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  • #46
    Originally posted by xraygoggles View Post
    ...For leaps, yes, its the same thing as buy and hold the underlying shares of the company. But most option strategies are not buy and hold, at least when you are purchasing them. For ex, last year, when we had the massive bull run in tech, I bought some Zoom calls at 300 strike, and my timing paid off, since it took off soon after, and when I thought it was really into bubble territory, I unloaded them for a big gain. If I had held those till today, would be a whole different story, and would have lost a lot of the winnings...
    For sure, buying calls lets you have the "control" of the upside without putting up the full price. Zoom is a good one... I had considered it but didn't know how they were going to monetize it when the vast majority of users just do the free version. I saw it as anther Pandora or early FB, etc but with no real ability to sell ads. I missed the boat, haha.

    I was referring more to buying stuff to sell covered calls on it when I said it should be analyzed similar to potential buy-and-hold... quality and fundamental reasons should still be paramount for getting the 100, 200, 3000 etc shares. Basically, my watchlist for tickers to buy and maybe sell calls on is the same as my list to buy and trade or buy and hold... I want very good stuff at a good price for any - not just volatile stuff or low share price stuff (which options ppl tend to have blinders for since they contracts are affordable or the calls are cheap on).

    ...It is rly good to be able to have discussion on stuff like options and singles. This is honestly the first one I've seen here that doesn't get closed down or overrun with the "gambling, gambling... sounds too risky" folk.

    Comment


    • #47
      Hi options aficionados, I have a play account on robinhood and am doing some option trading. What do you think about call debit spreads? Specifically in the money debit spreads where both the call you buy and sell have strike prices that are in the money. It seems this is more favorable, however most of what I read recommends buying the call near the current share price and selling a call with an out of the money strike.

      Comment


      • #48
        Originally posted by BCBiker

        This is pretty dumb thing to say about a company about to post their 6th straight quarter of profit that has reached scale and is unlikely to ever post another quarterly loss... But ok. I’ve made $8M off of this junk company.
        You made $8M off of leveraged stock price movements, not earnings. Two different stories and this is a story driven investment. Just saying. It remains to be seen which story sells more and which is fiction or nonfiction. Two different books. The endings of each could be drastically different. Happy ending or a tragedy, remains to be written.

        Comment


        • #49
          Originally posted by fatlittlepig View Post
          Hi options aficionados, I have a play account on robinhood and am doing some option trading. What do you think about call debit spreads? Specifically in the money debit spreads where both the call you buy and sell have strike prices that are in the money. It seems this is more favorable, however most of what I read recommends buying the call near the current share price and selling a call with an out of the money strike.
          Debit spreads are essentially a cheaper way to buy calls or puts. The downside is that you cap your potential gains by the delta between the 2 strikes.

          say you think tsla is going to go up and current price is 850. So you buy the 850 call (71.90) and sell the 1000 call (24.80) for the same expiration (2/19).

          pro: cheaper than just buying the 850 call because you get some premium for selling the 1000 call.

          con: if TSLA goes to 1100+ then your profit is capped at 1000-850=150

          So it’s just a way to decrease risk (decrease your cost) by capping potential profit.


          when you’re talking about itm debit spreads, then I guess it depends on how itm you’re talking about. Generally options deep itm behave just like shares and there’s little extrinsic (time/volatility) left to profit from. Also the bid/ask spreads tend to be wider so you might not get the pricing you want

          Comment


          • #50
            Originally posted by Nysoz View Post

            Debit spreads are essentially a cheaper way to buy calls or puts. The downside is that you cap your potential gains by the delta between the 2 strikes.

            say you think tsla is going to go up and current price is 850. So you buy the 850 call (71.90) and sell the 1000 call (24.80) for the same expiration (2/19).

            pro: cheaper than just buying the 850 call because you get some premium for selling the 1000 call.

            con: if TSLA goes to 1100+ then your profit is capped at 1000-850=150

            So it’s just a way to decrease risk (decrease your cost) by capping potential profit.


            when you’re talking about itm debit spreads, then I guess it depends on how itm you’re talking about. Generally options deep itm behave just like shares and there’s little extrinsic (time/volatility) left to profit from. Also the bid/ask spreads tend to be wider so you might not get the pricing you want
            Yes I understand how they work. In your example however tsla would need to go to >1000 for your debit spread to have maximum return whereas if you structured your debit spread where both your buy and sell call were in the money, tsla would merely have to maintain or go up from current levels to profit. So in this example that follows you make 100% return if TSLA merely maintains it current value. Am i missing something?

