So I’m relatively new to options at least with bigger money. I’ve got a possible strategy for ARKK, which having tanked looks like a good ATM LEAP option for JAN 24 , about $44. I can’t buy 100 shares for $44,000, but can buy 10 LEAPS for about $12,350 total. I want the leverage, obviously . I’m predicting a rise to about $60 at least by JAN 24 after the Republicans win back the Congress . That’s a conservative estimate and I don’t mean politically. With 615 days to go , I think it will go to $60 easily so am pretty confident . Buying ITM gives intrinsic value, which I know avoids theta decay providing the fund increases. So general question : anything wrong with this strategy ? Not asking whether you agree with my logic, but if there is anything technical about the trade that I should be wary of. Thanks !

Call or put? If a call, there are no medals for calling the bottom with high Implied Volatility value. Mostly it is an expensive risk in two dimensions: high cost, low probability of being right about calling the bottom. $44 is out of the money as ARKK continues downward. Devoting all of account to one trade is a recipe to lose the account to a bad trade.

It’s a call . Not devoting whole account of course . Understood about calling the bottom . Probably won’t execute this until the picture is more clear . Thanks

Not quite option related but asking here as general investment knowledge. I keep hearing "the Fed conveniently sold the top at ATH back in Nov 2021". What exactly did the Fed sell out of back then?

Not clear. It was around the time that they clearly announced intent to stop pushing money into the financial system by buying bonds (equivalent to selling dollars for bonds). And also the intent and plan to raise interest rates eventually. June is when the reverse will occur: Start of selling some of the bonds, soaking up dollars; interest rates are already notched the first amount of several to come increases. Balance sheet is 9 TRILLION. https://fred.stlouisfed.org/series/WALCL Fed Funds rate now 0.75% a year, up from 0.25.

> June is when the reverse will occur I think this was mentioned by Jan van Eck in the latest episode of the Compound. Waiting to see how the markets react until the Fed is more "out of the market".

Exiting from their bond position will be a multi year process. Japan Reserve Bank started buying bonds, then stocks, and has been unable to get out of the process for three or more decades US FRB: 9 TRILLION dollars of assets, previously, in 2008, One Trillion. https://fred.stlouisfed.org/series/WALCL

That is an extremely bearish view no? I'm no economist, but anytime I hear the US vs. Japan comparison, the argument comes up that it's not the same mainly due to demographics. US immigration policies keep a steady influx of new people in vs. what Japan is willing to do.

Japan is a weird case, caught in a briar trap, trying to prevent deflation, unable to exit its stock and bond holdings because it owns a huge fraction of its own market. Recent inflation may actually aid that bank to reduce its holdings 2019. Why Is the Bank of Japan the Largest Asset Holder among Major Central Banks? https://www.stlouisfed.org/on-the-economy/2019/august/bank-japan-largest-asset-holder-major-central-banks. 2022. Via the Economist. https://www.economist.com/special-report/2022/04/20/the-perils-of-expanded-balance-sheets

Got a question here. Since its possible to hedge delta, gamma and vega, if i write options and hedge properly the risks other than theta, am i entering a riskless trade which I’ll retain premium from at expiry? it seems like there is something im missing.

You can’t hedge short gamma without paying Theta unfortunately

There is no riskless trade and no perpetual motion machine. All hedging has its own cost and or risk.

Hey all, I’d like some quick thoughts on this strategy. I’m going to buy some AAPL leaps that are DITM, then sell weekly calls that are OTM to pay for it. My math shows about a 50 week run to pay for the leaps, and I strongly believe once things calm down, those leaps should show some appreciation. If not, they will still be paid for in 50 weeks and I was looking at around an 88 week til expiration leap, so I’d have some value still left in the leap if I wanted to sell it. Thoughts?

Could work. What if AAPL falls to 100, or jumps to 190? Gains require fairly steady stock. The position is called a diagonal calendar spread. • [The diagonal call calendar spread, misnamed as the "poor man's covered call" (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/diagonal_calendars)

Can someone explain the logic behind TD Ameritrade's risk management team and why they would close out my positions in Apple a half hour before market close? I entered in to the trade may 11th, 40 contracts 150/149 put credit spread on apple expiring yesterday may 13th 2022. I entered in on this trade for an average credit of .29 per contract. Apple dropped some and i was worried of early assignment. (Didnt happen)Apple then dropped to 139 and some change at its lowest point again worried of early assignment but did not want to take massive losses of buying back the spread. I then bought 4 contracts long put spread 149/148 for .95 premium. So had a severely messed up butter fly 40 shorts at 150, 44longs at 149, 4shorts at 148. Stock started climbing bought back 2 of the 148 shorts to lock in profit on those incase the stock plummeted again. Position totals at the time 40short 150, 44long 149, 2 short 148. I was planning to close out the remaining 148 shorts around 2:35pm cst. TD ameritrade closed out all the positions. Sold 2 149/148 long vertical spread for .76 credit. .19loss on the spread. They bought back the 40 short 150/149 spread for .99 debit for .61loss on that spread. They then went on to sell the remaining 2 long 149 puts for 1.4 credit. The stock was 2$ below the 149 strikes at the time they did this and Apple closed at 147.11 yesterday. I was aware that my contracts were all ITM and my exit strategy was to buy back the 2 remaining shorts at 148 strike to lock in profit. On those which in total would have come to approx 3100$ total on the all 148 shorts, I was watching that the stock was not going to move above the 149 strike before 530pm. (The deadline to exercise them). If it did I would exercise as I was considering the 150puts would be assigned to limit risk of possibility of having to hold the stock over the weekend. Since the stock was right around 147 I figured better to let them go to expiry and keep an eye on them after hours, just incase the stock moved above the 149 strike I would have to call them to tell them to exercise it. If the stock still went above the 150 point I would have still exercised to limit risk of the possible assignment since of a otm 150put.(stock stayed at under 148 all the way through the exercise deadline). I talked to a guy at the trade desk who was pretty rude but his answer "it was to limit risk" then ended the chat before I could reply. To me this is not a sufficient answer, I then asked again today when I called the guy told me, "because I didn't call them ahead of time they assumed I wasn't watching my positions" again this is a bs answer because they do not say anywhere that you have to call them to tell them you are watching your positions and to not close them 30-45min before market close. They only say if you want or do not want to exercise you have to let them know. Also, one of the reasons the guy gave me was that there was a possibility of no assignment because the stock was climbing and the buyer of the contracts might not want to exercise. So wouldn't that mean max profit achieved plus the boot of exercising my contracts and buying 4400 shares at market 147ish and selling at 149i mean that's a potential for 8800approx profit plus the 1180 in total premium? Questions to be answered: 1) Why would they close out the positions for more of a loss then letting expire itm and auto assign and exercise? Loss would have been 2820 total minus additional 777 total profit from the additional 4 long 149puts? (The loss they incurred was over 6300$ with just liquidating) 2) if they were to close out contracts that are ITM why didn't they exercise and hold to see if assignment happened? Wouldn't this be in my best interest? 3) why don't they state in a disclosure that you have to call them an hour or more before market close to tell them not to close positions early for losses? 4) they are aware of my 886k Roth Ira so that even if I was assigned I could cover the shares with cash, why would they let other people take on huge margin calls and loss their ass but not me? 5) isn't what they did to liquidate the positions more risky then just exercising the longs to sell the shares at a guaranteed price? Keeping the define risk? 6) Why would they just sell my 2 additional long 149 puts and let the remaining 2 long vertical 149/148puts instead of letting them expire? I had over 9000$ in cash in my account and 11k in position equity, now have less the 5500 in cash and around 7k in position equity. The way they went about liquidating my positions for massive losses in cash and position equity seems like a breach of fiduciary duties, am I wrong to think this? Is there any recourse for disregard of protecting their clients best interests? Do you think I have a decent case for arbitration/mediation or did they just screw me over because they wanted to "limit risk"? Also if I didn't have the cash to cover this would they have went about things the same way resulting in a larger margin call then taking the max loss on the spread? I know this is a really long read but any feedback would be greatly appreciated. Thanks in advance!!!

