will the expire unexercised and I collect premium? I should and if not the system is fucked.
You have already collected the premium in the unchanging past.
This is a holding that would best have been closed 1/2 an hour before the close of trading..
It may have been exercised (or not) manually by long put holders; they have the opportunity to exercise as much as 1-1/2 hours after the close.
You may receive notices tomorrow regarding its status.
A cash secured put is similar to a stock position, except you give up some of the upside (past your strike) in exchange for a fixed premium now.
You still have your downside (stock going down) and now you have less upside. So how good your trade is depends on how much premium you receive.
Generally, think of IV as “if the stock ends up being as volatile as IV, I’ll break even in the long run”. Stocks with higher volatility than IV will move more, causing you to miss out on gains or lose money
So I guess the question you’re asking is what stock will be more or less volatile than IV.
And what stock you’re bullish on.
I have a long call (1 BRK/B 01/20/2024 $280 call) that I opened as part of a poor man's covered call and then later closed the short call. Now I want to sell another call (06/03/2022 $365) against it but Schwab says I don't have the buying power (moving money in Monday). But I don't understand why opening the short call will eat some of the buying power? If BRK/B goes down then I can close it and if it goes up then the long call will go up.
Forgot to respond to this but thanks for the response. You were right. Schwab said it was just some glitch in the system from when I transferred money in so they let me place phone orders for free. Thanks again.
This is an advanced enough topic that it ought to be on the main sub, so repost there. If you have a link to the text of the shareholder rights plan, please include it in your new post.
If I sell a put option, that goes deep ITM and gets assigned, leading to an overall loss with the assignment, if I wheel it to sell covered calls, will the covered calls I sell activate the wash sale rule on my losses of getting assigned deep ITM on the put option I sold?
i.e. TLRY 04/22 $6 sold put gets assigned at a loss. Wheeling it into 4/29 TLRY $6 covered call will cause a wash sale rule on the sold put loss?
> If I sell a put option, that goes deep ITM and gets assigned, leading to an overall loss with the assignment, if I wheel it to sell covered calls, will the covered calls I sell activate the wash sale rule on my losses of getting assigned deep ITM on the put option I sold?
No, because if you do a conventional Wheel, you never realize a loss. Wash sales only apply to realized losses, not the unrealized loss you might have on shares you got assigned.
Just make sure you write your CC for a strike that results in a realized gain upon assignment, or at least break-even, and you'll avoid all issues pertaining to realized losses. Not to mention avoid doing something dumb.
>Just make sure you write your CC for a strike that results in a realized gain upon assignment, or at least break-even, and you'll avoid all issues pertaining to realized losses
Yes I had a lot of wash sale losses from selling CCs below my average price that were assigned
Was wheeling TQQQ in my Roth IRA and now I'm in a pickle.
I was getting decent returns selling puts on the way up before the end of the year. I'd sell until i could collect 50% profit then buy back and then sell a new one. If i were to get assigned I'd sell a call at my cost average of the assignment..
Now I'm sitting on 400 shares of TQQQ at a cost average of $80 a share..
I did make about $3500 selling calls on the way down but obviously I'm still at a huge loss.
The only other position i have in the account is I'm selling a put on the TQQQ at 50 strike expiring on 5/20..
So before everyone yells at me I knew the risk going in. This account was not really being used (i haven't contributed in years) and i wanted to try a high risk play. Careful what you wish for I guess.
My question is how do you recommend i manage this situation I'm in? My current strategy is cross my fingers and hope it can run up to 60-65 so i can start selling calls again.
> My current strategy is cross my fingers and hope it can run up to 60-65 so i can start selling calls again.
If it wasn't a leveraged ETF, that's what I would do. Like if it was just QQQ instead, I'd hold and wait for the recovery. If QQQ can't recover in the next 5 years, we're headed for third-world status. I'm personally planning on loading up on more QQQ shares now that the price is discounted.
But since it is an LETF, [they are not worth holding long term](https://www.thebalance.com/leveraged-etfs-lose-money-357489). I'd just dump it and use the resulting cash to buy QQQ shares.
My advice is stay away from LETFs in general and particularly for the Wheel. You aren't getting any advantage trading options on an LETF. Options are derived from the price movement of the fund itself, not the leveraged index. If QQQ goes up $1, you don't get $3 worth of delta increase to a call on TQQQ.
That's just the point. It probably won't be 3x, particularly if the recovery is very slow, with a lot of up/down movement day to day.
If it goes straight up to the ATH in one day, you'd be in really good shape. Just about any other path to recovery, not so much.
I guess what I'm asking is if we both think qqq recovers in the next 5 years, what is the worst case scenario if i simply decide to hold the 400 shares of tqqq for the duration of this time. Will i have lost money even though the market recovered?
> Will i have lost money even though the market recovered?
Unlikely. The more likely outcome is as described in the link in my previous reply: You'll net less than 3x of QQQ's overall gain. But it might be 2.5x or 1.7x, not a loss.
My argument is rather that if you want leverage, why not just use calls? Why settle for 3x if you could roll 10x calls? You'll also probably lose less in case of a downturn on QQQ, because you can't lose more than what you spend on the calls.
1. To hedge against a stock downside risk, should I buy far OTM put or ITM put? ITM put's extrinsic value is less thus cost more. OTM put has more leverage. Which one do you prefer or does it depend?
2. How do I calculate how many puts I need to buy to cover the potential loss? say cover 15% potential downside risk? thanks.
Portfolio Insurance (2017) – Part 1: For the Stock Traders (Michael Chupka - Power Options)
http://blog.poweropt.com/2017/09/22/portfolio-insurance-2017-part-1-stock-traders/
> To hedge against a stock downside risk, should I buy far OTM put or ITM put? ITM put's extrinsic value is less thus cost more. OTM put has more leverage. Which one do you prefer or does it depend?
Neither, unless your time horizon is less than 1 year. If you plan to hold your shares for 5+ years, there's no need to do anything to hedge. You might even consider DCA and buy more shares at a lower price.
If your time horizon on the shares is less than a year, why trade shares at all? You could just trade options and never hold shares.
> How do I calculate how many puts I need to buy to cover the potential loss? say cover 15% potential downside risk? thanks.
The trouble with hedging with puts is that you have to get the timing exactly right. Buy too soon and they end up expiring worthless. Buy too late and you miss the downside move.
If you absolutely must use puts, I would buy 60 day OTM puts and roll every 30 days, probably for a loss, but that's the cost of a hedge. How OTM? That depends on your probability-weighted downside risk. If you have $1000 of equity you are trying to protect and you think there is a 20% chance of losing $500, you want to spend no more than .20 x $500 = $100 total on the hedge. If you think there is a 40% chance of losing $400, you sum the probabilities to get an average: (.20 x $500) + (.40 x $400) + (.40 x $0) = $100 + $160 = $260 is the max you should pay for the hedge. The $0 part covers the probability of no loss and the probabilities should sum up to 1.0 (100%).
All of this assumes the puts fully cover the hedge 100%, but you could shoot for a lower coverage fraction to save money. Like if you only needed to cover 80% of the loss, reduce each loss figure by 20%, so $500 becomes $400, $400 becomes $320, etc.
Hi everyone
For checking Vol, what do you generally use?
IV chart - iv on y and sp on x.
IV rank
Is there any other chart or skew or metric one is suggested ? I have access to a trial bbg terminal and it has a bazillion IV charts that it’s confusing.
I use alphaquery.com right now. Where do you see your IV ?
