Random Option plays on Market Update stock plays

[Yodean]

My goal here is to teach simple but advanced options strategies to several subscribers with the hope that they start to contribute and help other newbies.

There's been more than enough posts by various subs, etc., videos, and so forth, for those who wish to learn these option strategies, I would think, to get started. You can't really spoon-feed this stuff, imo - dangerous wrt to option trading, in particular.

You can show the way to a few doors, but ultimately the OptionsNoob still has to walk through those doors of her own volition, and Dance With Spears (large lots), or at least Play With Toothpicks (tiny lots).

Otherwise, it's arguably just another mild version of Plato's Allegory of the Cave.

[Yodean]

You could also weave and bob. When the call rises in value sell it; when the put drops in value, buy it back and then rinse and repeat

@BossJedi: been meaning to ask ---> when do you like to take profits when you SCC and SCP, i.e. close or buy back those options? 50% to 70%+?

I know it depends on many different factors, including time to expiry, position size, what you think the stock will do, etc., but some general guidelines may be helpful.

[SOL]

You could also weave and bob. When the call rises in value sell it; when the put drops in value, buy it back and then rinse and repeat

@BossJedi: been meaning to ask ---> when do you like to take profits when you SCC and SCP, i.e. close or buy back those options? 50% to 70%+?

I know it depends on many different factors, including time to expiry, position size, what you think the stock will do, etc., but some general guidelines may be helpful.

I am not greedy depending on my mood i and those behind TI can profits after the position is showing gains north of 30%. Then we wait for the pullback if its selling covered calls to take profits or a spike up if we sold cash secured puts, after that its rinse and repeat. You develop a feel once you start playing with them. It can yield large gains over a 12 to 24 month period if you are not driven by greed. I look at the stock market as ATM, but you need to be a disciplined trader. Such things cannot be taught, however, they can be learned (not good English) but it's the best I can do, some things are hard to express in words

[Triplethought]

Bought CALL WAL-MART STORES INC $110 EXP 01/19/24 for $24

[Yodean]

I am not greedy depending on my mood i and those behind TI can profits after the position is showing gains north of 30%. Then we wait for the pullback if its selling covered calls to take profits or a spike up if we sold cash secured puts, after that its rinse and repeat. You develop a feel once you start playing with them. It can yield large gains over a 12 to 24 month period if you are not driven by greed. I look at the stock market as ATM but you need to be a disciplined trader. Such things cannot be taught, however they be learned (not good English) but its the best i can do, somethings are hard to express in words

Gracias. Learnt.

Yeh, as with most things, experience generally trumps theory, although a bit of theory can be helpful in the beginning.

Some of these option strategies feels almost like printing your own fiat currency - on a much lesser scale, of course. No wonder mainstream Wall Street doesn't seem to promote them much.

https://youtu.be/HraaYH-sJBI

[Centeron631]

For learning purposes only: Can someone explain why Triple's short term cyberoptics call with only 6mo's to run bought far out of the money and yet his wmt call with 18 mo's to run so far in the money? something im not getting. thks

[Eric]

For learning purposes only: Can someone explain why Triple's short term cyberoptics call with only 6mo's to run bought far out of the money and yet his wmt call with 18 mo's to run so far in the money? something im not getting. thks

Over simplified for learning purposes. This kind of follows an 80/20 rule... Should get you at least an 80% understanding of the situation with only 20% of the words.

CYBE was selling a put. TT sold someone an issuance policy on 100 shares... Basically TT told someone "I guarantee your shares won't be worth less than $35 on November 18th" and the insurance policy premium was $300 paid to TT.

WMT was buying an in the money call... Essentially he put the shares on layaway until January 2024 and paid a 20% down payment on them.

[SOL]

For learning purposes only: Can someone explain why Triple's short term cyberoptics call with only 6mo's to run bought far out of the money and yet his wmt call with 18 mo's to run so far in the money? something im not getting. thks

The best way to learn, and I am not trying to be mean, is to Google everything you don't understand. In other words, make an attempt to try to find a solution to a problem you identified. When you try, you activate different brain cells, so now you are in a more receptive mode to digest and process information. When you sit back, and the information is handed to you, you are in a passive mode, and most of the information could fly over you.

Taking over from where Eric left. TT sold a put and used part of the proceeds to buy a far out of the money call. The far out of the money call is gambling with house money. With WMT, he likes the company but would rather not dish out so much cash, so he bought deep in the money calls with a lot of time premium on them.

[LoriPrecisely]

CYBE was selling a put. TT sold someone an issuance policy on 100 shares... Basically TT told someone "I guarantee your shares won't be worth less than $35 on November 18th" and the insurance policy premium was $300 paid to TT.

"And, if the market price is $35 or less on expiry, I will buy them from you."