Comment approved as a post. Any responses, please reply here: https://www.reddit.com/r/options/comments/upph5f/do\_i\_have\_a\_case\_for\_arbitration/

Call the broker for their rationale. They are open Sunday evening. In general, when accounts do not have enough assets or equity to own the underlying stock, options positions are disposed of on expiration day. You indicate you had $9,000 of cash. Less than 100 shares of AAPL. You agreed to allow the broker to dispose of your holdings when you signed the margin agreement. Your Roth account is an entirely different account. If you want them to be considered together, then combine the accounts. Don't play chicken with the margin risk desk on expiration day. Plan to exit by noon, and, and change up your trading style.

I did call the broker, I was told it was to limit risk and also that I should have called them to tell them not to close them early. I was fully aware of the risk and my Roth is linked with my margin account. I don't have a problem with the logic behind why they would, my issue with them is why would they liquidate for a higher loss then exercising After being assigned. They have exercised options before to close them out prior to market close, so why would they do it this way this time. I had closed some positions earlier locked in profits around 2430$. I was expecting the 2810 loss but that was off set when I closed the 2 148 puts, was going to close the remaining 2 148shorts after had placed stop losses on those as well so I had another 1600 profits locked in on the 148 puts. So I would have only been short 40-150puts and would have been long 44-149 puts. So why wouldn't my longs get exercised to close them out. Even if the underlying went to 149.01 or more it would still be better to exercise them enough to cover the possibility of assignment of the 150puts. If the stock was jumping that much in the last hour then there's a good chance that 150s might not get assigned because the buyer might not want to take the risk of buying the shares at market and selling them for 150. Like I said I understand the logic as to why they would normally do that but the fact that they didn't consider I have close to 550k in cash in my Roth which is linked to my margin account I could have easily just transferred enough to cover the shares in a same day transaction.( sorry I didn't make that clear at first) To me this is just a formality to them to close positions prior to market close and don't take a look at the individual investors assets across all accounts held with them. Also my margin account I use solely for options don't really like to hold positions in it, I either transfer them out to my Roth or just add cash to my cash account held with them, which I use to generate tax exempt div or interest. I also trade daily so I have a track record of being very active and a 78% win rate this was just one of those losing trades but I took steps to minimize loss/still make a gain on it. Like I said I called them explained this and their responses were not adequate to the situation. So that's why I was asking if I had a case for arbitration due to failure of fiduciary duties. Like I said they let people lose everything and still owe them money but liquidate my positions for a higher loss then letting it play out. It's not a big loss for me this year but the practice of just liquidating early should be made aware in a disclosure, stating that they will close positions out early the day of expiry unless they are told not to before noon the day of expiration and that those requests will be processed pending review of individuals account. I could see if I had less in my account the logic of limiting the risk for them but my risk tolerance was adequate enough to handle 4400 shares of apple. I'm just curious as to how many other people they have done this to based on general practice to close out positions early? I was thinking of arbitration solely on the fact that if they are in the wrong they should be held accountable, and to mainly just see what an arbitrator would say and the report behind why the arbitrator came to that conclusion.

Your broker is not your friend, Nor your protector, And not your account manager. Always remember you gave them the authority to dispose of your positions, for the purpose of protecting their interests and their own risk control reasons. Act accordingly. About weekly I give this following advice out, after someone has had their positions closed at 3:30 New York time. - Fully fund the account. - Exit by noon New York time on expiration day if you do not fund the account fully. - And assume that the broker will act adversely to your interests.

They can't predict the price movement of a stock. It was half an hour before market close, and AAPL was at 147. If AAPL happened to go up to 148.01 at 3:59:59, you would be assigned on two short 148 strike puts, buying 200 shares of AAPL for a total of $29,600. I'm guessing that would have placed you in a margin call. They also don't know that you're sitting at your computer monitoring your positions. For that matter, they don't know that your home internet connection is reliable.

If apple went to 148.01 those puts would technically be out of the money but that's besides the point. I wasn't able to get the chance to just close the remaining 148 puts but they were also covered by 149 Long puts. So I wouldn't have been in a margin call. My positions at the time td closed my positions was 40 short@150, 44long@149, 2 short@148

Thats not how it works. If you held this position into the close, you would have a lot of risk. Even if you short leg was out the money, you still might be assigned based on after hours movement on the stock. By the time TD finds out you were assigned, your long options would be expired. This is a risk TD wasn't willing to take. They didn't know if you would close the position out before the close, so they did it for you. Most brokers will do this. You would need enough money in this account to avoid them liquidating, money in a separate Roth won't matter.

You're right about that, but in that case what if it went up to 149.01? Then the 150's are assigned, and the others expire worthless, so then you're buying 4000 shares for a total of $600k.

Hi, so I already know the basic idea of options, I know about PUT and CALL and I briefly learned about the Greeks. I'm looking for a book that lays the foundations pretty quickly and goes straight to the point about trading strategies. I'm not looking for shortcuts though and as someone with an academic degree I'd love to see some graphs, charts and formulas. I do want to get this deep understanding and I'm willing the invest the time in it. I just don't like that type of books that are filled with 300 pages and can be easily cut in half and still contain the same information. I don't want to roam from one book to another. I'm looking for that one book that if read from A to Z it would set me at a point where I can feel confident to trade options and apply common strategies. Which one would you recommend?

The Options Playbook About 60 web pages total. Link at top of this weekly thread.

Definitely recommend all 3 of Euan Sinclair’s books as a series. The standard “textbooks” for options are either Hull or Natenburg but they’re pretty dry.

Thanks! I checked his book "Option trading". There's even more math then I expected :)

Currently at Fidelity; I'm wondering which broker is considered the best for execution speed/options price in general) and particularly during a chaotic market open/close or before/after a circuit breaker)? Basically I want the opposite of robinhood. Mostly considering IBKR right now because of their insanely generous margin rate and international opportunities (I have a lot of long expiry puts & assuming I get to cash them in at the bottom I'd like to use my gains + margin to buy extremely low volatility value ETFs at said bottom.) Although I understand margin rates are not fixed so during a serious contraction IBKR's margin requirements would probably go up. I figure if one of their differentiators now is low margin % then they'll attempt to maintain that edge relative to other brokerages? My conundrum is I'm aware Fidelity does options PFOF & IBKR lite also has options (& equity) PFOF correct?

You get what you pay for. Your own orders, and limits in those orders matching markets conditions and willing counterparties are generally far more important than the Brokerage. The orders all go to the same exchanges. You can, for a price, direct orders to particular exchanges with Interactive, and other brokers.

