Fills

[LoriPrecisely]

If the option is exercised, it is always at the strike price. However if the option is just slightly is at the money the option buyer might not exercise the right to take or put the shares to your account. If have seen this also happen sometimes when the option is only very slightly in the money like say 5 to 15 cents.

If you sold puts and the shares were not put into your account. Remember if you can buy them at a discounted price after factoring in the premium. So say you SOLD INTC Jan 27, 2024, put for 3.00 ( I just made up the premium number), and the shares are not put to your account. Well, any price at 24.00 or better would be a good deal when the premium is factored in. SO it could be trading at 29.00, and you would still get a better price. I am assuming here that you kept the full premium, and the puts were no longer in your account for simplicity's sake, but it is easy to adjust all these factors.

If you sell the 12 month PUTs, and the market falls before that, will you buy back the put and buy the shares immediately? I know you also talk about buying calls with the proceeds. If the stock crashes let's say just after 2 months, would we buy the put back and buy calls or stock immediately ? Obviously we will be giving up some of the gains on the originally sold put.

Put premiums increase in Down markets, and Call premiums increase in Up markets.

[LoriPrecisely]

Even though the put expires in 12 months, it most likely will be exercised when the put falls to the strike price any time before the expiration date. When that happens, you automatically will purchase 100 shares. That’s my understanding.

I’m trying to find a good book on options to better understand strategies.

In the U.S. market, it is rare for you to be assigned shares before expiration.
You could be assigned within the final month of expiration if your strike is deep in the money.

[LoriPrecisely]

I’m trying to find a good book on options to better understand strategies.

For the simple but effective option strategies discussed on these boards (e.g. SCC/SCP/SpinningTheWheel, LEAPS, etc.), this dude's videos are pretty good:

https://www.youtube.com/c/BradFinn/videos

He explains things pretty well without getting bogged down in too many academic details. He's also frank and his enthusiasm is quite infectious. Dude is just as happy to tell you about the $51 he made in a trade, and doesn't hesitate to mention his own mistakes.

I have also learned a lot from this guy: https://www.youtube.com/c/MyLifeofLearning
And, this guy: https://www.youtube.com/c/DrawbridgeFinance

OptionsTradingIQ.com and Options Alpha are also good places to learn.

[Yodean]

If you sell the 12 month PUTs, and the market falls before that, will you buy back the put and buy the shares immediately? I know you also talk about buying calls with the proceeds. If the stock crashes let's say just after 2 months, would we buy the put back and buy calls or stock immediately ? Obviously we will be giving up some of the gains on the originally sold put.

That's the downside with SCP. There is no free lunch.

On balance I think SCP'ing is generally a good strategy, but there are certain weaknesses, such as the scenario you mentioned above.

So you kind of need to know what you are doing. For example, if you were SCP'ing a bunch of highly volatile stocks in early February 2020, you likely would have been royally screwed, at least for a while (depending on your strike prices).

Another somewhat "safer" option is buy shares of stocks on significant dips - say, TSLA today - and as soon as TSLA starts going up, SCC your shares at strike above your cost basis. This is somewhat "safer" than Spinning The Wheel on both sides.

https://youtu.be/l22rxW0lljo

[LoriPrecisely]

If you sell the 12 month PUTs, and the market falls before that, will you buy back the put and buy the shares immediately? I know you also talk about buying calls with the proceeds. If the stock crashes let's say just after 2 months, would we buy the put back and buy calls or stock immediately ? Obviously we will be giving up some of the gains on the originally sold put.

That's the downside with SCP. There is no free lunch.

On balance I think SCP'ing is generally a good strategy, but there are certain weaknesses, such as the scenario you mentioned above.

So you kind of need to know what you are doing. For example, if you were SCP'ing a bunch of highly volatile stocks in early February 2020, you likely would have been royally screwed, at least for a while (depending on your strike prices).

Another somewhat "safer" option is buy shares of stocks on significant dips - say, TSLA today - and as soon as TSLA starts going up, SCC your shares at strike above your cost basis. This is somewhat "safer" than Spinning The Wheel on both sides.

That is funny you say that because I have done well on SCP, but not so much on SCC.
I just cannot seem to get it right.

For example, I want to sell covered calls on ASAN because it is climbing today. My cost basis is 25.36. So, I chose a $30 strike for Jan 2024, but I realize my stocks are locked into this play until that time, or until I buy to close, which is fine if the stock drops in value, then I will buy to close before expiry. But, if it were to continue rising, I either pay more to close than I received, or just sit on it. So, my guess/determination is based on how likely is the price to drop lower than today's price before expiration. Right?

So, I raise my strike to $55, thinking it will be less likely to reach that number, using the .30 delta you mentioned. Same expiry Jan 2024, but less premium received.

I had covered calls on almost all of my stocks, but bought to close all of them at a significant loss, because I thought we were heading into a rally and wanted to sell my shares before the next downward leg, so now I keep second-guessing myself.

