All things STOCKS

[Thunder Good-Oil]

I spent about a year learning about options and then another year trading. I think they're fun. The "wheel" strategy is probably the easiest to appreciate, but when it comes to the option premium themselves, that is all gambling money between you and the other guy. I do like that you can create securities. You can create an option and sell it, no matter how ordinary you are. But I don't have, after a year, any brilliant insight.

P.S. In the USA, the option OWNER can excercise the option any time no matter the price. The OWNER (that is to say, not you in the wheel strategy. The other guy). To do that, I would have to call Fidelity. YMMV. At expiration, Fidelity will automatically exercise in-the-money option contracts unless the OWNER tells them not to.

I’ve read up on some wheel strategy Google finds. That’s very similar to what I was thinking of doing. Funny how the articles consider it a pretty basic approach with options - but I guess it’s all relative. Options are complex. Wheel is fairly basic in the options universe.

I was thinking of starting with AMZN, but I went long MSTR stock at the end of June for $177. Bailed out at $199 on Thursday. It hit $236 on Friday before settling at $221 for the close. I’d rather be stuck with AMZN than MSTR, but hey… you only live once.

MicroStrategy is basically a proxy for Bitcoin. $160 on Tuesday 7/5 and peaked at $236 yesterday (7/8). So I think I might sell the 7/22 or 7/29 put next week. Or maybe even the 7/15 as wild as it’s been. I need some crypto exposure anyway if I end up being assigned shares. I don’t know if I’m going to do the call writing side of the wheel though. Maybe wait a week first.

MSTR’s 52 week range is $891-$134 so even at $200-$225 it is way off of where it’s been. The premiums on the options are huge ATM.

 

[mrorange211]

I sold my MSTR put last week from 3100 >4k. Bought it back Tuesday (RIP) and still holding. Bought some long dated NFLX and AAPL puts at close. Last week was a low vol melt up it seems to me and I think we take an elevator down this week. VIX expiration and CPI Wednesday. Gonna be fun.

 

[Thunder Good-Oil]

I sold my MSTR put last week from 3100 >4k. Bought it back Tuesday (RIP) and still holding. Bought some long dated NFLX and AAPL puts at close. Last week was a low vol melt up it seems to me and I think we take an elevator down this week. VIX expiration and CPI Wednesday. Gonna be fun.

I want to see MSTR around $200-$205 before I sell a put contract or 2. Probably the 7/22 or 7/29. MSTR almost moves like a 2x or 3x Bitcoin bull ETF.

 

[mrorange211]

I want to see MSTR around $200-$205 before I sell a put contract or 2. Probably the 7/22 or 7/29. MSTR almost moves like a 2x or 3x Bitcoin bull ETF.

IMO you'll see it hit $175 by Wednesday.

 

[Thunder Good-Oil]

IMO you'll see it hit $175 by Wednesday.

I’m thinking about being short the $200 MSTR puts. October is over $40. That would be about $160 for a $220 stock. It is about 15 weeks out though.

@Firebirdparts

 

[Thunder Good-Oil]

What’s highly significant here?

 

[Thunder Good-Oil]

Checking out the 2021 MSTR 10-k (12/31/2021)

Market cap $2.5B (5x sales)
——————————-
Strategy is 2-fold.
1) core software platform
2) acquire Bitcoin with excess working capital

Sales: $500M

Loss: $500M

Gross profit: $420M

Digital asset impairment loss: $830M

Digital assets: $2.85B

LT debt: $2.15B

Current assets: $270M

 

[Thunder Good-Oil]

Might take a smaller short put position in PLTR. 8/12 or 8/19. $8.00-$9.50.

Friday: $10.17 close, $9.83-$10.38 range

 

[Carp]

Ha ha.

A blast from the past

They certainly don't seem to be phony as a company, but they did get pumped and overvalued.

 

[Firebirdparts]

What’s highly significant here?

IV is pretty high, so the options are "expensive" which is nice if you're selling them. The options are just priced by people, and that one number aggregates what those people think into an opinion of how volatile the people trading options think it is. I noticed the calls are about as expensive as the puts for August 5th. So evidently opinion is divided there.

I don't know anything about MSTR so I am looking at that asset impairment and wondering what that is about. They are sort of close to break even when they're not doing huge special charges.

 

[Velo Vol]

 

[Thunder Good-Oil]

IV is pretty high, so the options are "expensive" which is nice if you're selling them. The options are just priced by people, and that one number aggregates what those people think into an opinion of how volatile the people trading options think it is. I noticed the calls are about as expensive as the puts for August 5th. So evidently opinion is divided there.