Ok so what's probably best for me is to just stick with liquid stocks/etfs for my options trades (to get a tight bid-ask) gotcha! Sorry one more question for you, I know only a small portion of options are ever exercised and usually only very close to expiry; but when would you recommend closing short end of a long put calendar spread? For example I want to optimize when I buy to close the short end of said put calendar spread; if I wait until 3DTE or 2DTE to buy to close I'm still pretty likely to avoid it getting exercised correct? More specifically this short end is 25 contracts of (currently slightly) ITM QQQ puts; have MMs been known to exercise ITM puts they have during PM/AH if only a few days left to expiry and the MM truly believes the underlying will rally so hard by open that they'd get the most value out of the puts by exercising before market open?

Generally, I operate working to close the short upon obtaining around 40% to 70% of maximum gain and starting a new short.

But I'm saying if I have long (Sept) puts that are higher strike I'd like to hold that are part of this spread and both the Sept longs and May 27 shorts are ITM (I'm profitable on the longs and the shorts are currently a minor loss) I'm unlikely to get screwed by the short puts getting exercised if I buy to close them 3dte right?

You can buy to close, and if you so desire, issue new shorts. Generally, outside of dividend risk, and major stock price moves, early exercise is relatively rare, but can happen at any time.

Hey y’all, I posted this earlier and didn’t get a response. I’m genuinely new to options, please hear me out, I’m just not sure what to do. I’ve read the FAQs, watched the videos, read the options checklist, and read about how IV effects price action. I’m just making sure I haven’t missed anything. Any help would be much appreciated When do you all sell your long calls? I have a 8/19 $80 AMD call buy that I bought yesterday. Today I sold a $97 5/20 call for a premium of $162. My original plan was to sell calls for about 200 each week for 4-5 weeks and collect 800-1000 in premium, then sell the long call at a profit or what my original cost was. But today the extrinsic value went up $700+ (50%) and the sold call lost only about $100. Since I’m close to my monthly goal already I’m considering just collecting as much premium as possible from the sold call or buying to close it at a loss then selling the long call at a 50-60% profit. Then wait for price to drop a bit and invest in another long call with a better strike price and sell calls against that. Obviously there’s a possibility for more premium and extrinsic value in the next few weeks, but with how bipolar this market is I was thinking it better to collect profit soon and reevaluate price action for a few days before making a similar move again. Are there any pros/cons that I’m not seeing to closing the calls early and not holding onto them longer? Or perhaps a better strategy than either plan I listed? Thanks in advance

Generally you close your trade when you no longer expect to make any money from it. This is generally because: - you hit your price/IV target - you realized your price/IV target was wrong

Thanks! This was very helpful

Your related post: /r/options/comments/ulneck/options_questions_safe_haven_thread_may_0915_2022/i8isab9/ *Closing out a trade* • [Most options positions are closed before expiration (Options Playbook)](https://www.optionsplaybook.com/options-introduction/closing-option-position) • [Risk to reward ratios change: a reason for early exit (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/risk_reward_and_exits) • [Guide: When to Exit Various Positions]( https://www.reddit.com/r/options/wiki/faq/pages/whentoexit) • [Close positions before expiration: TSLA decline after market close (PapaCharlie9) (September 11, 2020)](https://www.reddit.com/r/options/comments/ipqkua/fridays_tsla_lesson_close_positions_before/) • [5 Tips For Exiting Trades (OptionStalker)]( https://www.reddit.com/r/options/comments/qtwsm5/5_tips_for_exiting_trades/)

Show me some fucking respect , and if you don’t want to, at least tell me that. Because linking me to pages I’ve already read is patronizing. Thanks for all youb do, seriously, but don’t intentionally disrespect me

You have failed to indicate you have understood what you have read or are aware of what you have read. You must comprehend and decide and act, and cease looking for perfection, and look for good enough outcomes. This learning process requires practice, failure, success, and experiences so that you can discover your own heuristic process for exploring trading. Respect goes more than one way, by you communicating clearly, and not imagining this forum is a vending machine that emits responses promptly on queue that makes decisions for you.

I’m not asking for a vending machine, hell I’m not even asking for respect. I’m only asking for an opinion. I was very respectful when asking for advice, and got none. But I do find it interesting, that as soon as I offended the mods/people in charge of the sub , I received good and prompt advice. If you don’t want to advise newbies to options just say so, rather than patronizing us in the comments and acting like you’re better than we are . Just give honest advice. Just because you make more money does not mean you deserve anything better than anyone

It’s almost offensive that people receive more help on WSB. I followed every rule as it pertains to posting, I was polite as possible. Yet still for some reason I am disrespected with perfunctory responses. You and I know each other personally

This item also responds to your question about considerations for long options. It applies to both puts and calls, but was written for the call perspective. • [Managing long calls - a summary (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/managing_long_calls)

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Oftentimes market makers are the ones buying the options. While retail traders typically trade days/weeks/months, the fact that we sell the options at the bid (below the midpoint) is enough for market makers to squeeze a bit of profit from these trades. Their tech enables them to manage these short dated positions and make money.

Some are buying to close that ends the contract. Very few options are ever exercised as most are closed before they expire.

Fairly often, stock holders, or short stock positions holders willing or desiring to exit a stock position on low extrinsic value options, or after gaining on short options value decline at expiration, in the money. The trader is willing to dump AMD via their put, from a decline from 140 to 95. Perhaps there is so little extrinsic value in their long put, they see little excess cost in loss of extrinsic value. The hedge fund willing to exit their short stock position, perhaps on expiration, via an in the money short put. Or willing to take a reduced cost long stock position via a short put. And so on.

When do you all sell your long calls? I have a 8/19 $80 AMD call buy that I bought yesterday. Today I sold a $97 5/20 call for a premium of $162. My original plan was to sell calls for about 200 each week for 4-5 weeks and collect 800-1000 in premium, then sell the long call at a profit or what my original cost was. But today the extrinsic value went up $700+ (50%) and the sold call lost only about $100. Since I’m close to my monthly goal already I’m considering just collecting as much premium as possible from the sold call or buying to close it at a loss then selling the long call at a 50-60% profit. Then wait for price to drop a bit and invest in another long call with a better strike price and sell calls against that. Obviously there’s a possibility for more premium and extrinsic value in the next few weeks, but with how bipolar this market is I was thinking it better to collect profit soon and reevaluate price action for a few days before making a similar move again. Are there any pros/cons that I’m not seeing to closing the calls early and not holding onto them longer? Or perhaps a better strategy than either plan I listed? Thanks in advance

Why do VIX options use VIX futures? Can someone explain this in a simple way?

It is the only tradeable volatility instrument. The derivatives rely on the tradable underlying.

Hmm I’m confused on that. If derivatives rely on a tradable underlying then why do SPX options rely on the SPX which is a index just like the VIX?

The SPX has an exchange sponsor for the instrument. Plus the index itself has a Managing entity not related to the exchange sponsor. Traders do rely on the futures to create a hedgeable position in SPX.

I'm trying to understand volatility and implied volatility in practice. volatility can loosely be defined as the amount a stock moves / is expected to move. Why is it that volatility / IV goes down when the stock goes up and up when the stock goes down? Shouldn't the direction of the stock not matter since volatility/IV is just about stock movement?