I am reading the relevant chapter in "Option Think" right now.

[SOL]

I had covered calls on almost all of my stocks, but bought to close all of them at a significant loss, because I thought we were heading into a rally and wanted to sell my shares before the next downward leg, so now I keep second-guessing myself.

I am reading the relevant chapter in "Option Think" right now.

If you sold covered calls then you want the market to drop so you can buy them back on the cheap. Are you sure you had covered calls, for if you did, the drop in the market provided you with the chance to buy them back on the cheap? With cash secured puts you want the market to rise after you sell them so you can buy them back on the cheap.

[Yodean]

I just cannot seem to get it right.

I think you are being too hard on yourself. From what I have seen you have learned a lot in a very short period of time.

You're going against the best of the best in these markets - the PTBs, the Fed, Rothschilds, etc.

You're not going to win consistently right away.

It's like expecting after teaching a nine-year-old child how to dribble a basketball, to expect her to be able to beat a healthy Lebron one-on-one on the basketball court.

Survival/capital preservation/risk management is the most important thing to learn. In poker terms, it's known as bankroll management.

After that, accumulate skills and experience, which you are rapidly doing. During this time, you will have some wins and many losses. If you don't, then you are just lucky .

As long as you are solvent and continue to improve as an investor-trader, you are "winning," no matter what is in your P/L column.

Every consistently successful investor I know personally - and there aren't many - have had to suffer tremendous, heartbreaking drawdowns on her journey to lasting wealth.

[LoriPrecisely]

I had covered calls on almost all of my stocks, but bought to close all of them at a significant loss, because I thought we were heading into a rally and wanted to sell my shares before the next downward leg, so now I keep second-guessing myself.

I am reading the relevant chapter in "Option Think" right now.

If you sold covered calls then you want the market to drop so you can buy them back on the cheap. Are you sure you had covered calls, for if you did, the drop in the market provided you with the chance to buy them back on the cheap? With cash secured puts you want the market to rise after you sell them so you can buy them back on the cheap.

Hi Sol, I hope you are doing good. I know the markets are crazy volatile right now.
Makes for very interesting times, and challenging for your analysis, I'm sure.

I sold Calls 5 times on ASAN in the month of June and did fine.

I got my timing wrong on these most recent calls.

For example:
I sold 2 - $20 Calls on ASAN on July 19 for 11/18/22 expiry for 3.00 each.
Market was $17.
I bought to close on Aug 15 for 10.00 ea. Market was $28.
I thought we were headed to the moon!!

[SOL]

I had covered calls on almost all of my stocks, but bought to close all of them at a significant loss, because I thought we were heading into a rally and wanted to sell my shares before the next downward leg, so now I keep second-guessing myself.

I am reading the relevant chapter in "Option Think" right now.

If you sold covered calls then you want the market to drop so you can buy them back on the cheap. Are you sure you had covered calls, for if you did, the drop in the market provided you with the chance to buy them back on the cheap? With cash secured puts you want the market to rise after you sell them so you can buy them back on the cheap.

Hi Sol, I hope you are doing good. I know the markets are crazy volatile right now.
Makes for very interesting times, and challenging for your analysis, I'm sure.

I sold Calls 5 times on ASAN in the month of June and did fine.

I got my timing wrong on these most recent calls.

For example:
I sold 2 - $20 Calls on ASAN on July 19 for 11/18/22 expiry for 3.00 each.
Market was $17.
I bought to close on Aug 15 for 10.00 ea. Market was $28.
I thought we were headed to the moon!!

The rally was supposed to be strong but not to the moon, as the second correction was expected. If I said to the moon, then I need to apologise in advance for saying that. To the moon stage will start after the market puts in a long-term bottom, which for now is expected to occur sometime next year.

The rally was cut short due to the Fed's incredibly strong attack dog stance. However, I view it as a negative on our end that the rally did not last long. It started off nicely but was cut short twice. If today's employment numbers are not strong, then we can expect the rally to continue and potentially challenge the new targets. The short-term action has been beyond insane.

If you have time read up on credit spreads. I was deeply in the Red when I sold covered calls on PDD, but I kept rolling them. I only sold calls within three months of time, so when it exploded from 45 to 55 and beyond it, it looked bad, as I sold calls with strike prices at 45 and 50. So what I did buy was enter a net credit order. I bought back the 45 calls and sold 55 calls with more time premium, bought back the 50 calls and sold 60 calls with more time premium. In each case, I walked away with a tiny net credit. Then when the stock topped in July, i watched the daily charts and bought the calls back when the stock dipped below 50. So the strategy of rolling away bought me more time, and with some luck, I walked away with a decent profit. However, sometimes I just let the shares get called away. It happened to me on WOLF; overall, I had made a decent profit and then, by luck, WOLF shares dropped again but the bad luck was I did not move in time to buy them back at the low prices.