[jlhooter]

Bought CALL WAL-MART STORES INC $110 EXP 01/19/24 for $24

TT, I fully understand your drive for this play. You wanted to keep your play to your target lot (~$2.4k).
What is nice about these deeper in the money calls is that you spend much less money to leverage 100 shares. In your case 2400 spend to leverage ~12500 in shares (assuming $125/share at that time) or 5:1.

Please anyone correct me if I am wrong in my math:
Running the numbers your breakeven would be $24 (premium) + $110 (strike) = $134/share (or 7.2% over the $125/share at purchase); it wouldn't make sense to call those shares until > this price. Assume you want a 20% gain, you would need the stock price to be $160.80.
Another approach for gain is to sell back the call. For 20% gain, you would need to sell the call when it hits $28.80. As of this writing the avg premium is $25.83 or you already have a 7.6% gain. Of course I am ignoring the fact that short-term changes doesn't matter too much since it could change drastically in a couple of days.

From research of LEAPS, you would do a much deeper in the money call where delta is as close to 1 as possible (presently your call is at a delta of 0.68). Delta has a couple of meanings, but for LEAPS I leverage the rule of thumb that for every $1 change in the stock price, the option moves by delta (not exact, but leverageable in trying to target entry).
On May 20 I got lucky and bought .WMT240119C70 (Jan 19, 2024 Call, $70 strike) for $50.31.
Breakeven: 50.31 + 70 = 120.31 which was slightly higher than that day's price ~$119 or 1.1% over the price at that time. For 20% gain, I want the stock price to hit $144.37. If I like the stock and I can leverage the shares <3% (Breakeven/Price), then I will place a target premium of where I think the price will go. For example if I want the price to drop $2 and the present premium is $54 with a delta of 0.87 (my delta today), I would target a premium of 54 - 2 * 0.87 <= 52.26 with a GTC order.

I understand that my premium is 2x greater than your target lot, so I would look for LEAPS with lower priced stocks. The key for me is that breakeven-to-price ratio of <3%, AND if I want to sell back my call, I can do that as well. Today the average premium is $58.10 for my call or 15.5% above my $50.31 entry.

My exit plan? Well that is a good question and I need to be patient and disciplined. I would like to see 30%, but I also purposely selected WMT because it is on the MU list. I will tend to follow Sol's exit plan on this one.

[harryg]

If selling back the call, the time premium will make a big difference unless very far OTM.

With WMT @ 134 in 2 weeks from now, those calls will be worth a lot more than their intrinsic value of 24, even though the share is only @ 'breakeven'.

Also, keep an eye on Delta as it changes with implied volatility.

[SOL]

One solid idea is to treat deep in the money calls as you treat a stock investment. So if you would sell when the position was showing gains of 30%, well then lower it slightly and close the call position when the stock is showing gains of say 25%

Another thing is to focus on the time you put in. If making 50% requires less than half the effort that it takes to make 100%, then in my opinion 50% is a better target. Money with no time to enjoy it is well like eating chocolate with the wrapper on

[harryg]

Another thing is to focus on the time you put in. If making 50% requires less than half the effort that it takes to make 100%, then in my opinion 50% is a better target. Money with no time to enjoy it is well like eating chocolate with the wrapper on

I couldn't agree more

viewtopic.php?p=10277#p10277

[LoriPrecisely]

Today, I sold to open a Put on VALE at 18. strike price for .70 premium expiry June 17.
I tried a couple more premiums and dates for expiry, but the midpoint price kept changing so much for this stock option. So, this is the only one I got for VALE. It is ITM. Today, it closed at 18.05. I want to own this stock.

Secondly, I sold to open a Call on ASAN at 35. for .95 premium expiry July 15.
I own 200 shares of this stock at 29.34 avg price. My goal with this one is to either buy to close, and/or roll it up. I have to 'cram for the exam' to learn the time decay and when is the best time to adjust this play. And, I will try to learn the Greeks. Having Fun

[Eric]

Bought CALL WAL-MART STORES INC $110 EXP 01/19/24 for $24

Another approach for gain is to sell back the call. For 20% gain, you would need to sell the call when it hits $28.80. As of this writing the avg premium is $25.83 or you already have a 7.6% gain. Of course I am ignoring the fact that short-term changes doesn't matter too much since it could change drastically in a couple of days.

Another approach for gain is to sell a covered call with a higher strike price against your low strike purchased call. You can swing trade this short call... Hypothetically, sell a $150 Jan-2024 when you can get $10 for it and buy it back when you can buy it back for $7.50... You could probably do this several times between now and Jan-'24. (The short call you sell is covered by the long call you purchased, make sure you don't sell the long call before buying to close the short call or you put yourself in a position of naked shorting with potential unlimited loss.)