AMD

[Eric]

With the sentiment development the last few days I decided to lever up on AMD today (and possibly other stocks tomorrow). I sold my shares of AMD and in their place I bought April 2023 $140 calls. I got 2/3rds of my (AMD-deployed) capital back to do some other things and have synthetic control of about 5x as many shares.

The official alternate play was to get into January 2023 $145-$150 calls when AMD traded below$111, I went a little more conservative in all aspects with a lower strike, further out, with AMD trading right around $96.

I'm probably going to do the same with other holdings of mine that are essentially at 52-week lows and have good options volume.

[SOL]

With the sentiment development the last few days I decided to lever up on AMD today (and possibly other stocks tomorrow). I sold my shares of AMD and in their place I bought April 2023 $140 calls. I got 2/3rds of my (AMD-deployed) capital back to do some other things and have synthetic control of about 5x as many shares.

The official alternate play was to get into January 2023 $145-$150 calls when AMD traded below$111, I went a little more conservative in all aspects with a lower strike, further out, with AMD trading right around $96.

I'm probably going to do the same with other holdings of mine that are essentially at 52-week lows and have good options volume.

Just don't over-leverage yourself. One can use the formula below as a rough guideline


Low-risk investors; only purchase calls that would roughly match the number of shares you have. For example, 70 to 100 shares would equal 1 call

Medium Risk investors: can go for a 2 to 1 ratio. Purchase twice the number of calls in comparison to the shares you owned.

High-risk investors. Can deploy 40 to 50% of the capital they had in stock into long term options

Ultra-Low risk option

You have enough funds to purchase 200 shares or you had 200 shares and you sell them for a small profit because you want to leverage your position. This strategy is best used on stocks that are trading in the oversold ranges on at least the weekly charts but ideally the monthly charts. The money you received from the sale of the puts can be used to purchase several out of the money calls. For example, AMD is trading at almost 97. You sell the April 2023 80 put and you get say roughly 920 per contract ( or 9.2 shares). Then you can purchase the April 2023 145 or 150 calls for between 5.00 to 5.70 (the higher price is for the 145 calls) If you go for the 150 calls you can roughly get 2 calls for every put you sold. If the stock closes below 80, the shares could be put to your account, but you would get in almost at a $17 discount. At the same time, you have the option to lock in unlimited gains via the purchase of the calls, which are essentially free as you don't mind owning the stock. Now you have a limit order with the potential to get paid very well.


The more calls you buy, the higher the risk, except for the ultra-low risk strategy, and it only falls in the Ultra-low risk category because you would not mind owning the shares. If you employ this strategy on stocks you don't want to own that the risk has to be elevated to the ultra-high risk category

[Eric]

Just don't over-leverage yourself. One can use the formula below as a rough guideline
...
High-risk investors. Can deploy 40 to 50% of the capital they had in stock into long term options

Since I only converted 33% of my existing shares into options with a lower strike, a longer expiration, and at a much lower underlying price than the official alternate play I think I'm ok.

[blogbuilder]

Low-risk investors; only purchase calls that would roughly match the number of shares you have. For example, 70 to 100 shares would equal 1 call

Medium Risk investors: can go for a 2 to 1 ratio. Purchase twice the number of calls in comparison to the shares you owned.

Would you recommend calls a year out or 6 months?

How do you determine what price to call?

Sorry for the basic questions...I'm still learning about calls.

Thanks.

[SOL]

Low-risk investors; only purchase calls that would roughly match the number of shares you have. For example, 70 to 100 shares would equal 1 call

Medium Risk investors: can go for a 2 to 1 ratio. Purchase twice the number of calls in comparison to the shares you owned.

Would you recommend calls a year out or 6 months?

How do you determine what price to call?

Sorry for the basic questions...I'm still learning about calls.


Thanks.

For such a strategy nothing short of 1 year in time premium. In terms of determining targets, you should have some basic TA knowledge that can help you come up with a target. If you are new to options best to paper trade before you jump in, there are things you just can't learn by reading books

[jlhooter]

With the sentiment development the last few days I decided to lever up on AMD today (and possibly other stocks tomorrow). I sold my shares of AMD and in their place I bought April 2023 $140 calls. I got 2/3rds of my (AMD-deployed) capital back to do some other things and have synthetic control of about 5x as many shares.

The official alternate play was to get into January 2023 $145-$150 calls when AMD traded below$111, I went a little more conservative in all aspects with a lower strike, further out, with AMD trading right around $96.

I'm probably going to do the same with other holdings of mine that are essentially at 52-week lows and have good options volume.