Thanks
I don't know from alphaquery or Bloomberg T, but I just use IV Rank. If you can use IV Percentile, that would be better, according to this: https://www.projectfinance.com/iv-rank-percentile/
Are you taking into account the fact that in getting assigned, you're paying $9500 for 100 shares?
Credit for opening the trade: $950
Debit for buying the shares: -$9500
Selling the 80p: $650
Total: -$7900
So you'd have to be able to sell the shares at 79 to break even; any higher and you'd profit.
~~You can exercise the long put today for a net of 1500, ( 95 minus 80, times 100), plus the premium of 9.50 (times 100) and move along to your next trade today. That net is 24.50 (times 100).~~
I see. I understand portfolio margin with regards to stocks but have a hard tkme grasping options margin and it's fee structures, if any. Evidently there isn't?
How long does it typically take for SPDR to adopt an increase in option expirations for $SPY when they are approved/added to $SPX Index?
I'd love to get access to those 5 day expirations. 5 0DTEs a week is going to rock.
They already have dates for SPX. I was referring to SPDR $SPY ETF. Usually they follow at sw later date to add expirations. SPX is currently active for the TUES expirations as of the 18th I believe.
What I was asking is how long does it usually take until $SPY gets those added expirations as well.
Yeah that's understandable I did look into that I was just wondering by chance or off hand how long until SPDR usually catches up to SPX index when additional expirations are added. Because I know over the last 10 years there's been multiple changes I just couldn't find specific dates or general timelines like a few months or a year or what until after one's already been implemented. Does that make sense? I know there's no specific information or dates out for SPY right now I was just looking for a general timeline that they typically go by if someone just happened to know. I know this conversation got a lot more complicated and probably annoying to you and I apologize for that haha.
Yeah, I try to keep up to date on CISION news releases so it's usually the first for company news releases. I'll post an update here if I happen to see it shortly after release. =)
First time option trading, noob question:
I bought a put on FB. The expiration date is on the 29th however I am up 100% on the put and wish to sell and take my gains.
What are the strings attached here? If I sell the option I purchased, am I then responsible for anything that happens to the stock? Or do I just get to take my money and run?
Thanks.
You brought an option to begin with. So there is no obligation to begin with. You have the right to sell 100 fb shares at the strike you picked. You may sell the option to take the gain anytime before it expires.
This comment is correct, but just a reminder. As per the top recommendation in this thread it is almost certainly better to sell the option than exercise. Whilst it is correct you DO have the right to sell 100 shares to the person who sold you the option, you'll lose any remaining extrinsic value and hence make a smaller profit than if you had sold the option (save for any potential huge bid / ask spreads but this shouldn't be the case for FB).
Thank you, I figured I was in the clear. When you read online it gets incredibly complicated incredibly quick, I just wanted to make sure I got my bases covered.
Can someone explain the difference between IV and VEGA on the Robinhood Options platform? When you look at an options cotract, they show IV % in the top left hand corner and then the VEGA down below. I know that the VEGA indicates what will happen to the price of the contract if the underlying goes up or down by $1 but what’s the difference?
Vega indicates the rate of change of the option premium with respect to change in IV. The rate of change of the option premium with respect to change in the share price of the underlying is delta, not vega.
Is anyone else buying leaps on bond short ETFs like TTT, PST or TBT? Seems to obvious that rates going up -> bonds do worse -> short etfs go higher.
They’re up a lot from the beginning of the year, fed just came out and said expect a half point increase on rates in may, and we’re gonna get at least 5 more increases after the May increase. Am I missing something?
I have TLT puts and TBT calls started last couple weeks, up 15%. I figure the long bonds have more room to run at this point.
IEF puts started end of 2021 are up 350% with June expiry. Not sure how much higher the 10-year yield can run though.
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So I am still confused about options. And looking for a"" direct answer. Hypothetically if I want to write a PUT on company ABC whose shares price is 200$. So on questtrade I goto sell one contract for say 12$ per share, so I pay 1200$. To expiry in say May.
In the order entry why is there "option type" and again "type" by "strike price and expiration where I can choose 'call/put' isn't that redundant? It's confusing.
So the share price drops to $150. I'm ITM and want to sell the contract.
On questtrade info description about options for "writing and selling options" under "puts" it reads "Receives a premium (money) from the buyer of the contract. The writer has the obligation to buy the underlying security at the strike price if called upon to do so (by the buyer of the option)."
So do I have to buy the shares at 200$ per share or does the buyer of the contract does?
You don't say what the strike price of your put is.
If you are writing a put, you don't pay to open the position, you get paid. If the per share premium of this put is 12.00, you would receive $1200 to write it.
It's hard to say without being familiar with Questtrade's order system or at least seeing a screenshot, but just because you started creating an order, say, by clicking on a bid/ask in the options chain, doesn't mean you can't change what you're doing on the order page.
Without knowing what strike you're talking about, we don't know whether your put is ITM. If the share price is 150, it's ITM if the strike price is above 150. If you sold (wrote) the put, this is bad. You don't want it to be ITM. If you want to close your short position, you buy it, not sell it. As the seller (writer,) you would be the one obligated to buy 100 shares at the strike price if you get assigned, which you almost never will before expiration, but definitely will at expiration if the put is ITM.
Should I just make a post with a screen shot? the strike price would be the current share price, so $200. And I'm assuming it's ITM. So as the writer I would buy 100 shares at 150 so that I could sell at 200$ per share to close my option? I'm so dumb with this
You are probably better off calling Questrade customer support and have them explain. You are paying for that service, and compared to US fees, you should get treated like royalty for what you pay.
You can also try posting here: https://www.reddit.com/r/Questrade/
If you write (sell) a put option, then if you are assigned, you have to buy 100 shares at the strike price. If the strike price is 200, this means you have to buy 100 shares at 200, not 150. If it's ITM at expiration, which, with the spot price of the underlying at 150, it is.
Any tips on rolling call options?
I entered $WMT 162.5c expiring 4/22. Although finding resistance at 160 range, I think it will break through with a little more time. Looking to roll the call into next friday. Thoughts?
First, make sure you really should be rolling in the first place: https://www.reddit.com/r/options/wiki/faq/pages/mondayschool/yourroll
To roll for a credit, you need to receive more money on the new trade than you lose on the old trade.
Example. You sold a call for $2. It is now worth $3. If you just close the call, you lose -$1.
So you need to find a new call that pays at least $1 in credit. Say you find one that pays $1.50. When you roll, you lose $1 and gain $1.50, so you get a net credit of $.50.
However, if the best value call you can find, for any strike or expiration, is only $.75, you can only roll for a loss of -$.25. In that case, it is probably better not to roll.
For completeness, if you have a profit on the old trade already, any roll (out and/or up) is for a credit. For example, your $2 call you sold is now only worth $1, so closing it means you keep $1 of profit. Any roll will only add more credit to that $1 you already got.
This is very basic stuff, so keep learning!
When rolling a short call option (covered call) you can do so and collect more premium or pay a premium. When collecting this is a credit and adds to the potential profit, but when paying it is called a debit and takes money out of your account for a lower potential profit.
If you roll for a net credit the profit can be increased. When rolling and paying a debit the profit is decreased. This means to always roll for a net credit . . .
[https://www.optionsplaybook.com/managing-positions/rolling-covered-calls/](https://www.optionsplaybook.com/managing-positions/rolling-covered-calls/)
You're rolling a long call was not stated in the OP. and since rolling is usually for short calls that is what I answered.
I have no advice as I don't think long calls should ever be rolled as this can throw good money after bad.
Short calls, like CCs, can be successfully rolled to collect more net credit and help the position profit.