            Long Call

            Buy or write: Buy Write
            Option:26th Feb $800.00 Call Select option
            Price per option:$
            Contracts:# x 100 ?
            Total cost:$
            Manual entry optionsShort Call

            Buy or write: Buy Write
            Option:26th Feb $850.00 Call Select option
            Price per option:$
            Contracts:# x 100 ?
            Total cost:$
            Manual entry optionsSpread

            Spread price:$-25 (net debit)?
            Graph range:$ - $?
            Add calculation in new tab

            More output optionsEstimated returns

            TSLA at $850.65 on 21st Jan 2021


            Entry cost: $2,500.00 (net debit) see details

            Maximum risk: $2,500.00 at a price of $800.00 at expiry

            Maximum return: $2,500.00 at a price of $850.00 at expiry

            Breakevens at expiry: $825.00

            Comment


            • #51
              Originally posted by fatlittlepig View Post
              Hi options aficionados, I have a play account on robinhood and am doing some option trading. What do you think about call debit spreads? Specifically in the money debit spreads where both the call you buy and sell have strike prices that are in the money. It seems this is more favorable, however most of what I read recommends buying the call near the current share price and selling a call with an out of the money strike.
              These can be good. The issue with buying them so ITM would be you are essentially on the wrong side of the risk/reward spread. There is very limited upside, lots of downside if it goes the other way.

              It would be cheaper and gain more even if it were simply right at the money. For example, using stuck prices from yesterdays close, a spread on spy using 383/384 is 0.60. You'd pay 60c and since spread is 1 dollar wide maximum payout 40c. However if you did 384/385 it would be 50c, etc...Now those are friday and atm and I'd assume you want longer term.

              It makes more sense to buy just out of the money with the spread there, and really the one you buy where you think it might get to reasonably. Even though options get cheaper in nominal price as you get further otm they are actually more expensive in implied volatility, so makes sense to be a bit otm as the option you sell will be even further and you benefit from a difference in IV between buy/sell. Spread width is important as it defines maximum loss.

              Sold weekly covered calls yesterday on my whole portfolio. Was nutty.

              Comment


              • #52
                Originally posted by fatlittlepig View Post

                Yes I understand how they work. In your example however tsla would need to go to >1000 for your debit spread to have maximum return whereas if you structured your debit spread where both your buy and sell call were in the money, tsla would merely have to maintain or go up from current levels to profit. So in this example that follows you make 100% return if TSLA merely maintains it current value. Am i missing something?

                Long Call

                Buy or write: Buy Write
                Option:26th Feb $800.00 Call Select option
                Price per option:$
                Contracts:# x 100 ?
                Total cost:$
                Manual entry optionsShort Call

                Buy or write: Buy Write
                Option:26th Feb $850.00 Call Select option
                Price per option:$
                Contracts:# x 100 ?
                Total cost:$
                Manual entry optionsSpread

                Spread price:$-25 (net debit)?
                Graph range:$ - $?
                Add calculation in new tab

                More output optionsEstimated returns

                TSLA at $850.65 on 21st Jan 2021


                Entry cost: $2,500.00 (net debit) see details

                Maximum risk: $2,500.00 at a price of $800.00 at expiry

                Maximum return: $2,500.00 at a price of $850.00 at expiry

                Breakevens at expiry: $825.00
                You're not necessarily trying to get max profit but the amount of exposure you want for the most reasonable price. If the call you're selling like your example here is more expensive, you're short the spread and synthetically short from at least lower strike to upper, and the negative means you get paid that premium, and its your total upside.

                Comment


                • #53
                  So you’re talking about just itm.

                  buying 2/19 800c is 98.50
                  selling 2/19 850c is 71.90

                  so it costs 26.60 to open this trade.

                  if both stay itm (flat/up), then your max profit is the delta (50.00) - premium (26.60)

                  if it goes below 800 then both are worthless and you lose the debit

                  breakeven is 826.00

                  not a bad trade if you think TSLA is going to stay flat (above 826) or up.

                  Just have to run these numbers on whatever underlying as TSLA premium is always crazy.