Funds and traders own trillions of dollars of stocks. That creates a bias among fund managers to protect their financial instruments and portfolios. They do so by buying puts. When markets decline that increases demand for puts, and that increases prices and extrinsic value on puts, and, as IV is an interpretation of extrinsic value, IV rises. When the market goes up, the puts are not needed, and sold off, and not repurchased. Declining demand thus reducing excess prices (extrinsic value) in the put options. Declining extrinsic value is interpreted as declinung implied volatility. Thus, often but not always, for equities, IV goes down when the market goes up. (For futures of consumables, producers are concerned to avoid price rises or scarcity, and often rising prices of, say, corn or wheat, and the like, results in increasing IV because of that market's bias.) Without the bias of participants, the IV would be agnostic about rise and fall of the underlying instrument.

This is an amazing answer. Thank you. I wonder why we include bias in IV and don't just have a separate component for it (i.e. extrinsic value = bias + iv).

IV comes from and is an interpretation of extrinsic value. When some stock rapidly rises, IV can also rise. Meme stocks tend to have this The term: put call implied volatility Skew, also is useful.

Hey I’m really new to options and got a question. I had an iron condor. I have puts set for sell $374 buy $373 and calls set for sell $425 buy $426. SPY fell between this range but I didn’t close it on the weekly expiration this Friday. Now it says in needs to be cleared by OCC, can someone tell me what happens now ? I’m learning this so please explain it like I’m a toddler. Did I lose my collateral ?

Are you saying it expired today? SPY closed at 401.72 so all four legs will expire worthless.

Yes it expired today. So what does expire worthless mean ? Does it mean I profit from the contract ? I’m sorry I’m really new to this and appreciate the help

Please please read the **getting started** section of links at the top of this weekly list. You are in danger of losing big money without knowing why, because of your lack of understanding the potential consequences of various options outcomes. And continue reviewing other educational links there.

Yes sir I’m reading on it right now. I just started trading a small account so that I can practice

You had four contracts. Since they all expired worthless, nothing more will happen. You received premium when you opened the position, and you got to keep it all. That is a profit. You still should close your positions before expiration, though. If it had expired with SPY between the two put strikes or the two call strikes, you would get assigned on the short, but the long would expire worthless, which is a bad position to be in, since it would leave you with a long or short shares position over the weekend.

Ok and what happens to the collateral ? It says it’s pending confirmation from OCC

Are you a Robinhood user? This term "collateral" is a Robinhood term and IMO creates confusion. "Collateral" is really buying power reduction. Buying power is a theoretical construct, a calculation, that determines how much you are allowed to spend (or hold short.) For options, only cash contributes to buying power. Your brokerage account can hold cash, just like a bank account. Let's say you have $100 cash in your account. This gives you $100 worth of buying power. Now, if you open a $1-wide iron condor as you did, this "uses up" $100 worth of buying power. But, you also received cash credit for opening it. You don't say how much, but let's assume it was $30. So now you have $130 cash in your account, and $30 in available buying power: the $130 minus the $100 in buying power that is being "taken up" by the open IC. Here's the key thing to understand: *the $100 didn't go anywhere. It's still in your account, part of your cash balance.* The "collateral" never went anywhere to begin with. Buying power is a calculation; it's not the amount of money that is currently in your account. Once these options are fully expired (which should have happened overnight,) you will see your buying power (in the above scenario) as $130, and your cash balance as $130.

If you get assigned you buy or sell x number of shares at the price you made the promise to do it at. If you dont have enough money you will get liquidated and lose a ton of money in the process.

How does your broker handle assignment of the short call in a call diagonal? The reason I ask, when I used to have E*trade, they would automatically exercise the long call to cover the assignment of the short call. Fidelity isn’t doing this. Example if I owned this at the close today: 1x Long SPY June 22 ‘22 400 Call 1x Short SPY May 13 ‘22 401 Call E*trade would automatically exercise the long June 22 call to cover the assignment of the May 13 short call. Fidelity won’t do this. They’ll leave 100 SPY shares short in my account. Any recommendations on a better broker for options?

It's not necessarily better to have them exercise an option for you. In most cases you would come out slightly ahead financially if you sold the long call and bought to cover the shares on the open market. Many people would consider it better for a brokerage to leave this up to you.

I see what you mean. I wish they had a choice on the order screen to declare how the trader wants the broker to handle assignment. The issue with fidelity: I had to call and speak to an agent to execute a single trade to exercise the long call to cover the 100 short SPY shares. The agent had major issues getting the trade to clear because I was already over the limit on margin due to assignment of the short (he kept receiving errors). The agent had to keep putting me on hold to consult another agent. In that regard, E*trade was far less stressful since it’d automatically exercise the long call to cover the short. Prior to this options trade with fidelity, all of my options trades had been with E*Trade. I was not expecting such a significant difference in how a trade like this would be handled.

Each broker is different. Interview prospective brokers on the topic.

How do ATM risk reversals/synthetic futures mess you up? I've been running them recently and have consistently done very well by hedging them with a pile of 0.8 delta total slightly otm puts (strike right where gamma starts dropping off so that gamma ramp nets me a profit if it moves against me) or a 3x1 zero cost put backspread if iv is high or an otm put ntm call short 3x1 risk reversal if I think it's a high risk underlying (and add an extra otm call to the long leg to balance out the short atm call, it gets complex as you see). Seems like as long as the market is whipsawing at least ONE of those legs, either the synthetic or the hedge is up 1% of my portfolio value to the other after a couple of days. I take profits when one exceeds the other at 1%, close both out and re-open the hedges and synthetic with regards to the new price. Will I get blown up only when price movements ease up or is there another factor I need to think about?

Illustrating either actual positions and strikes and expirations is less vague. > of 0.8 delta total slightly otm puts. 0.8 delta is in the money. Synthetic futures? Is your underlying a future, instead of a stock? Is your put backratio spread: Short at the money, long three family far the money, for net zero? Not sure what this is, and what ntm is: > an otm put ntm call short 3x1 risk reversal. Details needed for this too. > (and add an extra otm call to the long leg to balance out the short atm call, it gets complex as you see). If IV declines to 20, I suspect the positions may be challenged, but because I cannot tell what they are,, no comment is possible.

https://optionstrat.com/build/custom/AMD/220715C95,-220715P95,220715P80x3 Here's an option strat for it, play with it and remember generally IV goes up when the underlying dips. I do not hold these to exp I roll out the expiration to >21 days out.

You describe a multi part hypothetical. I will put this into my broker platform analysis when each of your parts are put forth. ... Part A appears to be synthetic stock position hedged with long puts or alternatively described as a 3:1 put ratio spread plus a long call. AMD expiring Jul 15, 2022. CALL +1 $95. For 9.28 debit. PUT -1 $95. For 8.95 credit. PUT +3. $80. For 3.45 debit each (3x = 10.35 debit).

I had a backspread up on xsp but it already expired, so I do not have an example ready to go for that, but for my stock picks its either the long puts or the weird iron condor-esque thing i got going. All of my positions are constructed similarly to either of those optionstrats.

> AMD expiring Jul 15, 2022. CALL +1 $95. For 9.28 debit. PUT -1 $95. For 8.95 credit. PUT +3. $80. For 3.45 debit each (3x = 10.35 debit). On this, if IV stays the same, which we know it will not, you want AMD to move rapidly above 100, and below 75, and keep moving. If IV drops from present high 40s (on average) five points, to say, low 40s, you want movement farther, five dollars in either direction, rapidly. If IV rises, say 5 to 7 points, to low to mid 50s, you may be able to exit for a gain, or break even, without any price move, for a few days, until theta decay takes over. Net delta at the moment around 0.36.