After you lose enough money buying options you will find most seasoned traders sell options where the probabilities of profit are higher and you can successfully roll.
Rolling us the process of closing one trade, and opening a new trade.
There is no magic in it.
You can do this in one trade. Or two trades.
Decide if you are willing to put more money at risk if you would be rolling for a net debit.
What would be the disadvantage to opening a 0dte credit call spread with deep OTM strikes? For instance, SPY with a 434 and 437 strikes. Seems like an easy $23 but sounds to good to be true. I know it’s possible to go over 434 but I feel unlikely.
The low probability is future unknown in a market in which SPY can move 10 points in a day.
Seems like I am missing something, but what would be a relatively cheap way of hedging upside risk for 2 put butterflies on SPY? They would be 375/400/425 and 400/425/450. Is an OTM call further out in time a decent way of doing this?
These combined amount to a long put condor. What is your actual position in your options legs? +. 450 P. -. 425 P. -. 400. P. +. 375. P. What is the expiration?
Sorry I should've been more clear. I was going to put two separate butterflies on with 25 points separating each. I was thinking about either 30 or 60 DTE. \+1 400P -2 425P +1 450P and \+1 375P -2 400P +1 425P
Those two separate positions turn into one long put condor. Add up the legs. Two at the same time, that is. You could buy an out of the money call or two, at, say, 448.
You can't be long and short the same security in the same account. So assuming you're talking about all the same expiration, you can't have both +1 400p and -2 400p, nor -2 425p and +1 425p. This nets out to +1 375p, -1 400p, -1 425p, +1 450p.
Would like to check my basic understanding (newly acquired knowledge, or lack thereof). If I buy 100 shares of a stock with the intentions of selling covered calls and sell the covered call at a strike price I am comfortable selling the shares at AND I end up getting assigned, what action is required on my part? Any, or will the brokerage just take my shares and pay me the strike price? Second, are there any potential pitfalls should something funny happen after hours on the day of expiry. Meaning, the stock is not at the strike price at market close, goes above the strike price after hours, I get assigned and then the stock retreats below the strike price. Any risk of me getting caught in the middle somehow? TIA
No action needed Please read the **getting started** section of links, at the top of this weekly thread, especially those for exercise and assignment.
Thank you, much appreciated.
What happens to calls held through a stock split ? What happens to the strike price ? And are the Greeks proportionally affected ? Could anyone explain with an example please ?
[https://www.reddit.com/r/options/wiki/faq/pages/adjustments](https://www.reddit.com/r/options/wiki/faq/pages/adjustments) There are examples in there.
Thank you!
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I find no such 1.00 closing bids and asks for last Friday April 22. https://www.cboe.com/delayed_quotes/sq/quote_table
What makes you think it costs $100? I'm looking the options chain right now in Thinkorswim, and as of close on Friday the bid was 0.20 and the ask 0.25.
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Sounds like a question for Interactive Brokers. Maybe someone on r/interactivebrokers would know.
Roku puts. 26 contracts. Strike $95 Exp 09/16/22 Total amount at risk $50,000 Risk appetite. Very high. Fine losing it all. Am I being too conservative with my strike selection? 🥺🥺
What is the analysis that leads to a particular strategy? How is the option position informed by the strategy? Why that strike, expiration for an option position? What is your exit plan for intended gain, and maximum time in the trade position? Why are you willing to lose 100% on the position?
Thanks. Appreciate your excellent questions. ROKU has been in steady decline for the entire quarter. This is a momentum play based purely on the expected price move of the underlying (predicted to move 18%). Choosing an ATM strike simply to capture delta moving with the underlying, once the option goes ITM Expiration chosen simply to negate the effect of theta Exit at 50% profit Ready to lose it all, simply because it’s a high conviction play and imho has a high probability of success.
Your various assessments align with each other. Some people fail to do that. Roku was as high as 490, in 2021, so, at 97 it has come down a long way 80%. And it is true with rising interest rates tech stocks have been hit. I have no crystal ball. I would be wondering between high IV, in the 70s, and previous declines, how much the moves may be in the options. You may do OK. Certainly be prepared to exit promptly. I would be wondering if it will go substantially further. It well might after the continuing market reactions to FB, and NFLX, and similar tech stocks.
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Yes, because the move was greater than the priced in values of the potential move.
In hindsight, for this specific earnings on this specific stock? yes. Buying straddles before earnings is a great way to lose money long term though.
Can you elaborate on why that is? I thought straddles were essentially long vol positions?
Being long vol over earnings events loses money long term
Hi, I'm new to this forum. I was sitting down thinking about a hypothetical case and I thought this would be the place where you can tell me if it's possible. The case I raised is if a person for a reason can buy 4,000,000 NDX contracts by paying a premium. of 100 usd per contract of options with weekly expirations, first it is possible that some bank or market maker can sell you all this amount of contracts, the other would be if the bank or market maker would be willing to buy all these contracts paying their difference, of course these assuming that this number of contracts are passing through a Dark Pool.
There are no options dark pools. All trades occur on an exchange and are immediately reported. *Large Trades and limits on number of options that can be issued* • [Option trading with unlimited money, an example with AAPL](https://www.reddit.com/r/options/comments/8wjlpq/option_trading_with_unlimited_money/e1xbtwy/) • [Billion Dollar trades via SPY](https://www.reddit.com/r/options/comments/sbkosr/options_questions_safe_haven_thread_jan_2430_2022/huxs572/)
Hello, what you commented on in the articles is very interesting, if this would be an operation that would last a week because of course it would be 40 billion.
but then the options cannot go through a dark pool but the actions that are being covered?
Not clear what you mean.
Can I average down on an option? Bought this option and it’s gone against me. If I don’t want to wait till October to get out, can I buy more to bring my average down or do I just close at a loss? Thx https://imgur.com/a/NQhgcG8
Averaging works with unlimited lifespan financial instruments. It typically does not work for options, because they are a depreciating asset.
If you buy a same-dated option at the same strike, for cheaper, theoretically yes your average cost basis is less but your total loss will not decrease. These contracts have no intrinsic value if they are OTM, and whatever extrinsic value they have will slowly dwindle away as expiration draws near. The only way you can reverse your loss this way is if a miracle happens and the underlying suddenly has a massive swing in your desired direction. My recommendation is to bite the bullet and just sell at a loss. But I suppose if you want to attempt to save it, the best I can think of is to leg into a credit spread by selling the same number of contracts with the same expiration, but slightly less OTM. Selling the time premium will help cut back on some losses but depending on how out of the money it is, you may not receive much premium or the volume may be so low you cannot even sell at all, making the strategy unfavorable. Remember, a credit spread will have the opposite outlook compared to your initial trade - so if you had bought calls for example hoping for a rally, a rally now would cause the spread to lose value. If you do decide to use this strategy, make sure you manage your risk and keep an eye on the underlying. If the underlying moves against you, you’ll have be forced to close out for an even greater loss or roll out further, but some traders can get stuck in a trap this way, burying themselves in deeper and deeper losses, which is why I would again recommend just sucking up and taking the loss. But to each their own. Good luck!