Just don't over-leverage yourself. One can use the formula below as a rough guideline


Low-risk investors; only purchase calls that would roughly match the number of shares you have. For example, 70 to 100 shares would equal 1 call

Medium Risk investors: can go for a 2 to 1 ratio. Purchase twice the number of calls in comparison to the shares you owned.

High-risk investors. Can deploy 40 to 50% of the capital they had in stock into long term options

Ultra-Low risk option

You have enough funds to purchase 200 shares or you had 200 shares and you sell them for a small profit because you want to leverage your position. This strategy is best used on stocks that are trading in the oversold ranges on at least the weekly charts but ideally the monthly charts. The money you received from the sale of the puts can be used to purchase several out of the money calls. For example, AMD is trading at almost 97. You sell the April 2023 80 put and you get say roughly 920 per contract ( or 9.2 shares). Then you can purchase the April 2023 145 or 150 calls for between 5.00 to 5.70 (the higher price is for the 145 calls) If you go for the 150 calls you can roughly get 2 calls for every put you sold. If the stock closes below 80, the shares could be put to your account, but you would get in almost at a $17 discount. At the same time, you have the option to lock in unlimited gains via the purchase of the calls, which are essentially free as you don't mind owning the stock. Now you have a limit order with the potential to get paid very well.


The more calls you buy, the higher the risk, except for the ultra-low risk strategy, and it only falls in the Ultra-low risk category because you would not mind owning the shares. If you employ this strategy on stocks you don't want to own that the risk has to be elevated to the ultra-high risk category

Sol, extracting your basic "common sense" rules
1. Do this with stocks you don't mind owning
2. Perform when stock is over sold in weekly, but preferably monthly
3. Over the long term, you expect the stock to go up (but may not be necessary depending how you play)

The are 5 ways this could go (using your example above ($80 put; $145 call, and assuming before Apr 2023 the price hits say $160)
1. Shares are Put to you and You Call shares away. This seems to be the biggest gain if you hold the put shares through the time you Call; per share analysis: $80 gain for put + $15 gain for call + $3.50 gain for credit spread = $98.5/share (assuming 1 option of each) = $9,850
2. Neither Put or Call activates: smallest gain: $3.50/share = $350
3. You call shares at $160 (put never occurs): $15 gain for call + $3.50 gain for credit spread = $1,850 total gain
4. Put only occurs and price never hits $160, but still assume gain at some point if stock increases: Varies depending on price and how long you want to hold shares before selling. Assume this happens, would it make sense to sell Calls on the Puts you own driving down cost basis? Is it best to approach selling calls when the stock is over bought?
5. Put only occurs and price continues down: goes back to rule 1 if you are ok with the risk

If I have this right and you don't do a Debit spread (assume 9.20 for put received - 2 * 5.70 for calls = -2.20 or -$220 lost and both option types expire), then it is always a "win", UNLESS you violate rule 1.

[SOL]

Sol, extracting your basic "common sense" rules
1. Do this with stocks you don't mind owning
2. Perform when stock is over sold in weekly, but preferably monthly
3. Over the long term, you expect the stock to go up (but may not be necessary depending how you play)

The are 5 ways this could go (using your example above ($80 put; $145 call, and assuming before Apr 2023 the price hits say $160)
1. Shares are Put to you and You Call shares away. This seems to be the biggest gain if you hold the put shares through the time you Call; per share analysis: $80 gain for put + $15 gain for call + $3.50 gain for credit spread = $98.5/share (assuming 1 option of each) = $9,850
2. Neither Put or Call activates: smallest gain: $3.50/share = $350
3. You call shares at $160 (put never occurs): $15 gain for call + $3.50 gain for credit spread = $1,850 total gain
4. Put only occurs and price never hits $160, but still assume gain at some point if stock increases: Varies depending on price and how long you want to hold shares before selling. Assume this happens, would it make sense to sell Calls on the Puts you own driving down cost basis? Is it best to approach selling calls when the stock is over bought?
5. Put only occurs and price continues down: goes back to rule 1 if you are ok with the risk

If I have this right and you don't do a Debit spread (assume 9.20 for put received - 2 * 5.70 for calls = -2.20 or -$220 lost and both option types expire), then it is always a "win", UNLESS you violate rule 1.