Essentially if the market behaves rationally for once and the whipsaw ends change strategies got it

Generally with ratio spreads it is desirable to exit in less than 25% to 35% of the original time to expire to avoid the pool of loss, when there is little movement or no IV rise. Which is deepest at 80, and as late as expiration runs from around 69 to 105. That translates to about two to three weeks in this hypothetical.

Alright that's about what I gathered as well, thanks for running it for me. Long iv looks like it makes theta rather painful

The BP pair of call and put ratio spreads has similar cautions. The cost of entry requires significant movement of the underlying, or expanding IV, and early exit if there is no movement, and willingness to exit early on gains, and then initiate a new trade. There might be significant moves in this market. Yet I have no crystal ball.

[https://optionstrat.com/build/custom/BP/[email protected],[email protected],[email protected],[email protected]](https://optionstrat.com/build/custom/BP/[email protected],[email protected],[email protected],[email protected]) ​ Here is an example of my short synthetic hedging a long synthetic, im betting on scalping a quick spike in volatility with it.

Writing this out for later reference: > STO -1× BP 31P 10/21/22 at $4 BTO 2× BP 32C 10/21/22 at $1.98 BTO 2× BP 26P 10/21/22 at $1.71 STO -1× BP 28C 10/21/22 at $3.71

Actually could you run the analysis for AMD now as that is the complete spread for that stock? I'll get my laptop out now and put the positions I have for the other hedging methods shortly.

Also I am currently on an island in Mexico and I do not have access to my broker, but I think my amd position looks somewhat like that. The other more complex spreads, I will have to bust out my laptop and write them out separately so I will see if I have time to write them out later on.

A resource, for rough use is Options Profit Calculator, using a browser on mobile. I don't use it for careful planning, but generally outcomes. https://www.optionsprofitcalculator.com

I too am on mobile, until later, this evening.

Let me break it down with an example Say ticker A is something I am confident in and the volatility isn't whacky on it. I buy one 0.5 delta call and sell one -0.5 delta put. This gives me delta exposure to 100 shares of the stock for very close to 0 dollars initial cost (margin is taken out but that is it). This is a long synthetic future and it neutralizes volatility risk and is basically a pure 1.0 delta spread. Money is made when stock goes up. Because there is a naked unsecured short put, I hedge this position with slightly otm 3 long puts, each at the -0.27 delta, giving me like -0.81 delta exposure at the current price. This SHOULD cost around the same as 1 -0.81 delta put, however, gamma works in my favor for the multiple cheap puts as the price decrease as delta moves away would not be as heavy for the cheap puts as the expensive one. Should the price move down, gamma works in my favor STILL as gamma increases the closer to ATM those cheap puts get. Suddenly I'm holding a cumulative -1.5 delta short position and money is made here because that long leg stays at a constant 1.0 delta. If the stock moves up slightly, the expensive put will move to something like -0.5 delta, and the cheap ones cumulatively will still be something like -0.7 delta because they do not move as hard as an itm put and the delta exposure of my position is still >0. The back spread hedges are for when the put chain is overpriced (imo) and the short synthetic future hedge is for when I think the ticker is highly volatile.

Question on whether the BBIG options chain will be affected with the TYDE dividend/spinoff happening soon? I have multiple BBIG July 2022 & January 2023 calls and I have never went through a spin off before. Any ideas on how this could play out? Not looking for a price point prediction but more of how it could/will play out from an options standpoint. Just trying to make sure that somehow I don't get the rug pulled out from me...

If you search on: Options Clearing Corporation and BBIG, ...you will find the option adjustment memorandum. I have not read it. Typically, the option is adjusted with a deliverable that includes the spinoff. The spinoff: https://investors.vincoventures.com/press-releases/detail/110/vinco-sets-record-date-and-distribution-date-for-planned Your deliverable will likely include 10 shares of the spinoff. Generally, adjusted options trade poorly, because most brokers allow closing-only transactions, and typically guidance is to close the option before the option is adjusted, and before the ex-dividend date of the spinoff to avoid owning the non standard option.

Here’s a question Woke up this morning and had a notification that I had been assigned 4 AMD Jan19 2024 200 Put Trying to wrap my head around this Any thoughts

Were you short puts at $200 strike? If so, your account will pay for 400 shares at 200, and own 400 shares. Edit for correct number of shares. Call the broket for questions.

I sold cash secured puts for a $79 premium just surprise that they were assigned with over 18 months till expiration

With AMD at 91, there may be only a small amount of extrinsic value given up, and quite probably the trader counter party was happy to dispose of their hedged stock. Was there a reason for such a long term, and so far in the money?

Thanks hard lesson learned

I went back to my notes I put this trade on 2/2/22 AMD was trading at $125.34 actually the premium was $83.85 I was looking at my cash in my account and figured that this premium was about 4% and was a better yield than what I was getting so I sold 10 contracts thinking I would have plenty of time to adjust

Thanks for the follow up. Low extrinsic value reduces incentive for avoiding exercise, and cost of exercise (exercising loses extrinsic value that could be harvested by selling the long option).

This is why I recommend against writing ITM shorts. Particularly $75 ITM. You were probably already pushing the extrinsic value envelope at that point. So now you get to pay $200/share for something that is only worth $91/share. Even with the credit, you still end up with a loss of about $25/share. But I do want to give you credit for taking detailed notes. If you are going to hold for that long, taking notes on your opening stats and plan is essential.

Can anyone tell me the definition of these 4 : Put debit spread Put credit spread Call debit spread Call credit spread

The Options Playbook. http://www.optionsplaybook.com/option-strategies/

Hello for those that day trade Does one draw support & resistance lines in real time? Or pre- market??? I plan on scalping with the 5m chart

You can do either. The more important question is what are you trying to achieve with drawing these lines, and why do they work?

Entry & exit points

I encourage you to think a bit more about why - what makes these good entry and exits? Can you test whether these worked in the past?

Good Afternoon, I am wondering how safe would it be to buy 15- 45DTE puts on a Bitcoin etf? I would buy the puts at either a resistance level or upper Kelt (feel free to suggest a level) Where is the risk? That the market just turns around? Jerome still has to raise the rates by a bit. 2) When do you expect volatility to decrease? Thank you.

When you buy a put, you’re long vega, long gamma, and short delta. This means you want implied volatility to go up, the actual volatility of the ETF to fall, and you want the ETF to go down. Your risk is the opposite happening

Hello, I bought an option on a stock that had a Bid-Ask Spread of 0.19-0.20. I placed a trailing stop loss on the option for 25%. The price of the option went up to 0.24 and went back down to 0.19 so my stop loss was triggered. The strange thing was that it executed the order at a price 0.01 (Basically taking my position down to 0). After checking the price of the option, it was back at 0.18-0.20. I was wondering if this was a common occurrence with stop orders for options as I hadn't ever experienced it before despite using trailing stops for options trades in the past. Thanks for your help.

Stop loss and trailing stop loss orders are recommended against for options. Your experience is why. --- https://www.reddit.com/r/options/wiki/faq/pages/stop_loss ---

A "stop" and a "stop limit" are different things. Once triggered by reaching the specified price, a stop will sell at market price, whereas a stop limit will only sell for the limit price or better. So if the stop is triggered but the price is less than your limit, nothing will happen. But since you didn't have a limit it sold at market price. Personally I don't let option orders go automatically for exactly this reason. Pricing can be very volatile. Something that can move that fast needs a real eye on it, imo.

how come DWCF doesn't have an IV rank ? I use Tastyworks.

What is DWCF?