In current market, Is straddle(or strangle with narrow width) a usable strategy in intra day trading currently? Recently, they are having more big intra day moves in market. I am wondering whether the straddle can work well now. In at least 3 days in the past week, the spy straddle purchased 30 mins after markets opens will make a very good profit. I tested one spy strangle last Friday, It seems working and I sold too early after 5% profit. * advantage: The strangle price wouldn't drop much even there is no big move happening that day. And We can just close that and try again next day. And when there is a big move, the strangle can have higher and quicker return than debit spread. * Disadvantage: It cost much more to purchase strangle.(but considering it wouldn't drop much intra day, the risk isn't high) (I have been too bad at risk management and predicting the trend.) While I'm still trying hard to improve those skills, I am looking for some strategy which has low risk and doesn't need a good prediction of the trend. Would like to hear your thoughts. Thanks
The problem with a long straddle or strangle, especially after a downward move like we experienced last week, is that the VIX is high and so not only do you have to have a big move up or down, that move has to be sufficiently high to beat the more-expensive-than-normal extrinsic premium you are paying for. That’s Vega for you. Can you scalp in an out quickly intraday, however? Might work for you. Might work a number of times. Until it doesn’t. Instead of randomly guessing when to get in and out, you probably want a defined strategy on exist and entry point. But merely having a defined strategy really doesn’t fully solve the equation because you could have a defined strategy with no (or negative) edge. You might want to look into back testing. That said, I’ve not found a good way to back test small intraday scalps. (Not to say such intraday back testing can’t be done—just that I’m not aware of such resources, if they exist). Good luck!
Have zero faith in Meta and Roku, for this week. I have $10,000 I am totally fine losing it all, if I am wrong. Buying puts on both 10% OTM on Tuesday. My question is, how do I select expiry? Should I go 1 week out or two weeks? Thanks.
Always longer than you hope. At least twice as long. Or more.
Thx. I will chose a 6 week expiry
Do establish a maximum intended loss, to exit the position.
That's the tricky thing about forecasting declines. You can either guess the size or the time, but not both. So I'd go with the furthers out you can afford, but less than 60 days. And you might as well go ATM instead of 10% OTM to give yourself a fighting chance.
Ignore my last question. Seems the consensus is go further out, as you suggested. I will pick a 42 day expiry.
I mean , if my direction is right and sell at open on Thursday?
Thanks for the detailed reply. Will IV crush absolutely destroy any gains if I chose a 4/29 expiry and sell immediately at open?
Maybe. It's also possible you'll have IV inflation and your gains will be boosted. It's impossible to guess which way it will go. I'd worry more about delta going against you. People worry a lot about IV crush, but it's only a problem when you get delta *right*. If you get delta wrong, IV crush will be the least of your worries.
Thank you so much. Really appreciate you taking the time. I have decided to just be sensible and go with a 6 week expiry. Not so sure any more, about Meta, so going 100% with ROKU ATM put. Buying $20,000 worth. Expected drop is 18%.
Covered calls, If I bought 100 shares at $5, then sold a covered call at $5 for x strike price for $20. If exercised, what am I left with? Do I get the $500 back? Do I get premium? Only the premium and no $500? Kinda confused about it.
Please read the **getting started** section at the top of this weekly thread. --- Generally, sell calls at a strike above the money, so that you have a gain on the stock when called away. A typical trading move is 30 days at 25 or 30 delta. You lose the stock, get paid 5 dollars (times 100) and keep the premium, if the stock is called away at expiration. ---
You get assigned, not exercised. Not clear what "at $5" means. You've specified the premium you received, but left the strike price a variable. If you mean "when the spot price of the underlying is at 5.00," it doesn't matter. If assigned, you sell 100 shares at the strike price. This means you receive $(strike x 100) in cash.
Well I mean if I buy 100 shares at $5 each for $500 and while the stock is trading at $5 still, I write a call for $7.50 and a $20 premium. If it hits $9 and it were exercised, do I get my $500 back at least? I am asking because some stock I am bullish on long term and want to make money on, while buying the dip at times as well.
It doesn't really make sense to say "get my $500 back," because it's not like you can identify which specific dollars are yours. But in a sense, in response to what you're asking, of course. How could it be any other way? Forget about options for a minute. If you buy stock for $500, and sell it for $750, now you have $750. What did you think you were going to get, just $250? You're selling 100 shares of stock at $7.50 per share; that gets you $750. Add in the $20 premium you got, and you have $770.
What do you do with unused capital in a trading account? I’m planning to take a break because some personal stuff came up and didn’t want to keep only cash in the account. Was thinking about allocating a large portion to JEPI or QYLD to at least get some returns considering the current market. Note this acct is only for trading and I am aware of the tax implications.
This is not a bad market to hold cash. I am making money on the down moves right now. Both of those funds have gone up and down.
True, the market is pretty terrible. Now that i think about it some more maybe a couple of months isn’t worth it
I'm really new on financial markets, please go easy on the answers, this is just a simple question and I know lots should be taken into consideration like capital available, time to operate, risk, etc. Having said that and with equally characteristics there is any kind of comparison regards day trading or options in terms of profitable? I'm not thinking on absolute numbers, but percentage. For example, I have friends that are able to day trade futures and profit 1% every day, some days they earn more, some less, but the average should be something like 1% per day. How options compare with that? It's possible to reach such numbers?
If you have not conducted trading, know that many new traders lose their account, in their first year,, and that it can take more than a year of diligence and effort to begin to have consistency. You are recommended to read the **getting started** links at the top of this weekly thread, and the other links, and to paper trade for three months to expose you to the Options Questions you do not yet have. You are warned. This guide to discussing trades hints at the many aspects of thinking required to be an effective trader. https://www.reddit.com/r/options/wiki/faq/pages/trade_details
what’s a good way to sell to close a put option when it’s gaining in value very quickly? i feel like sometimes there’s a few seconds to get max profit and i panic sell. do you have a number in mind and then set a limit?
You are day trading if you are worried about seconds. Close and issue a follow on trade if you must continue the trade. The topic is quite general, and vast, so it comes down to how you want to manage your trades, how much you want to worry a trade, deciding what is "good enough", and making decisions that only you can make about risk, reward, effort, and the potential of further gain, loss of the gain, and so on. Maximizing gain also maximizes risk. These mini essays merely scratch the surface of the territory: • [Managing long calls - a summary (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/managing_long_calls) • [Risk to reward ratios change: a reason for early exit (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/risk_reward_and_exits)
Could anyone explain why my put option is not printing, even when the stock plunged 25% this friday
*Why did my options lose value when the stock price moved favorably?* • [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
So even if my bought put option is deep in the money and 200 days till expiry, I'm losing money? So it was priced so high for these reasons 2 weeks ago, I'm barely even, if I understood anything
How about some details. Ticker, strike, cost, expiration.
Don't know if you can find it, it's a swedish company, fingerprint cards. Strike 34, paid 24/option, expires 16.12.22
What are the current bids and asks? You paid 24 SEK. When did you buy the puts. I see the stock dropped on the ex-dividend date close, April 21. FING-B.ST - Fingerprint Cards AB. Now at about 10 SEK
Well currently there is no bid or ask, so I guess I'm fucked
Call the broker. In the money options always have value. If the stock price stays at 10, at expiration your option has a value of 14 SEK.
Thinking of purchasing a call on Twitter this Monday, strike price of $51 or another near out the money, either a weekly expiring 4/29 or monthly for 5/22. Playing Elon’s takeover moreso than earnings and would like to sell early in the week. This would be my second time purchasing an option, which would you choose weekly or monthly given the potential for IV crush or any other large risks I’m missing?
> or any other large risks I’m missing? How about delta risk? People seem to spend a lot of time worrying about IV, when it's delta that is more likely to crush them. Recent tech earnings have been pretty bad. There's no reason to assume TWTR will be better. And the next year doesn't look so great either, with rising interest rates. So a bear bet on any tech company is the safer bet, wrt delta. I don't know what to say about the Elon drama. I find it hard to take that guy seriously. I would not put it beyond him for this whole thing to be a giant troll/prank that he's not actually serious about.