                  Comment


                  • #54
                    If you structure the spread for buying 2/19 850, selling 900
                    your profit potential is a bit higher but it seems to me the risk is disproportionately higher.
                    seems like my first example is a better deal because the security doesn't have to rise at all to make a 100% profit.

                    Current price:$Long Call

                    Buy or write: Buy Write
                    Option:19th Feb $850.00 Call Select option
                    Price per option:$
                    Contracts:# x 100 ?
                    Total cost:$
                    Manual entry optionsShort Call

                    Buy or write: Buy Write
                    Option:19th Feb $900.00 Call Select option
                    Price per option:$
                    Contracts:# x 100 ?
                    Total cost:$
                    Manual entry optionsSpread

                    Spread price:$-20.55 (net debit)?
                    Graph range:$ - $?
                    Add calculation in new tab

                    More output optionsEstimated returns

                    TSLA at $850.65 on 21st Jan 2021


                    Entry cost: $2,055.00 (net debit) see details

                    Maximum risk: $2,055.00 at a price of $850.00 at expiry

                    Maximum return: $2,945.00 at a price of $900.00 at expiry

                    Breakevens at expiry: $870.56

                    Share this on:

                    Comment


                    • #55
                      Yep you can slide the strikes/deltas around to see what fits your risk/reward trade.

                      just when dealing with itm options, depending on how far itm, the bid/ask may not get these theoretical numbers or might not get filled. So everything may get shifted by a bit.

                      Comment


                      • #56
                        Here's my latest trade:

                        Underlying stock symbol

                        Symbol: Get price ?
                        Current price:$ Long Call

                        Buy or write: Buy Write
                        Option:5th Feb $130.00 Call Select option
                        Price per option:$
                        Contracts:# x 100 ?
                        Total cost:$
                        Manual entry optionsShort Call

                        Buy or write: Buy Write
                        Option:5th Feb $136.00 Call Select option
                        Price per option:$
                        Contracts:# x 100 ?
                        Total cost:$
                        Manual entry optionsSpread

                        Spread price:$-64 (net debit)?
                        Graph range:$ - $?
                        Add calculation in new tab

                        More output optionsEstimated returns

                        AAPL at $135.91 on 22nd Jan 2021


                        Entry cost: $6400 (net debit) see details

                        Maximum risk: $6400 at a price of $130 at expiry

                        Maximum return: $5600 at a price of $136 at expiry

                        Breakevens at expiry: $133.20

                        Comment


                        • #57
                          You can also look up credit spreads. Where max profit is the premium and max loss is the delta-premium. All different but kinda similar at the same time

                          I do like discussing TSLA the company but refraining as I’m trying to keep this thread for the discussion of options and using TSLA as an example. There’s a different thread for discussion about TSLA the investment/company.

                          Comment


                          • #58
                            here's my second trade for the day:
                            if these two trades go belly up, that may be a good thing as i'll retire my amateur options trading at that point.

                            Underlying stock symbol

                            Symbol: Get price ?
                            Current price:$ Long Call

                            Buy or write: Buy Write
                            Option:5th Feb $750.00 Call Select option
                            Price per option:$
                            Contracts:# x 100 ?
                            Total cost:$
                            Short Call

                            Buy or write: Buy Write
                            Option:5th Feb $800.00 Call Select option
                            Price per option:$
                            Contracts:# x 100 ?
                            Total cost:$
                            Spread

                            Spread price:$-34.95 (net debit)?
                            Graph range:$ - $?
                            Add calculation in new tab

                            Estimated returns

                            TSLA at $847.87 on 22nd Jan 2021


                            Entry cost: $3495 (net debit) see details

                            Maximum risk: $3495 at a price of $750 at expiry

                            Maximum return: $1505 at a price of $800 at expiry

                            Breakevens at expiry: $784.96

                            Comment


                            • #59
                              Originally posted by Jack_Sparrow View Post
                              buying 2/12 50c on GME.
                              Im happy 4 u.

                              Comment


                              • #60
                                Originally posted by Jack_Sparrow View Post

                                Excellent, Its a good start. But the short squeeze is going to happen next Friday so you sold too early. I'm going to sell half when the shares hit $100 and then see how close it gets to $200.
                                What other option plays are you looking at, I’m looking for some good candidates for call debit spreads. I’m thinking amzn if it goes lower.

                                Comment

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