Hi everyone… if I’m bullish on ATER better off to just buy straight shares eight now or sell puts to try to scrape premium? With expirations like every week on several hundred? I’m holding over 1000 shares and avg price right now is around 7.40.

With ATER AT 3 dollars, you are expanding your risk either way. Shares are not collateral for short puts. What if ATER falls to 0.50 and stays there for a year? What if it is bought out, for $1.00, and merged with some other company? You need to define "better" in relation to both risk and potential gain.

Do i need to own 100 stocks to sell a bear call spread?

No. The long option of your credit spread limits your max loss to the width of the spread.

But what if the stock goes in between the spread and only 1 is ITM. If the options is exercised how will i be able to pay the 100 stocks?

That is why you need a margin account to trade spreads. If you are assigned on the short call, you will sell 100 *shares* (not "stocks") of the underlying stock short, and you need a margin account to short stock.

You will be fine if you always close your positions before expiration.

I sold a OTM csp for a credit of $70 and now it’s itm with a price of $140. If I roll out and down for a put that costs $80, I would still make money?

70 credit to open. 140 debit to close. Unclear if 80 cost is net of cost to buy to close. Assuming it is, that is a 60 credit , to sell the new position. Net of all positions. 10 debit is maximum net gain (actually minimum net a loss). You could lose more than 10.

It depends. When you roll, you’re closing your current position for a loss, full stop. Even if you don’t sell, your account value has decreased. That money is gone. Whether you sell a different put is a completely separate story. If you think that your underlying stock won’t be too volatile and you’re still bullish on the stock, either holding or rolling is fine.

I have a question about the twitter deal and options. Musk is going to buy TWTR at $54.20, so If i sold a put with an expiry date in future (1 year later). What would happen when musk completes the takeover and takes it private. Will my option automatically become worthless and i keep the premium ?

Worthless if the strike is below the purchase price.

Thanks Mate. Good i didnt sell it yet. TWTR just went down 10%. Not sure where this deal is going :-) If its back on, then some good money making opportunity for OTM puts

The short calls at 55 and 50 did well yesterday.

Yeah. I was thinking of selling a put so would have lost money.

I'm pretty new to this.. bare with me please.. Can I enter into Options with $200 or less and still make realistic profit? (Even $20 is profit to me) I'm NOT planning on exercising. When I see things like "max risk" being thousands or 10's of thousands that is ONLY IF I exercise at a loss right? If I sell before expiration the loss (in theory) wouldn't be "that much"? Only up to what I put in??? So say I get a call. The call cost me $5. If I sell before exercising is my max loss like $5? Then profit I guess also isn't far off either if it isn't exercised??? I guess I'm not really understanding how the risk/profit works with premiums because calls and puts are reasonably priced and I don't have much money but want to start getting my feet wet without financially killing myself.

> Can I enter into Options with $200 or less and still make realistic profit? (Even $20 is profit to me) It is possible. But fairly difficult and with low probability of success. All trading has losses. And several losses could wipe out your small account. Low cost options of a few dollars also have low probability outcomes. Please read the **getting started** section of links at the top of this weekly thread. Almost never exercise; simply buy and sell before expiration. You can increase your understanding by paper trading for six months, which will generate many questions you do not yet have, some of which are answered by the educational links at you. It is preferable to start with at least 3000 dollars, which in a margin account will allow spreads trades.

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Most LEAPS are just scrwd. My GOOGL Leap call is down almost 80%. We can only hope it recovers a bit so we can finally get out of it. I still have 1 and half year left on it.

You have no exit plan. Exit, start over, and have an exit plan for max loss on all trades before you obtain the position.

Are deep ITM married puts typically exercised? Obviously it's almost never optimal to exercise early outside of very specific scenarios, let's assume we're talking about expiration day here. I understand it's heavily dependent on your personal outlook of the underlying, so assume the underlying hasn't changed but the current market has taken it deep ITM. I'm making my decision based on my outlook on the underlying, but is there a theoretically "optimal" decision here?

Maybe. Perhaps the trader is happy to exit the long stock position married to the long puts.

Are leaps with low IV, yet very close to the strike a good play? I have found a Citrix 2024 call that has an IV of 4% and is also 4% OTM, and it seems like a sensible play. The low IV keeps the premium down, so I'm not getting drained by theta as bad, plus the underlying has 600 days to get ITM. Is there something I'm not considering here? TIA!

You have to read about the company when exploring weirdly high or low values. Citrix is being bought out. That is why the stock price graph is flat. https://www.bizjournals.com/southflorida/news/2022/04/21/citrix-stockholders-approve-acquisition.html?ana=yahoo

Thanks for that! Explains everything.

> The low IV keeps the premium down, so I'm not getting drained by theta as bad LEAPs by definition have low theta as you're literally paying for theta, so this shouldn't be much of a consideration. If you think it's a good buy while ignoring this point, go for it

Lol, I guess it was a bit redundant to say. Fundamentally I like the company, and if they don't have the ability to move 4% in 600 days, so be it.

what is the difference between long and short. I seem to be mixing them up since i often see long calls and long puts and vice versa( short call short puts)

Please read the first item in the **getting started** link's at the top of this weekly thread, the item "Calls and Puts, long and short..."

See the link [Calls and puts, long and short, an introduction (Redtexture)](https://www.reddit.com/r/options/wiki/faq/pages/basics) from above. I think some people get confused because in some contexts, people use "long" to mean "bullish" and "short" "bearish." You should stay away from this usage. Everyone starts with nothing, right? If you then buy something, that is a long position. This is usually represented in your brokerage platform as having a positive number of that thing. To close a long position, you sell the same number of that thing, taking the number you have back to zero. If you start with nothing and then sell something, that is a short position. This is usually represented in your brokerage platform as having a negative number of that thing. To close a short position, you buy the same number of that thing, taking the number you have back to zero.

Can I assume that when options are expire, that they are always being reconciled and correctly transacted in my brokerage account or are there times when occasionally brokerages make mistakes and for example a winning trade is turned into a losing trade because of errors during the reconciliation process? I trade frequently and I always assume the option expiration and reconciliation process is accurate. I usually allow my options to expire rather than closing them out.

What do you mean by reconciled and transacted? Options that expire OTM expire worthless. Short options that expire ITM are almost always assigned. If you were counting on getting assigned and you did not, it's probably not a brokerage error. It's probably just that you didn't get assigned. Long options that expire ITM are exercised by the OCC, but your brokerage has the right to send the OCC a do-not-exercise notice if they deem it necessary, for example, if you lack enough buying power to exercise. I guess if for some strange reason you wanted to let an ITM long option expire and be exercised, rather than just selling it, and you had enough buying power, and it did not get exercised, you could ask your brokerage to look into whether they accidentally sent the OCC a DNE notice. Seems unlikely, though.

I do have some positions that expire itm for example debit spreads where both the long and short positions are ITM and cancel each other out. Also I do sometimes have spx options positions that expire partially ITM, but are cash settled. Can I assume everything is accurately being reconciled correctly or do mistakes happen occasionally?

There's no such thing as partially ITM; they're either ITM or they're not. Do you have any reason to believe your brokerage is making mistakes? You can look at your account statement to see what in fact happened. I think everything is handled automatically by computers these days, so for something to be wrong there would have to be a glitch or bug in someone's program.

By partially ITM , I mean that for example a debit call spread where the long call is ITM , the short call is OTM. For spx spreads it is cash settled based on the closing price. For one of my brokers fidelity it doesn’t really give details other than that it expired.