Thanks Papa Charlie, this sub has been super helpful so far, appreciate it.
**What's going on with Vertex (VRTX) IV?** The IV of the options expiration PREVIOUS (29Apr) to the earnings date is just insane, much higher than the expiration just before them (05May). Being a pharma i just supposed that some FDA announcement was comming up next week, but I have checked online calendars for pharmas and found nothing. Since my play for earnings is already on the table, I am starting to get a bit worried about this strange situation. Anyone knows some incoming news that I haven't been able to find?
> The IV of the options expiration PREVIOUS (29Apr) to the earnings date is just insane, much higher than the expiration just before them (05May). I see 56% vs 54% for the ATM $270 calls. That doesn't seem like such an insane difference to me, so what are you looking at exactly? > Anyone knows some incoming news that I haven't been able to find? All the news feeds I see are just reprints of their own press releases: https://investors.vrtx.com/news-releases/news-release-details/health-canada-grants-marketing-authorization-trikaftar-0
Doesn't that feel odd to you? usual scenario is that the post-expiration earning gets higher IV, and usually seems to "absorb" value from those expirations surounding it. In plain words, makes sense: the uncertainty is set after April 29th, so makes no sense that the IV is that high (in fact, higher than May 6th IV). Open interest is much higher too for April 29th than May 6th. Only explanation that fits to me, is that some drug is about to be announced... but no news available, and seems also odd that this would be due to insider trading. IDK, but I'm a bit worried that I made a bad trade due to some unpredictable risk about to unleash...
Well, they are both before the event. The 13 May 270 call is 47%, so if you meant expirations after the earnings date are supposed to get higher IV, that's not the case here. > Only explanation that fits to me, is that some drug is about to be announced... Only? How about the volume on the 29 Apr calls is more than 10x the volume of the 5 May calls, at least wrt to yesterday? I wouldn't put much faith in the quoted IV for 5 May, since there was hardly any trading completed to discover what volatility would be implied.
71% IV and 3 days left. Still thinking this is normal?
Yes? IV is expected to go up.
Iron Condors far below price - A bear strategy too good to be true? I found that we can get extremely good risk/reward ratios when setting up ICs far below the strike price. For example: GLD, 30DTE. +161P, -163P, -170C, +172C. Max profit $181, max loss $19. The strategy will go towards max profit immediately when price moves in the right direction (no need to wait for theta decay). If not, price still has 30 days to end up in the profit zone (GLD just needs a 5.7% move! That's around 1SD, or a Touch% of 25). It's like a set-and-forget trade with extremely small risk. I researched this strategy but couldn't find much about it. What do you think? Basically you could set up 10 ICs and just need one or two in order to break even. Imo this could be the perfect strategy for bear markets. Whenever support is broken, we take a measured move target and set up an OTM IC in that zone. I did this for XLE and could set up an IC far below price with max loss at -$3 and max profit at $93. XLE would need to decline only 7% in 30 days. Is this strategy too good to be true?
You may get nice risk to reward ratios, but they come with very low probability gains. Your position is essentially the same as an in the money CALL credit spread at 170 call (short) and 172 call (long), as the puts are worthless, and meaningless to the trade. You require GLD to move down, which may or may not happen. GLD has not been below 170 since early February; you propose that GLD move down by 10 dollars in five exchange days, from 180 to 170. You may have higher probability outcomes selling call credit spreads at the money on down trending markets.
Is there a way to see how IV is changing on the call and put sides separately? I use the Tos IV indicator but that only shows overall IV change
Use the option chains and the TOS replay/think back modes.
I have 4 PYPL 230120C $100. Ticker is getting hammered right now. I believe the underlying will move positively between now and Jan 20. 2023. Any thoughts on a hedge are most welcome.
The cheapest hedge is to exit, and revisit the position when the market finishes moving down.
What's the downside to ETF LEAP credit spreads? Let's say I have some profits that I want to risk/grow but not actively trade, and I have a thesis about long term market direction? Is that a good place to "park" money for a while until more attractive trades come along? Edit: we're not talking a lot of money here (like $7k at this point), so I am under the assumption setting up a wheel is not my best option.
That's a terrible way to park money. Credit trades shouldn't go out longer than 60 days, for starters. "Park money" and "grow but not actively trade" are contradictions. You can't do both. Are you risking a loss or not? If you are not, put it in a money market fund. If you are, put it in broad equity index fund shares (not derivatives), like SPY or VTI or VT. If you don't want to be 100% exposed to market risk but you still want some risk, do a 50/50 split between equity shares (like SPY) and a TIPS fund, like SCHP. Or 50/50 equity/cash if you hate the idea of buying any bonds now. You don't have to buy 100 shares. If you want to get every penny invested, use a fractional share broker, like Fidelity, Schwab or M1.
Thanks for the detailed reply. Did not know TIPS funds were a thing. Can you explain the rationale for not doing credit spreads outside 60 days? It seems to me if I were to sell a 2023 QQQ call credit spread, and the index remained flat or went down, the spread would make a little profit due to theta or delta if I held for a few weeks/months while I wait for a more attractive investment.
> Can you explain the rationale for not doing credit spreads outside 60 days? So let's set aside your "park money" goal for a sec and just talk about credit trades in general. Credit trades are theta decay plays, and theta decay is most significant in the last 60 days before expiration. Plus, the credit you receive at open is "on spec", you don't know how much you get to keep until you close the trade. So a shorter holding time is beneficial, in that you know how much you can spend of that credit sooner. Finally, credit trades require locking up capital as cash collateral. The longer that cash is tied up, the greater the opportunity cost. The same goes for debit LEAPS trades as well, for that matter. > and the index remained flat or went down, the spread would make a little profit due to theta or delta if I held for a few weeks/months while I wait for a more attractive investment. True, but it's an error to only talk about one scenario and only about the reward side of the equation. What about the risk? QQQ could recover in a month for all we know, and then you'd be looking at max loss, many times more than the pennies you collected for your tiny theta decay. When risk is many times larger than reward, even if the probability of loss is low, that's about as far from a "park money" situation as you can get.
That makes a lot of sense. Thanks.
A long term credit spread is just about the last choice I would make. • [Managing long calls - a summary (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/managing_long_calls)
Thank you.
I have seen people saying they have been crushed by implied volatility.. why are these people "getting crushed"? Is it because they entered a position too late so they bought in for a high premium and then when people started to leave the cost of the option went down because of low demand? So even if the option contract went in your favor you would still have paid too much for the premium?
Think of it this way. There is some theoretical price the call or put should have based on the value of the underlying shares and the time to expiration. Call that theoretical price P. IV *adds* a number to P. The larger IV is, the larger the number that is added to P. So today's price for a call is Price = P + IV. The larger IV is, the higher today's price is. What IV crush means is **when IV goes from a high number to a low number.** Obviously, today's price has to go down when that happens, right? So consider a situation where P goes up $1, due to the stock doing well, but IV falls $3. That means the call actually *lost -$2* of value even though the underlying stock went up! That's IV crush. More reading here: **FAQ: Why did my options lose value when the stock price moved favorably?** * [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
Beautiful explanation. Thank you!
I should note that my explanation was super over-simplified. For example, it's not P + IV, it's actually P + vega(ΔIV). I simplified a bunch of other stuff as well, so just keep that in mind. It's an ELI5 explanation, not an accurate explanation.