[bpcw]

The rally was supposed to be strong but not to the moon, as the second correction was expected. If I said to the moon, then I need to apologise in advance for saying that. To the moon stage will start after the market puts in a long-term bottom, which for now is expected to occur sometime next year.

Almost certain that wasn't your quote, doesn't even sound like you!

Pretty sure that's our friend Yodean!

[LoriPrecisely]

The rally was supposed to be strong but not to the moon, as the second correction was expected. If I said to the moon, then I need to apologise in advance for saying that. To the moon stage will start after the market puts in a long-term bottom, which for now is expected to occur sometime next year.

Almost certain that wasn't your quote, doesn't even sound like you!

Pretty sure that's our friend Yodean!

Yes, it is.
We all seem to adopt his slogans, such as 'to the moon', and 'PTB'.

[LoriPrecisely]

The rally was supposed to be strong but not to the moon, as the second correction was expected. If I said to the moon, then I need to apologise in advance for saying that. To the moon stage will start after the market puts in a long-term bottom, which for now is expected to occur sometime next year.

The rally was cut short due to the Fed's incredibly strong attack dog stance. However, I view it as a negative on our end that the rally did not last long. It started off nicely but was cut short twice. If today's employment numbers are not strong, then we can expect the rally to continue and potentially challenge the new targets. The short-term action has been beyond insane.

If you have time read up on credit spreads. I was deeply in the Red when I sold covered calls on PDD, but I kept rolling them. I only sold calls within three months of time, so when it exploded from 45 to 55 and beyond it, it looked bad, as I sold calls with strike prices at 45 and 50. So what I did buy was enter a net credit order. I bought back the 45 calls and sold 55 calls with more time premium, bought back the 50 calls and sold 60 calls with more time premium. In each case, I walked away with a tiny net credit. Then when the stock topped in July, i watched the daily charts and bought the calls back when the stock dipped below 50. So the strategy of rolling away bought me more time, and with some luck, I walked away with a decent profit. However, sometimes I just let the shares get called away. It happened to me on WOLF; overall, I had made a decent profit and then, by luck, WOLF shares dropped again but the bad luck was I did not move in time to buy them back at the low prices.

"To the moon" I picked up from Yodean because he keeps saying it to be funny.
The phrase I read in the update was "fast and furious rally".

Thank you for sharing your experience. I am understanding that the market is volatile and we have to learn how to take advantage of it. I also very much appreciate your honesty and transparency.

Sometimes I roll out to a later date also,
but in this case I was thinking I wanted to sell my shares to get more into cash,
so I didn't want to be locked in a Call.

I have been working on deciding which shares I will potentially hold through the downturn, and I will sell Jan 2024 covered calls on them.
That way I don't have to worry about the short term action,
and the premiums are much higher.

AMZN Jan 2024 $150 Call was paying a nice 13.60 premium last night, but today it is down to 11.00. Or, I could do a $122.50 Call for $20 premium. AMZN's market low was $102 in June.

Why is there so much after/before market activity?
Is that coming from other countries?

[SOL]

Thank you for sharing your experience.

Let's call it PAINPERIENCE as none of it came pain free. There are no free meals and any good trader that said he became good without getting his gut punched several times or getting his teeth knocked out, is plain lying.

As for this statement that sounds more like my style

The phrase I read in the update was "fast and furious rally"

.

It was supposed to be that fast and furious put in a lower high and then drop hard. It started off nicely we got from Dow 30K to 34K in record time then the wind was knocked out. Whatever the reasons, I take responsibility for not getting the call right. Hence in the future, we will be very clear to separate the short-term and long-term calls and clearly state that the short-term is riskier. This is the first time I think in almost 20 years that the tail move proved to be weak. The first part of the bull move is strong and the end move is very strong. As Eric stated somewhere else there is always a first time. I also did not get a chance to bail out. I would be close to 50% under, what reduced my loss was selling a lot of cash-secured puts and then buying them at a lower price and doing some covered calls with the same strategy. However, I am not going to sell anything unless I get a better price than I paid. Most of the companies are good and history indicates that they will be trading several levels higher than they are today.

Think back to 2008-2009 and then pull up charts and see how much they rallied. Hell, today I would give my arm to buy right at the top of 2008, but only in dreams can we do that, for there is no turning back the hands of time.

[LoriPrecisely]

Whatever the reasons, I take responsibility for not getting the call right. Hence in the future, we will be very clear to separate the short-term and long-term calls and clearly state that the short-term is riskier.

You did tell us that the short-term was more difficult to call precisely.

I also did not get a chance to bail out. I would be close to 50% under, what reduced my loss was selling a lot of cash-secured puts and then buying them at a lower price and doing some covered calls with the same strategy.

Thank you for sharing you personal painperience. I really appreciate it a lot.

However, I am not going to sell anything unless I get a better price than I paid. Most of the companies are good and history indicates that they will be trading several levels higher than they are today.

Yes, I agree. We will all make money together.

[Yodean]

Stocks to the moon, or at least the space station.

I think I kind of mean it this time.