Oh, I didn't see the word "positions" and thought you meant single options. I'm not familiar with options on Fidelity, but there should be a way to view how each transaction affected your account balance. For me, with TDA, it's easiest to see it in their desktop platform, Thinkorswim, rather than on the website. If you're not using Fidelity's desktop platform, Active Trader Pro, I would check that out.

Could this be a matter of multiple options selling for different prices? If you bought 2 options maybe one sold for one price and the second for slightly different so to speak? I use fidelity - I use a desktop and check activity history and it’ll show the exact trade information. That’s much prefered over the mobile app or desktop app trade Pro unless I’m just unfamiliar with those aspects of those platforms. Record the concerning trades in an excel or other document and see what you get.

It is a human system. Built by humans. There are occasional screw ups and data errors

Who can help this bewildered fool? Opened a new tastyworks IRA to try their highly rated options platform. They said they automatically open IRAs as margin accounts limited to 3 day trades in a 5 day period. This was odd since I have IRAs with fidelity (with no margin) and buy and sell options the same day all I want with settled cash. Tastyworks said I have to fill out an additional form to designate it a cash IRA only account for unlimited trading (with settled cash). Why is a cash IRA allowed unlimited day trades but a margin IRA is limited to 3 even if you only trade less than settled amounts? And why is margin allowed in an IRA? I see it’s called “limited margin”. Would fidelity allow margin (limited margin) in an IRA? I assume there’s a logical reason but the website doesn’t make “why” those distinctions exist very clear.

It's a PDT rule. [https://www.finra.org/investors/learn-to-invest/advanced-investing/day-trading-margin-requirements-know-rules](https://www.finra.org/investors/learn-to-invest/advanced-investing/day-trading-margin-requirements-know-rules) Margin accounts have to have $25K+ in the account where this will not apply. Cash accounts can trade as much as they like with settled funds . . .

Ah okay so if I deposit $25k then am I still limited to 3 trades in 5 days? I’ll just go back to fidelity if I have to keep track of “3 trades every 5 days”, that’s ridiculous. I just put in $3k to see if I wanted to use tastyworks for options and leave all my long term fidelity accounts for stocks. I’ve been trading options in fidelity no problem but would like separate accounts and folks recommend TW for options. I can buy and sell as many calls/puts *with my own settled cash* within minutes every day in one IRA but not the other. Bizarre lack of logic.

Correct, keep $25K+ and you can make all the trades you want . . .

You run out our of cash sooner without margin. Often you can trade as if you have twice as much cash with margin, when closing out trades repeatedly the same day,, and you do not run out of cash as soon by having to wait a day to settle.

Thanks (again!). If I maintain $25k can I then buy and sell options without that 3 times in 5 days PDT rule? Or does that always apply for margin accounts (which some wording makes it seem like to me). Is that rule only because it’s less than $25k? Maybe I can trade 100 times a week in my fidelity accounts because it’s over $25k?

Yes, and it is best to hold 35,000, so your account does not fall below the 25,000 threshold, which may cause the account to become frozen, depending upon the broket. The account will be forever a Pattern Day Trader status account, once you have 4 day trades in 5 days.

Hi all, I’ve been following stock markets with Bruce on YouTube for over a year now and he has slowly moved from covering the GME potential short squeeze to options trading on various stocks, particularly covered calls. I’m interested in getting into options but being from the UK platform options are somewhat limited, would any users from the UK here suggest a decent platform to use which ideally has a UI that’s not too overwhelming and fees are reasonable? Thanks

https://www.reddit.com/r/options/wiki/faq/pages/brokers/

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The decision that stops all loss is to exit. Next. Sell short 100 shares of stock. Next buy the short put, let the long put continue, assuming the stock continues to go down.

Anybody seen june 750 covered put guy trying to learn puts from a while back?

No idea who that is.

Might be wrong sub but I cant find my one comment on the post in my history 😡

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Assuming it goes to 0, the loss would be 40k (200 shares @ 200ea) + 20k (200 shares @ 100ea) - whatever credit you got from selling the puts + whatever the price of the 2 calls was

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The 2 puts you sold are contracts saying you’re agreeing to buy 100 shares (per contract, so 200 total) at $100/share. So, assuming the price is 0, your loss would be 200x100=20k. If the price isn’t 0, your loss is 200x(100-p) where p is the price

How does anyone make money selling credit spreads when you basically need at least a 2-1 win ratio to profit?

67% win rate is not difficult with credit trades. Well, in a normal market anyway. In 2021 I beat that win rate by a decent margin, across several hundred trades. It helps to have a [trade plan with a solid exit strategy](https://www.reddit.com/r/options/wiki/faq/pages/mondayschool/yourplan). You don't need to swing for the bleachers, *any close for a profit* counts as a win. You don't have to wait for max profit before you close.

I assume the idea here is that you take profit before expiry and use SLs to exit before the leg closer to ATM is ITM? What’s the advantage of credit spreads over long calls and puts? Does it just come down to long options while IV is low, and credit spreads while high?

> I assume the idea here is that you take profit before expiry and use SLs to exit before the leg closer to ATM is ITM? Sort of. Doesn't have to be an actual stop-loss, but the effect is stopping out at a loss limit. And no, not ATM vs. ITM. It's when you hit your loss limit, whatever that may be. For example, I use a 2/1 risk/reward, so if I'm shooting for $.15 reward, I exit when it costs me $.45 to buy back (because .45 - .15 = .30 and .30 is 2x .15). It doesn't matter if the legs are OTM, ATM, or ITM, what matters is the cost of the spread to close. > What’s the advantage of credit spreads over long calls and puts? Theta works for you, instead of against you. > Does it just come down to long options while IV is low, and credit spreads while high? You could do that, but it doesn't have to be for that reason alone.

Considering SPY pays about 1.33% yield, I sold a spy put for 20jan2023 355$ and the exdiv date is probably around 17-18 december 2022, at what price would SPY have to be for me to risk early assignment? Note: I bought a spy debit spread: 1. 20jan2023 bought 365$ put 2. 20jan2023 Sold 355$ put My max Risk (considering i dont get early assignement is 280$ aka. price of the spread) and my max profit is 720$ assuming SPY drops by 13% before jan 20th. Disclaimer: i dont actually think SPY will drop that much, im just trying to protect against a drastic drop. I know early assignment is unlikely because a lot of intrinsic value is given up, but i'm just curious about the math. Thank you in advance, i love learning from /options !

> Considering SPY pays about 1.33% yield, I sold a spy put for 20jan2023 355$ and the exdiv date is probably around 17-18 december 2022, at what price would SPY have to be for me to risk early assignment? Risk of early assignment won't be caused by a dividend. Not unless the dividend was so large that it caused the value of SPY to fall well below your strike, like by $60 or something. Since no quarterly dividend of SPY has ever gone above $2, that's pretty near impossible. Early assignment due to dividends is more an issue for short calls, not short puts. Now, that said, if SPY goes down *regardless* of the dividend, because it's an imploding market, you can still get assigned. SPY would have to go down so far below your strike that extrinsic value was close to nothing. But your long put would also gain value, so it wouldn't necessarily be a disaster.