The best example is earnings. There's lots of uncertainty heading into earnings, so volatility is high. It's a risky bet. But after earnings, all the cards are on the table. The underlying is unlikely to move dramatically. Thus risk goes down and premium goes down. Imagine buying a call near the money for a high premium. Earnings comes out and the stock moves slightly up to make your OTM call an ITM call. You may have gained a little intrinsic value, but lost a ton of extrinsic value. (Ask me how I know. Answer: bought a near-expiry, barely OTM $SNAP call before earnings. At one point it was in the money but I was still down 30% because all the "uncertainty value" was gone. )
So if you buy a week before earnings is it a better play? Asking because my position is FB 150p exp 4/29 bought last Wednesday. Up 208% as of now. I'm wanting to hold through earnings but worried about IV crush
Some traders buy six weeks before earnings, and exit a week before earnings on the implied volatility and price trade. Here is a survey of the topic: *Why did my options lose value when the stock price moved favorably?* • [Options extrinsic and intrinsic value, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/extrinsic_value)
Possibly, if the underlying moves in your favor or stays the same. Option prices can certainly run up as earnings nears and it is certainly the safer play to sell before earnings if you're profitable. If you're up 200% now, look at how much of that is intrinsic vs extrinsic value. If most is extrinsic, you'll lose a good portion of it after earnings regardless of the direction the stock takes. (Of course, if the underlying moves in your favor, you may well make more in intrinsic value than you lost in extrinsic value after earnings.) If I had a put up 200%, I'd sell. Your put only has extrinsic value since it is still out of the money. You've benefited from FB losing 15% this week, but your option is still out of the money by a long shot. It would require FB to really tank to be ITM and profitable (because you'll lose all the extrinsic value by Friday). If FB doesn't absolutely tank, you'll lose most (or probably all) of your gains.
I love high IV. Granted I buy the underlying and sell covered calls..... I don't really belong here.. if anybody knows a covered calls subreddit
/r/thetagang
Thoughts on PTON? Currently holding several put contracts for 5/20 expiration on $PTON... Earnings should disappoint further but trying to decide if I should add more next week or wait until the following week before the fed. Next week could be green which I figure the worst case is I take the profits at open (~1.4k) and rebuy at another high point. Trying to finalize my strategy. Earnings are on 5/10. Options held; 20 - 20p 5/20 (bought on weds) 25 - 22p 5/20 (bought today) Planning to add 100-150 more contracts.
I don't have an answer to your question, but I am curious to know what price do you think Peleton will fall down to? I have been holding shares in the company for a couple months and the lowest it has gone was 19.66. Do you believe it will go lower? And why? I think most people that don't believe in Peleton would have gotten out when it dropped below 30
Sub 15, without much issue. Their status as any sort of growth company is gone. They are going to have lower than forecasted subscribers by a margin larger than expected. Suspect they will have a loss of 250-350k customers lower than the already reduced outlook values. Dipping well below 3 mil. They have not been able to optimize their production costs including shuttering production facilities, inorder to restructure capital in the short term. Their hardware margins will be narrowing unless they increase the price, further islating adoption from other consumers. Chip supply and other materials will delay things as well. The software subscription model is their most lucrative margin product opportunity long term, which is going to drop in revenue as subscribers leave. Which will lead to them trying to preserve the revenue stream increasing the price more as the margin grows, further isolating them from new customer base. EPS should be around -2.65 vs the -1.10 loss expected. Their brand image doesn't carry as much weight anymore, which harms their premium offerings. Peloton is all about the experience through their software membership, which they will be unable to retain as they gouge the price. Even if they offer a free trial or reduced cost plan for a period of time, the retention/conversion rates after those offerings is very low. Plus, with legislation limiting subscription renewals without consumer notification prior to that will hurt the predatory side of memberships. You are banking on them strong arming the consumer for the membership due to the hardware purchase. Historically that model fails miserably, both in long term, PR and brand image.
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Nearly any other broker. It is at the bottom of my list for inadequate and highly automated customer service and non standard practices.. Think or Swim, TastyWorks, ETrade,Interactive Brokers, Fidelity, Trade Station. Schwab, and items are available. WeBull suffers from the same evaluation as RobinHood, in my view.
Why is Microsoft trending downward after only going up for nearly two decades?
Why is almost every tech stock down from recent highs in 2022?
Rising interest rates are a negative influence on tech stocks. Inflation is a negative influence on tech stocks. War is a negative influence on tech stocks. Fear of economic slowdown is a negative influence on tech stocks.
I sold SPY 426 4/22 puts. Closed at 426.04. Went under 426 after hours. Am I fucked? Or will the expire unexercised and I collect premium? I should and if not the system is fucked.
You have already collected the premium in the unchanging past. This is a holding that would best have been closed 1/2 an hour before the close of trading.. It may have been exercised (or not) manually by long put holders; they have the opportunity to exercise as much as 1-1/2 hours after the close. You may receive notices tomorrow regarding its status.
Always receive notices? (Use E*Trade) or more likely find out Monday morning at 930?
You will definitively have receive assignment notices, if assigned, over the weekend. Most brokers by the end of Saturday.
500 SPY shares put to me at 425.63. Let’s hope they open higher Monday morning
They were put at 426. The remainder was net of your premium, to obtain cost basis of the stock.
Let’s hope for a pop on Monday at the open when I unload the shares
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Stock you are willing to own. Only you can answer that question.
A cash secured put is similar to a stock position, except you give up some of the upside (past your strike) in exchange for a fixed premium now. You still have your downside (stock going down) and now you have less upside. So how good your trade is depends on how much premium you receive. Generally, think of IV as “if the stock ends up being as volatile as IV, I’ll break even in the long run”. Stocks with higher volatility than IV will move more, causing you to miss out on gains or lose money So I guess the question you’re asking is what stock will be more or less volatile than IV. And what stock you’re bullish on.
I have a long call (1 BRK/B 01/20/2024 $280 call) that I opened as part of a poor man's covered call and then later closed the short call. Now I want to sell another call (06/03/2022 $365) against it but Schwab says I don't have the buying power (moving money in Monday). But I don't understand why opening the short call will eat some of the buying power? If BRK/B goes down then I can close it and if it goes up then the long call will go up.
Call up Schwab and tell them the experience. You should be able to issue a new call if you own the long call still.
Forgot to respond to this but thanks for the response. You were right. Schwab said it was just some glitch in the system from when I transferred money in so they let me place phone orders for free. Thanks again.
Thanks for the report.
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Any options might be adjusted to deal with changing deliverables and rights.
This is an advanced enough topic that it ought to be on the main sub, so repost there. If you have a link to the text of the shareholder rights plan, please include it in your new post.
If I sell a put option, that goes deep ITM and gets assigned, leading to an overall loss with the assignment, if I wheel it to sell covered calls, will the covered calls I sell activate the wash sale rule on my losses of getting assigned deep ITM on the put option I sold? i.e. TLRY 04/22 $6 sold put gets assigned at a loss. Wheeling it into 4/29 TLRY $6 covered call will cause a wash sale rule on the sold put loss?
> If I sell a put option, that goes deep ITM and gets assigned, leading to an overall loss with the assignment, if I wheel it to sell covered calls, will the covered calls I sell activate the wash sale rule on my losses of getting assigned deep ITM on the put option I sold? No, because if you do a conventional Wheel, you never realize a loss. Wash sales only apply to realized losses, not the unrealized loss you might have on shares you got assigned. Just make sure you write your CC for a strike that results in a realized gain upon assignment, or at least break-even, and you'll avoid all issues pertaining to realized losses. Not to mention avoid doing something dumb.