There is a flaw in your reasoning. . However, it is only a win-win if you don't mind owning the shares. But here is a hint, if the stock drops to 60. The shares are put to your account at 80. So you lose 20 per share on paper and you lose the put premium to the calls you purchased which would expire worthlessly. On the profit side if you sold the put you would get 920 per contract. You would then use that to buy calls, say up to two calls. If in between now and April 2023, the shares drop below 80, you could get in at 80. Then AMD stocks trades to say 150. You make 7K in profit, the calls would soar at least 400 to 500 per cent, so your calls would worth roughly 2500. So total gain would be 9500 if everything worked out. This is the highest profit potential scenario
Now the shares are not put to your account but the option rises to 2500 or more and your put expires worthless. So profit is roughly 2500 minus the cost of the premium you paid per call. Actually, it's all pure profit as you did not pay for the call with your own money. You sold puts to fund your call.


Options master Astute can chime in or other options experts

[AstuteShift]

I’m no master lol but options require really to evaluate deeply your risk tolerance

Don’t pretend to be someone or copy anyone, options is for the best of the best, adapt or die concept at a extreme level

Personally i like to sell put spreads in European indexes like the SPX. I have a strategy in case the markets don’t go as expected in the short term but since the trend is bullish then its easier to take care of the small details

Imho, less is always more, remember the law of paradox and balance. Go for the jugular when lady opportunity comes and chill when stripper high risk comes at the club

[jlhooter]

I’m no master lol but options require really to evaluate deeply your risk tolerance

Don’t pretend to be someone or copy anyone, options is for the best of the best, adapt or die concept at a extreme level

Personally i like to sell put spreads in European indexes like the SPX. I have a strategy in case the markets don’t go as expected in the short term but since the trend is bullish then its easier to take care of the small details

Imho, less is always more, remember the law of paradox and balance. Go for the jugular when lady opportunity comes and chill when stripper high risk comes at the club

Yes, I see where my analysis was flawed. I didn't think it all the way through and realized the major gap in the other possibilities.

I am going into options with my eyes wide open and since the beginning of March, I have learned a ton and only have a little amount of funds to do real trading. I realize you only learn by doing, so I look at any losses in this time of the game as a price for tuition. I also realize that there are a lot of 'gimmicks' around options and using my observer mind to doubt everything, but also watch, learn, repeat, then try myself. I don't dream of hitting it big, which is for losers who have no plan (not to confuse with having a plan to do extremely well after putting in the effort).

I believe my risk level has either changed (I am more risky than when I started TI) or I am actually learning what my risk level is. I think it is a bit of both. As I study and document everything I do, I learn what my risk is, but I also incrementally push my 'risk line' over time. For example, I was afraid to make my first trade; just buying my first stock. It was terrifying. I look back and laugh, not because I think I am good at it, but I realized my fear hindered my ability to take a chance. I had the same fear of options 6 months ago and now am slowly getting into it.

I disagree a bit about copying, because I believe there are extremely few instances of original ideas. Many ideas and inventions tend to 'copy' other ideas, tweak them and create a new, but if you look hard at many 'new' ideas, they are just copies of something else; again, there are absolutely fresh, new ideas out there, they are hard to find.
Argue the above point all you want, but I copy all the time, and I feel I have learned with MANY of them to improve upon them in great ways. I have many examples in my job that has allowed me to continue to be a Linchpin (by Seth Godin) by taking 'garbage' ideas and tools and improved them to greatly improve efficiency at what I and others do. My point is, I will absolutely copy what Sol defined above and make it my own someday since I fully understand what most of Sol is saying, but I won't blindly copy some other idea without fully vetting it myself.

[SOL]

I’m no master lol but options require really to evaluate deeply your risk tolerance

Don’t pretend to be someone or copy anyone, options is for the best of the best, adapt or die concept at a extreme level

Personally i like to sell put spreads in European indexes like the SPX. I have a strategy in case the markets don’t go as expected in the short term but since the trend is bullish then its easier to take care of the small details

Imho, less is always more, remember the law of paradox and balance. Go for the jugular when lady opportunity comes and chill when stripper high risk comes at the club

Yes, I see where my analysis was flawed. I didn't think it all the way through and realized the major gap in the other possibilities.

I am going into options with my eyes wide open and since the beginning of March, I have learned a ton and only have a little amount of funds to do real trading. I realize you only learn by doing, so I look at any losses in this time of the game as a price for tuition. I also realize that there are a lot of 'gimmicks' around options and using my observer mind to doubt everything, but also watch, learn, repeat, then try myself. I don't dream of hitting it big, which is for losers who have no plan (not to confuse with having a plan to do extremely well after putting in the effort).

