Intro to options

[Zaphod]

If they take the call, you get $ to buy something else. If they don't (and they often won't even when it is deep ITM), you get dividends all along.

You win either way. That's the point of covered calls. If the share price shoots up, oh well... that shouldn't be why you buy REITs. They more often stay fairly stagnant or oscillate around.

For example, I have dozens of CC contracts out on PSEC for $7 right now... bought them for around $5 last year and sold the CCs back when it was at around $6.50. It might stay up (nearly $8 right now), it might go back down. You would be surprised how many call buyers don't have the money to actually take the 100 shares even on a cheap stock and are holding them to see if it goes up further. Then, if it heads down in price, they panic since their call value shrinks very quick with time and share price drop. In reality, it doesn't matter to me whether they take them away or not... I'm making 10% on it in dividends... plus whatever I got in premiums when I sold the calls. I was never planning to make much/any on the share prices (or I would've bought something better for that purpose). It is actually pretty common on long term calls for the call to go fairly ITM and then back OTM by the end of the term... and it never gets taken when it could've.

You can do the same with F, WMT, KR, T, KHC or MMM or whatever that has fairly unexciting QEs, but it works even better on monthly dividend stuff like REITs or bond funds... those have a very tough time getting any momentum with monthly price dips to correct for divi, so you can just take the guaranteed win and force the call buyers to grab the contract to get the dividends... or let you have them.

They will always take your shares if ITM for a call (at expiry) if its a dividend stock its not uncommon for them to be exercised early for ex div capture. I've heard in the past it wasnt always the case for puts, but that doesnt really happen anymore either. You'll get auto assigned.

Your calls dont get taken, your shares do. Calls/puts are the contract for the underlying shares. Ofc price will move up/down and the contract will change price, you can buy it back cheaper or wait til expiry, etc...up to you.

[Zaphod]

As someone who has made 200,000% returns I may not understand it but I’ve made transactions decisions that suggest I know a little something about it. I’ve also said long term the revenue opportunities for Tesla will make it a $8-20T market cap company so with that in mind being mostly long is the general way to go. You and others have said many things in this forum about Tesla that suggest you know less than nothing about the company. Many people have blinders to how large the markets are that Tesla has clear paths to dominance. What makes Tesla a safer investment than most is that they have 3-4 trillion dollar markets in their crosshairs so if they miss entirely on 1-2 and partially miss on the rest they are still going to be largest company in the world. You cannot say that about Google, Apple, Amazon etc, who each have at most 2 comparably smaller markets.

No offense, but just because you've won doesnt mean anything about knowledge. Does winning the lottery mean you know about probability statistics? No, it means you won, nothing else and you can know nothing, or be the worlds expert.

Dont confuse winning on a good bet, and incredible diamond handsing of it, with actual knowledge or skill. You do have skills of holding/diamond handsing and thats for sure, but it really says nothing to anything else.

Tesla is by no means a "safer" investment, that would be ridiculous. It is highly unusual and and unlikely a safe company ever has the kinds of returns that tsla has. You dont get massive return without some crazy volatility, they kind of go hand in hand. The shorter the time period the more true it is. Feel free to find me a stock that has 10x in 3 years with less vol than the s&p.

[BCBiker]

No offense, but just because you've won doesnt mean anything about knowledge. Does winning the lottery mean you know about probability statistics? No, it means you won, nothing else and you can know nothing, or be the worlds expert.

Dont confuse winning on a good bet, and incredible diamond handsing of it, with actual knowledge or skill. You do have skills of holding/diamond handsing and thats for sure, but it really says nothing to anything else.

Tesla is by no means a "safer" investment, that would be ridiculous. It is highly unusual and and unlikely a safe company ever has the kinds of returns that tsla has. You dont get massive return without some crazy volatility, they kind of go hand in hand. The shorter the time period the more true it is. Feel free to find me a stock that has 10x in 3 years with less vol than the s&p.

volatility is not equal to risk… to think that is quite a silly assertion.

An asset that has a clear path to go from $30B market cap to $10T with tons of volatility along the way is less risky than for example an asset that is currently $30B with a stagnant enterprise and no diversification and will be worth $30B 10 years from now and has minimal volatility.

I have not just won a good bet. I’ve sold covers when the stock was hot on January, bought calls and sold puts when it was low. I have over $12M in gains. In the markets performance is actually a reasonable indication of skill.

[Zaphod]

Im sure you have gained tons of knowledge in the interim time from buying that option, managing it and everything afterwards.

That wasnt my point, just that one winning position doesnt = skill or knowledge and that will always be true. With options you're always buying/selling volatility in some way so I think that point is purely a semantic/10000ft view difference. Same with the bitcoin takes, few seem to grasp big returns/volatility go hand in hand. It doesnt necessarily make it "risky" its just how it is and cant be disentangled.

[Zaphod]

Im sure you have gained tons of knowledge in the interim time from buying that option, managing it and everything afterwards.

That wasnt my point, just that one winning position doesnt = skill or knowledge and that will always be true. With options you're always buying/selling volatility in some way so I think that point is purely a semantic/10000ft view difference. Same with the bitcoin takes, few seem to grasp big returns/volatility go hand in hand. It doesnt necessarily make it "risky" its just how it is and cant be disentangled.

Again congrats on this great trade and management of it, its awesome.

[Craigslist]

I just got into options yesterday, I'm playing it relatively safe right now taking in 1-2% per contract, I love this, this is the side hustle I was looking for my entire life.

[Nysoz]

There's a lot of volatility now and comes with it high premiums and high chance of having the trade move against you. Keep the amount small and risk small until you get the hang of it.

It's too easy to think of any strategy and think of it as you can't lose, but sooner or later, no matter how safe you play it, you can make a losing trade. Don't get greedy chasing premium, have a plan for when the trade goes against you.

Good luck! It's pretty fun and profitable, but can also be stomach churning at the same time lol.

[Craigslist]

It's too easy to think of any strategy and think of it as you can't lose, but sooner or later, no matter how safe you play it, you can make a losing trade. Don't get greedy chasing premium, have a plan for when the trade goes against you.

Good luck! It's pretty fun and profitable, but can also be stomach churning at the same time lol.

My first trade was buying 100k in tesla @ 1004.50 yesterday, selling a CC 90 days out for 6600$. Then the stock went up 5%. I realized my first mistake was selling a call so far out because a 2 week ITM call was selling for the same price and that I shouldnt go so far out DTE. So today, I transferred the remaining 20k I have to a cash balance remaining of 11k and bought 2 CSP on AMD for 810$ at a strike on 136.

I don't know if im chasing premium, im basing my trades on the premium return but im more focused on my strike prices and my willingness to hold these stocks for long periods of time.

So I went all in some relatively, in my opinion, conservative premiums. I dunno I think my investment is risky and conservative at the same time, or maybe they were crazy.

BTW thank you for these threads and your contributions to them.

[Nysoz]

Yeah, usually you’ll want to sell options 30-45 days out at the maximum. There’s specific times where you can sell it further out but usually 30-45 is most efficient.

When selling covered calls, pick a strike you’re happy letting the shares go at. TSLA is going to have abnormal premiums right now because earnings should be 1-2 weeks away.

Otherwise pick good stocks, pick good strikes, don’t get greedy are the mainstays of selling options. There’s always more to learn (I’m still learning after 2 years) so feel free to ask any questions as well.