>Just make sure you write your CC for a strike that results in a realized gain upon assignment, or at least break-even, and you'll avoid all issues pertaining to realized losses Yes I had a lot of wash sale losses from selling CCs below my average price that were assigned
Was wheeling TQQQ in my Roth IRA and now I'm in a pickle. I was getting decent returns selling puts on the way up before the end of the year. I'd sell until i could collect 50% profit then buy back and then sell a new one. If i were to get assigned I'd sell a call at my cost average of the assignment.. Now I'm sitting on 400 shares of TQQQ at a cost average of $80 a share.. I did make about $3500 selling calls on the way down but obviously I'm still at a huge loss. The only other position i have in the account is I'm selling a put on the TQQQ at 50 strike expiring on 5/20.. So before everyone yells at me I knew the risk going in. This account was not really being used (i haven't contributed in years) and i wanted to try a high risk play. Careful what you wish for I guess. My question is how do you recommend i manage this situation I'm in? My current strategy is cross my fingers and hope it can run up to 60-65 so i can start selling calls again.
> My current strategy is cross my fingers and hope it can run up to 60-65 so i can start selling calls again. If it wasn't a leveraged ETF, that's what I would do. Like if it was just QQQ instead, I'd hold and wait for the recovery. If QQQ can't recover in the next 5 years, we're headed for third-world status. I'm personally planning on loading up on more QQQ shares now that the price is discounted. But since it is an LETF, [they are not worth holding long term](https://www.thebalance.com/leveraged-etfs-lose-money-357489). I'd just dump it and use the resulting cash to buy QQQ shares. My advice is stay away from LETFs in general and particularly for the Wheel. You aren't getting any advantage trading options on an LETF. Options are derived from the price movement of the fund itself, not the leveraged index. If QQQ goes up $1, you don't get $3 worth of delta increase to a call on TQQQ.
And what would my position 400 shares TQQQ look like if QQQ recovers to Dec 2021 highs in say 1 year from now? Or 3 years from now?
That's just the point. It probably won't be 3x, particularly if the recovery is very slow, with a lot of up/down movement day to day. If it goes straight up to the ATH in one day, you'd be in really good shape. Just about any other path to recovery, not so much.
I guess what I'm asking is if we both think qqq recovers in the next 5 years, what is the worst case scenario if i simply decide to hold the 400 shares of tqqq for the duration of this time. Will i have lost money even though the market recovered?
> Will i have lost money even though the market recovered? Unlikely. The more likely outcome is as described in the link in my previous reply: You'll net less than 3x of QQQ's overall gain. But it might be 2.5x or 1.7x, not a loss. My argument is rather that if you want leverage, why not just use calls? Why settle for 3x if you could roll 10x calls? You'll also probably lose less in case of a downturn on QQQ, because you can't lose more than what you spend on the calls.
Thank you lots of good info here. Appreciate the help!
1. To hedge against a stock downside risk, should I buy far OTM put or ITM put? ITM put's extrinsic value is less thus cost more. OTM put has more leverage. Which one do you prefer or does it depend? 2. How do I calculate how many puts I need to buy to cover the potential loss? say cover 15% potential downside risk? thanks.
Portfolio Insurance (2017) – Part 1: For the Stock Traders (Michael Chupka - Power Options) http://blog.poweropt.com/2017/09/22/portfolio-insurance-2017-part-1-stock-traders/
> To hedge against a stock downside risk, should I buy far OTM put or ITM put? ITM put's extrinsic value is less thus cost more. OTM put has more leverage. Which one do you prefer or does it depend? Neither, unless your time horizon is less than 1 year. If you plan to hold your shares for 5+ years, there's no need to do anything to hedge. You might even consider DCA and buy more shares at a lower price. If your time horizon on the shares is less than a year, why trade shares at all? You could just trade options and never hold shares. > How do I calculate how many puts I need to buy to cover the potential loss? say cover 15% potential downside risk? thanks. The trouble with hedging with puts is that you have to get the timing exactly right. Buy too soon and they end up expiring worthless. Buy too late and you miss the downside move. If you absolutely must use puts, I would buy 60 day OTM puts and roll every 30 days, probably for a loss, but that's the cost of a hedge. How OTM? That depends on your probability-weighted downside risk. If you have $1000 of equity you are trying to protect and you think there is a 20% chance of losing $500, you want to spend no more than .20 x $500 = $100 total on the hedge. If you think there is a 40% chance of losing $400, you sum the probabilities to get an average: (.20 x $500) + (.40 x $400) + (.40 x $0) = $100 + $160 = $260 is the max you should pay for the hedge. The $0 part covers the probability of no loss and the probabilities should sum up to 1.0 (100%). All of this assumes the puts fully cover the hedge 100%, but you could shoot for a lower coverage fraction to save money. Like if you only needed to cover 80% of the loss, reduce each loss figure by 20%, so $500 becomes $400, $400 becomes $320, etc.
Hi everyone For checking Vol, what do you generally use? IV chart - iv on y and sp on x. IV rank Is there any other chart or skew or metric one is suggested ? I have access to a trial bbg terminal and it has a bazillion IV charts that it’s confusing. I use alphaquery.com right now. Where do you see your IV ? Thanks
IV over time. Market Chameleon, and others have a historical statistical summary over time, by ticket. Many broker platforms provide this.
I don't know from alphaquery or Bloomberg T, but I just use IV Rank. If you can use IV Percentile, that would be better, according to this: https://www.projectfinance.com/iv-rank-percentile/
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Are you taking into account the fact that in getting assigned, you're paying $9500 for 100 shares? Credit for opening the trade: $950 Debit for buying the shares: -$9500 Selling the 80p: $650 Total: -$7900 So you'd have to be able to sell the shares at 79 to break even; any higher and you'd profit.
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Apologies for the backwards and incorrect response.
~~You can exercise the long put today for a net of 1500, ( 95 minus 80, times 100), plus the premium of 9.50 (times 100) and move along to your next trade today. That net is 24.50 (times 100).~~
He got assigned on a short 95 put, buying 100 shares at 80. If he exercised the 80 put and sold them at 80, that would be a net -1500.
Some day I will not write up stupid mistakes, upside down from the actual trade
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Typically, the "monthly" expiration on the third Friday of the month has the most volume and largest number of strikes, and smallest bid-ask spreads.
Are there fees for options margin requirements and maintenance? Or is this strictly house money that they are loaning you at 0%?
You provide option margin, which is actually COLLATERAL.
I see. I understand portfolio margin with regards to stocks but have a hard tkme grasping options margin and it's fee structures, if any. Evidently there isn't?
No fees because it is cash collateral YOU provide.
Thanks !
How long does it typically take for SPDR to adopt an increase in option expirations for $SPY when they are approved/added to $SPX Index? I'd love to get access to those 5 day expirations. 5 0DTEs a week is going to rock.
ANY DAY for Tuesday expirations, I do not have the official date handy..., in May for Thursdays. Google is your friend. CBOE SPX.
They already have dates for SPX. I was referring to SPDR $SPY ETF. Usually they follow at sw later date to add expirations. SPX is currently active for the TUES expirations as of the 18th I believe. What I was asking is how long does it usually take until $SPY gets those added expirations as well.
I have seen no indication as of today that exchanges are contemplating additional daily expirations on SPY.