I believe my risk level has either changed (I am more risky than when I started TI) or I am actually learning what my risk level is. I think it is a bit of both. As I study and document everything I do, I learn what my risk is, but I also incrementally push my 'risk line' over time. For example, I was afraid to make my first trade; just buying my first stock. It was terrifying. I look back and laugh, not because I think I am good at it, but I realized my fear hindered my ability to take a chance. I had the same fear of options 6 months ago and now am slowly getting into it.

I disagree a bit about copying, because I believe there are extremely few instances of original ideas. Many ideas and inventions tend to 'copy' other ideas, tweak them and create a new, but if you look hard at many 'new' ideas, they are just copies of something else; again, there are absolutely fresh, new ideas out there, they are hard to find.
Argue the above point all you want, but I copy all the time, and I feel I have learned with MANY of them to improve upon them in great ways. I have many examples in my job that has allowed me to continue to be a Linchpin (by Seth Godin) by taking 'garbage' ideas and tools and improved them to greatly improve efficiency at what I and others do. My point is, I will absolutely copy what Sol defined above and make it my own someday since I fully understand what most of Sol is saying, but I won't blindly copy some other idea without fully vetting it myself.

You are right it is better to perfect the wheel than invent a new one. I also made a mistake. If the shares are put to you at 80, and the stock drops to 60. You don't lose 20 but 20 minus 9.20 which is 10.80 and with a stock like AMD unless the outlook changes dramatically it would be an excellent long term entry point. Your final price per share would 71.80 as opposed to 80. Hence if you don't mind owning the shares the above strategy is quite hard to beat. Options like all dangerous tools can be used with great efficiency if you know what you are doing and the outcome can be positive if one does not speculate, but uses options as a means to own a great asset with the option of booking serious gains.

[jlhooter]

Exactly is what I am doing with selling puts are for options I want to own.

Stupid question (I know there are no stupid questions but this one has to be close to one): I buy to open a call and later I want to sell to close it for some reason did I understand you that in one case the price to sell to close is above what I bought it? I understand that time decay has a neg effect but if the underlying's price increases so to does the call premium?

[SOL]

Exactly is what I am doing with selling puts are for options I want to own.

Stupid question (I know there are no stupid questions but this one has to be close to one): I buy to open a call and later I want to sell to close it for some reason did I understand you that in one case the price to sell to close is above what I bought it? I understand that time decay has a neg effect but if the underlying's price increases so to does the call premium?

If you are dealing with long term options then there 99% of the time the premium will rise if the price of the stock rises. So if you sold covered calls you could buy them back and sell calls that are further out of the money however, if you are not worried about short term capital gains. Then sell a put that's not too far out of the money and let your shares get called away. You will still walk away with a profit, its like getting paid to put a limit sell order in. If the shares are taken, then purchase new shares or sell puts and start the whole process again.

[AstuteShift]

I disagree a bit about copying, because I believe there are extremely few instances of original ideas. Many ideas and inventions tend to 'copy' other ideas, tweak them and create a new, but if you look hard at many 'new' ideas, they are just copies of something else; again, there are absolutely fresh, new ideas out there, they are hard to find.
Argue the above point all you want, but I copy all the time, and I feel I have learned with MANY of them to improve upon them in great ways. I have many examples in my job that has allowed me to continue to be a Linchpin (by Seth Godin) by taking 'garbage' ideas and tools and improved them to greatly improve efficiency at what I and others do. My point is, I will absolutely copy what Sol defined above and make it my own someday since I fully understand what most of Sol is saying, but I won't blindly copy some other idea without fully vetting it myself.

I’m more in the camp if it works for you then who am I to judge? Lol

Personally, I enjoy the psychological components that SOL talks about and love to incorporate ideas to improve my life.

MP is more than just trading for me, it’s a way of life lolol

Best way to get better with options trading is to trade. Analyze and what are the results.

[Centeron631]

So where does one find all this optimism for AMD. I looked at a chart going back to 1973 on tradingview and prior to Oct 2019 when it hit $40 again on way to a huge parabolic upper, the most it had been up to was was around $40 on two occasions which at those two times was a healthy climb up. thks

[AstuteShift]

So where does one find all this optimism for AMD. I looked at a chart going back to 1973 on tradingview and prior to Oct 2019 when it hit $40 again on way to a huge parabolic upper, the most it had been up to was was around $40 on two occasions which at those two times was a healthy climb up. thks

It’s a volatile stock but good semi conducting company. Intel in the past tried to heavily screw them as much as possible but now AMD is runned by a great CEO Lisa Sue.

Intel will eventually get their act together, the sleepy giant got too fat and lazy