Call above strike price

[Triplethought]

Is there anything special about a call that goes above the strike price? I ask because our EVH Call 1/21/22 @ $15 . The current underlying stock is $15.20 so it's hit the strike. Obviously the Call has done well (about 79%). But I started wondering if there is a reason to sell it or if can still run up.

[AstuteShift]

I think the aim is to sell at 100-150 percent

You can buy above the strike price (up to 30 percent) since they’re cheaper but be careful on risking too much and follow strict portfolio management

[Triplethought]

I think the aim is to sell at 100-150 percent

You can buy above the strike price (up to 30 percent) since they’re cheaper but be careful on risking too much and follow strict portfolio management

Thanks Astute. it seemed counter intuitive. Why would anyone continue to bet a stock would hit a strike price if it has already been hit. It seemed like betting on a football game after the score is in. I clearly need to study more.

[AstuteShift]

I think the aim is to sell at 100-150 percent

You can buy above the strike price (up to 30 percent) since they’re cheaper but be careful on risking too much and follow strict portfolio management

Thanks Astute. it seemed counter intuitive. Why would anyone continue to bet a stock would hit a strike price if it has already been hit. It seemed like betting on a football game after the score is in. I clearly need to study more.

If you think it can go higher then the option will go up in value even more due to the rise of delta and gamma which is acceleration. Remember options are derived from the stock price

[Eric]

I figure JP Morgan or BlackRock will buy my options if they can exercise them and make 0.5% in a day. I don't really concern myself with why someone would buy or sell my option, just that they would...similarly, I'm not all that concerned about whether I make 87% or 87.5% in just a few or several weeks.

I have a coworker that was DEATHLY afraid of options but I kept giving him little nuggets of knowledge (not that I'm an expert because I'm not)... Eventually he bought into the idea that he could sell physical shares of his favorite stock and in their place buy deep-in-the-money long-term long-calls that would offer substantial downside protection while at the same time giving him significant leverage (over 300%). Yesterday he told me that in the last ten weeks his recently levered (through options) position on his favorite stock has (unrealized) returns of almost a year's salary (it helps that his favorite stock is up over 100% in that time).

[AstuteShift]

Leverage is a powerful tool

Just don’t get addicted. It can easily go the opposite way and you lose everything

[MarkD]

I would be interested in the parameters being utilized to buy deep ITM calls on a given security.

[AstuteShift]

I would be interested in the parameters being utilized to buy deep ITM calls on a given security.

ITM deep calls have high delta but don’t move as much as the OTM calls, due to the Greeks of gamma and Vega

ITM is more defensive and more expensive but you still can generate decent profit

OTM is more offensive and cheaper but higher risk to lose money since you need the stock to move to the upside even more

ITM let’s you relax a little more essentially. You can learn about the Greeks of options but tbh it’s not necessary

[MarkD]

I understand ITM vs OTM. What parameters are being used to identify entry points, e.g., percent below current price, technical pattern (below lower BB), how far out into the future (two years or more).

Any primer on identifying the how is appreciated as I recognize for a small premium one can purchase more than buying just the stock/ETF directly (25-50%).

Thanks!

[AstuteShift]

I understand ITM vs OTM. What parameters are being used to identify entry points, e.g., percent below current price, technical pattern (below lower BB), how far out into the future (two years or more).

Any primer on identifying the how is appreciated as I recognize for a small premium one can purchase more than buying just the stock/ETF directly (25-50%).

Thanks!

I’d say it depends on the option premium price and your portfolio of how much risk you are willing to do on a particular play

For example, every play I only risk about 500 dollars per lot and that also goes with option prices. If the option price premium is at 2000 then either I don’t do options or I create a debit spread to lower the risk to 500 dollars.

Sometimes it’s illogical to do this if the option has extremely low volume or the the spread between the bid or ask is too great.

Normally I aim for OTM 20-30 percent strike.
I wait usually when SOLs prices hit the 1st, 2nd and 3rd lots then purchase the options

As a former option junkie, I never used TA since there are so many advanced strategies you can do where you don’t care about direction but rather how big the move or how little the move is.
That style is trading like a market maker

They’re really for the advanced trader. Advanced option strategies with SOLs MP is like a nuclear explosion in profits

[MarkD]

Thanks for the response. I am not new to options but only used put/call and strangle. Will continue to learn. This looks like a good method when there's a third buy point using LT LEAPS as suggested.

Will continue to investigate.

[AstuteShift]

Thanks for the response. I am not new to options but only used put/call and strangle. Will continue to learn. This looks like a good method when there's a third buy point using LT LEAPS as suggested.

Will continue to investigate.

The biggest issue with buying options is usually the time factor

So never go to options less than 9 months imho unless SOL suggests but usually he does not, LEAPS minimalize the theta decay while short term options the theta decay is huge

[mani]

Guys,
I just joined this service and reading thru the posts- So happy after years got into a service which is trustworthy and informative.
You woudn't believe having a CA,CPA and FRM I have never traded in options as felt it was very risky and there was no practical guidance.
I am wondering where can I go thru some material on options and learn about it and tehn make some sense in the way the tactical investor approaches their calls?

Cheers

[AstuteShift]

Guys,
I just joined this service and reading thru the posts- So happy after years got into a service which is trustworthy and informative.
You woudn't believe having a CA,CPA and FRM I have never traded in options as felt it was very risky and there was no practical guidance.
I am wondering where can I go thru some material on options and learn about it and tehn make some sense in the way the tactical investor approaches their calls?

Cheers

The best way honestly to know options is really to trade them but for beginner information and advanced strategies I find tastytrade.com pretty good with how options work

Just ignore the broker bias and how option selling is the best etc.

[mani]

Thank you very much