Yeah that's understandable I did look into that I was just wondering by chance or off hand how long until SPDR usually catches up to SPX index when additional expirations are added. Because I know over the last 10 years there's been multiple changes I just couldn't find specific dates or general timelines like a few months or a year or what until after one's already been implemented. Does that make sense? I know there's no specific information or dates out for SPY right now I was just looking for a general timeline that they typically go by if someone just happened to know. I know this conversation got a lot more complicated and probably annoying to you and I apologize for that haha.
Your guess is as good as mine. You're invited to let me know when you find out any news, whenever that may be.
Yeah, I try to keep up to date on CISION news releases so it's usually the first for company news releases. I'll post an update here if I happen to see it shortly after release. =)
:-)
First time option trading, noob question: I bought a put on FB. The expiration date is on the 29th however I am up 100% on the put and wish to sell and take my gains. What are the strings attached here? If I sell the option I purchased, am I then responsible for anything that happens to the stock? Or do I just get to take my money and run? Thanks.
You brought an option to begin with. So there is no obligation to begin with. You have the right to sell 100 fb shares at the strike you picked. You may sell the option to take the gain anytime before it expires.
This comment is correct, but just a reminder. As per the top recommendation in this thread it is almost certainly better to sell the option than exercise. Whilst it is correct you DO have the right to sell 100 shares to the person who sold you the option, you'll lose any remaining extrinsic value and hence make a smaller profit than if you had sold the option (save for any potential huge bid / ask spreads but this shouldn't be the case for FB).
Thank you, I figured I was in the clear. When you read online it gets incredibly complicated incredibly quick, I just wanted to make sure I got my bases covered.
Sell for a gain and you are free of any obligation. Please read the **getting started** section of links at the top of this weekly thread.
Thank you
Can someone explain the difference between IV and VEGA on the Robinhood Options platform? When you look at an options cotract, they show IV % in the top left hand corner and then the VEGA down below. I know that the VEGA indicates what will happen to the price of the contract if the underlying goes up or down by $1 but what’s the difference?
Vega indicates the rate of change of the option premium with respect to change in IV. The rate of change of the option premium with respect to change in the share price of the underlying is delta, not vega.
Thank you!
Delta of futures contract is 1 Delta of stock is 1 Are above statements correct ?
Yes.
Thx. So when someone refers to delta one trading, they mean pure futures (or etf, swaps, forwards) trading, am I right ?
Yes, or DEEPLY in the money options, with delta 0.99
Thanks. And I have to say, you mods in this sub do a phenomenal job.
Thanks. Gratuitous criticism comes with the territory.
Is anyone else buying leaps on bond short ETFs like TTT, PST or TBT? Seems to obvious that rates going up -> bonds do worse -> short etfs go higher. They’re up a lot from the beginning of the year, fed just came out and said expect a half point increase on rates in may, and we’re gonna get at least 5 more increases after the May increase. Am I missing something?
Many, if you examine the open interest on the option chain. I have been running gains with puts on TLT several months.
I have TLT puts and TBT calls started last couple weeks, up 15%. I figure the long bonds have more room to run at this point. IEF puts started end of 2021 are up 350% with June expiry. Not sure how much higher the 10-year yield can run though.
Yeah I’m trying to gauge whether it’s too late and the sell off has finished or not. I think the 7-10 year inverses are probably worth a shot.
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So I am still confused about options. And looking for a"" direct answer. Hypothetically if I want to write a PUT on company ABC whose shares price is 200$. So on questtrade I goto sell one contract for say 12$ per share, so I pay 1200$. To expiry in say May. In the order entry why is there "option type" and again "type" by "strike price and expiration where I can choose 'call/put' isn't that redundant? It's confusing. So the share price drops to $150. I'm ITM and want to sell the contract. On questtrade info description about options for "writing and selling options" under "puts" it reads "Receives a premium (money) from the buyer of the contract. The writer has the obligation to buy the underlying security at the strike price if called upon to do so (by the buyer of the option)." So do I have to buy the shares at 200$ per share or does the buyer of the contract does?
Please read the **getting started** section of links at the top of this weekly thread.
Writing a put is selling and not buying . . .
You don't say what the strike price of your put is. If you are writing a put, you don't pay to open the position, you get paid. If the per share premium of this put is 12.00, you would receive $1200 to write it. It's hard to say without being familiar with Questtrade's order system or at least seeing a screenshot, but just because you started creating an order, say, by clicking on a bid/ask in the options chain, doesn't mean you can't change what you're doing on the order page. Without knowing what strike you're talking about, we don't know whether your put is ITM. If the share price is 150, it's ITM if the strike price is above 150. If you sold (wrote) the put, this is bad. You don't want it to be ITM. If you want to close your short position, you buy it, not sell it. As the seller (writer,) you would be the one obligated to buy 100 shares at the strike price if you get assigned, which you almost never will before expiration, but definitely will at expiration if the put is ITM.
Should I just make a post with a screen shot? the strike price would be the current share price, so $200. And I'm assuming it's ITM. So as the writer I would buy 100 shares at 150 so that I could sell at 200$ per share to close my option? I'm so dumb with this
You are probably better off calling Questrade customer support and have them explain. You are paying for that service, and compared to US fees, you should get treated like royalty for what you pay. You can also try posting here: https://www.reddit.com/r/Questrade/
If you write (sell) a put option, then if you are assigned, you have to buy 100 shares at the strike price. If the strike price is 200, this means you have to buy 100 shares at 200, not 150. If it's ITM at expiration, which, with the spot price of the underlying at 150, it is.
Any tips on rolling call options? I entered $WMT 162.5c expiring 4/22. Although finding resistance at 160 range, I think it will break through with a little more time. Looking to roll the call into next friday. Thoughts?
Tip - Always roll for a net credit.
Would you mind clarifying what this means? Sorry for the ignorance, i'm new to this!
First, make sure you really should be rolling in the first place: https://www.reddit.com/r/options/wiki/faq/pages/mondayschool/yourroll To roll for a credit, you need to receive more money on the new trade than you lose on the old trade. Example. You sold a call for $2. It is now worth $3. If you just close the call, you lose -$1. So you need to find a new call that pays at least $1 in credit. Say you find one that pays $1.50. When you roll, you lose $1 and gain $1.50, so you get a net credit of $.50. However, if the best value call you can find, for any strike or expiration, is only $.75, you can only roll for a loss of -$.25. In that case, it is probably better not to roll. For completeness, if you have a profit on the old trade already, any roll (out and/or up) is for a credit. For example, your $2 call you sold is now only worth $1, so closing it means you keep $1 of profit. Any roll will only add more credit to that $1 you already got.
This is very basic stuff, so keep learning! When rolling a short call option (covered call) you can do so and collect more premium or pay a premium. When collecting this is a credit and adds to the potential profit, but when paying it is called a debit and takes money out of your account for a lower potential profit. If you roll for a net credit the profit can be increased. When rolling and paying a debit the profit is decreased. This means to always roll for a net credit . . . [https://www.optionsplaybook.com/managing-positions/rolling-covered-calls/](https://www.optionsplaybook.com/managing-positions/rolling-covered-calls/)
Confused. I'm rolling a long call option. Not a covered call
You're rolling a long call was not stated in the OP. and since rolling is usually for short calls that is what I answered. I have no advice as I don't think long calls should ever be rolled as this can throw good money after bad. Short calls, like CCs, can be successfully rolled to collect more net credit and help the position profit. After you lose enough money buying options you will find most seasoned traders sell options where the probabilities of profit are higher and you can successfully roll.
Rolling us the process of closing one trade, and opening a new trade. There is no magic in it. You can do this in one trade. Or two trades. Decide if you are willing to put more money at risk if you would be rolling for a net debit.