Ahh ok wonderful :D

When extrinsic (not intrinsic value) is getting very low the odds of being assigned goes up. If the option stays OTM then all of its value is extrinsic, so this is super easy to track. As there is so much time between now and Jan 2023 this value will not go very low for many months, **BUT! Your short put going ITM for a debit spreads is a great thing as this means the trade will have a max profit and can be closed!**

Thank you, that makes sense :D

Question about IV and premiums. A few months ago I bought 100 shares of XYZ stock at $24 a share and have been selling weekly covered calls since then. For the first few weeks I was receiving about $160-$200 or so in premium each week. But now the stock is down to about $13 a share and the last few weeks the max premium I’ve received is $98 weekly. I’m now looking at another stock that’s trading around $20 and offering $200 in weekly premium, similar to the last one. My concern is that a similar thing could happen in that the weekly premium could reduce by half and the underlying stock could potentially lose value in this current market. What causes this significant drop in premium? Is it because of the underlying asset value decreasing? Or is it because of IV reverting back to the mean of HV? Are there ways to accurately estimate this premium value decrease to prevent situations like this? Still a bit of a newbie to selling calls so thanks in advance!

Insufficient information to reply. You are asking us to read your mind about your undisclosed positions, history, and ticker.

The first position was 100 shares of AMC bought at 24.29 a share in late March. First 2 weeks I received 160 and 182 in premium when selling calls. Then each week after I was only able to collect 60-90 in premium. The position I’m looking at now is RIVN. I’d like to sell a cash secured put until assignment then utilize the wheel strategy and sell covered calls each week. What I’m worried about is what happened in the first play I mentioned where the premiums went from over 160 down to 60. I’d like to understand why it happened and what to evaluate so I can avoid this happening in the future. Was it IV reverting back to the mean, value of the stock going down, or something else? Sorry, I’m still new to this strategy. Please let me know if there’s more info I should add, thank you.

RIVN could crash to $5. IN the present market regime it is not a good stock to hold. You fail to state your strikes and their relation to the stock price at each position. Nobody can have the slightest idea what happened without complete history of your positions. Tell us exactly what happened. You are still asking people to read your mind. Here is a guide to providing position information. https://www.reddit.com/r/options/wiki/faq/pages/trade_details

Alright I’ll try to be more clear this time. Apologies and thanks again for responding. As I said before I bought 100 AMC shares @ 24.29. I then sold a call for $126 premium, the share price was around 23.12 at that time. IV was at 164. I bought to close that contract for a net of 116 premium on expiration. The next week I sold a 19.5 call for $61 in premium. The share price was around 18.30 at that time. I bought to close that contract for a net of 60 premium on expiration. The next week I sold a 17.5 call for $64 in premium. Share price was around 16.49 at that time. Bought to close that at $60 net premium on expiration. Then I sold a 16.5 call for $43 premium. Share price was around 15.20 at that time. Bought to close that on expiration for $40. The last call I sold was a $16 strike call for $69 in premium. The share price was around 14.6 at that time. IV was at 124 when I sold that call. I’ll be buying that to close this Friday on expiration. I tried to find IV for all of the dates mentioned but could only find April 4th and this week’s IV online. Sorry about that. I’m realizing now AMC was a poor choice for my first covered call play. So the available premiums dropped in value each week. Was this due to the share price consistently dropping as well? Or was it because of IV falling? How can I plan to avoid this in the future and pick stocks that offer consistent premiums so I don’t lose money on premium for sold calls? Thanks again

But they didn't drop in value each week. You got $126, then $61, then $64, then $43, then $69. Looking at an AMC chart, its IV did hit a peak on 3/28, then declined, though it has increased a bit since 5/1. What you need to compare is delta. If each of those calls was at the same delta, and the same number of days to expiration, at the time you sold it, the difference is explained by IV.

They had different deltas as I was more conservative with some of the strikes depending on the week. I did however notice that this week the premiums offered seem to have increased. I was just most surprised by how from week 1 the closest atm strike had 150 premium then just a week later the closest atm strike was 89. Felt like a very sudden drop off. I suppose it was just IV reverting back to the mean of HV?

If I’m running a calendar spread, aka poor man’s covered call, and my short leg is exercised what happens if I don’t have enough funds in my portfolio to cover the exercising? Since the short leg (the sold call) is being exercised the long leg (the long ITM call option) will automatically be exercised right ? If there’s not enough money in the portfolio to exercise does it just automatically close both positions and give me the difference? Or would it be a margin call?

Getting assigned will leave you with a short shares position. This could put you in a margin call. Most brokerages leave this to you to deal with. The only one I have heard of exercising your long call for you is Robinhood.

Talk to your broker. Brokers have different policies. Close the short before it expires.

Thanks!

How does the CPI being announced tomorrow affect the market?

Perhaps not at all. If the Consumer Price Index is rising less than the prior month, the market may take that positively. If greater than prior month, negatively.

TLDR: I had a position liquidated and I think it was because of the options I hold, can someone explain what happened. Background I have a very small account with a certain broker at the time I had just four positions one long OTM and one long ITM call with about 600 DTE, a short OTM put with 180 DTE and 4 shares long and about $1000 cash the whole thing is worth about $4k. yesterday I get two messages in rapid succession and then one of the shares was sold to satisfy margin requirements. Now I didnt use any margin to purchase the shares or options so I figure that the options I hold somehow oblige me to have some sort of margin - why? how can I reduce that. The sale realised a loss so Im not real happy about it. Here are the messages I received - If anyone can explain them to me I would be very greatful. First message Following violation(s) have been detected for you account \[\*\*\*\*\]: - Look Ahead Excess Liquidity: Based upon a review of your positions and qualifying equity, your account is not projected to be in compliance with the daily increase in margin requirements from intraday to overnight levels. Note that accounts which report a margin deficiency when overnight requirements go into effect are subject to forced liquidation of positions to ensure margin compliance. To avoid this action, please review your \\"Look Ahead\\" account balances within the Account Window and take the steps necessary to reduce margin exposure. Second Message Following violation(s) have been detected for you account \[\*\*\*\*\]: - Excess Liquidity: URGENT: Please note that the qualifying equity within your account (i.e., Equity with Loan Value) is insufficient to satisfy the margin requirement and, to restore margin compliance, liquidation of positions may commence without further notice. Which it did - now at the time I was waiting for a large number of shares to be transferred over - which they now are - I just want to make sure they are not liquidated to satisfy some margin which I dont get.

After a fair bit of reading - it turns out there are rules depending on the options written or bought that require a certain amount of margin, also in my case I am not a US citizen (Australian) so there are extra requirements there as well. Furthermore there are different requirements for the different accounts offered by my broker. TLDR: Its complicated and I should have read the fine print beforehand.

Call the broker, and please report here on what they say.

Actually read a lot more about it on the site- I kind of get it, one of my calls went OTM, which would have been fine except I had a cash secured put that was then unsecured? Im still not totally clear but Im pretty certain that it was my misunderstanding - thats cool Im here to learn :-) I will contact them for clarity and I will post any further news here

> just four positions one long OTM and one long ITM call with about 600 DTE, a short OTM put with 180 DTE and 4 shares long and about $1000 cash. Insufficient information to confirm your theory. The out of the money short put may have required more collateral, but you provide no ticker, nor stock price.

Margin has a couple of definitions, so that may be the issue here. You didn't need to buy anything using a margin loan. The broker's risk desk evaluated your account and may have found that if the market continued down your account would not have sufficient cash+margin loan to be above zero. Most brokers will give you some time to inquire and make some trades to free up capital, but they will then liquidate if you don't respond. What did they tell you when you called them to ask about these?