I don't know anything about MSTR so I am looking at that asset impairment and wondering what that is about. They are sort of close to break even when they're not doing huge special charges.

The digital asset impairment (expense) would be the losses that they have on their books for the Bitcoin that they hold but had not sold and recognized. Basically they are writing down their Bitcoin for their non-tax net income. They lost $500m in 2021, but that includes the $830m impairment. So they are turning a profit with their software business.

Thanks. It makes since that there’s high implied volatility as much of a premium there seems to be. I don’t know if it is reasonable or not. 7% pullback in the MSTR shares today, so the put options should be more favorable to sell.

Before looking at today’s pricing, for somebody wanting to buy the stock, selling the puts seems to only have the downside of tying up capital until the expiration. Sell an Oct 200 put for $40 and instead of buying now at $220 (down to around $205 this morning) there’s a good chance of owning the shares at a cost of $160. Of course the bottom could drop on the shares, but if I had bought them for $220 I would most likely still own them as the price fell into the $100s. Since I have practically zero crypto exposure, selling the puts seems to make sense for me. I think that the software business could keep the share price from going to the low $100s or worse.

 

[Thunder Good-Oil]

Bitcoin is off 2.5%. MSTR is off 10%. It like a 4x levered Bitcoin ETF.

 

[Thunder Good-Oil]

It is weird seeing LAST below the ASK AND below the BID. I guess that that is the nature of thinly traded options.

 

[Thunder Good-Oil]

Hilarious. I was trying to sell August 5 puts, but the system rejected my order for being too far from the last trade (must be within 10%). Then I messed up and entered the replacement as a buy instead of a sell. So I ended up owning the put that I meant to sell. So I set up an opposite limit order just to get out and break even. It just executed. I made $50. Better to be lucky than smart.

 

[Firebirdparts]

It is weird seeing LAST below the ASK AND below the BID. I guess that that is the nature of thinly traded options.

You do have to look at that. You are always on the wrong side of the bid/ask spread. You've heard of people getting stock transactions at crazy prices around open/close but with options it's actually common.

About your buy/sell error, I don't think I've ever done that, but I have had days where I wanted to buy an option and it was one I was already short on, and vice versa. And then once in a while I'll execute something in the wrong account.

 

[Thunder Good-Oil]

You do have to look at that. You are always on the wrong side of the bid/ask spread. You've heard of people getting stock transactions at crazy prices around open/close but with options it's actually common.

About your buy/sell error, I don't think I've ever done that, but I have had days where I wanted to buy an option and it was one I was already short on, and vice versa. And then once in a while I'll execute something in the wrong account.

Yes. I understood what I wanted to do, but the trading platform wasn’t easy having not been using the options trading (Fidelity/mobile) yet. Extra variables to keep track of and enter. I’ve traded stocks about 20x on it and was familiar with that side. I’ve traded hundreds or a thousand plus times on Ameritrade and Schwab. It was complicated because I wasn’t seeing real time quotes on their page so I had the real time pricing pulled up in a different window with Ameritrade and was flipping back and forth. I almost made another mistake putting in the sale on Ameritrade of what I accidentally bought earlier on the Fidelity account. Luckily I had selected SELL TO CLOSE POSITION and the Ameritrade system didn’t allow it. Part of it was also being nervous about setting up the trades since I only bought call options 2 or 3 times ever before.

Lessons learned:

Color matters.
BUY = green screen indicator.
SELL = red screen indicator.

Probably best to use an iMac rather than an iPhone while trading options. But it doesn’t have a touch screen. I’m taping that screen all the time since I use my phone 95% of the time.

I actually made $125 on the erroneous trade instead of $50. I just wanted to break even - so I’m thrilled despite being a dumb ass on my first put trades.

 

[Thunder Good-Oil]

One benefit of getting involved with selling puts - on crappy down days like this, it gives me something to be happy about while trying to sell puts for more $$$. A lot of the time (before attempting to trade options) I’m done buying stocks and want to sell something. So on market down days I typically just turn it all off and do something else.

I might not be buying shares of stock very often going forward and instead sell puts on what I want to own. Shares go up - pocket the money from having sold the put. Shares go down - get assigned the stock at a lower price than when I initially wanted to buy it. I guess there is an opportunity cost of not owning the stock though if shares zoom up in price. And it ties up capital when cash must be kept in the account to cover any assignment on the puts that have been sold.

I doubt that I’ll get into spreads, straddles, iron condors, butterflies, and what not. Who knows though. As it becomes easier with experience the complicated trades might be fun to work with.

 

[Thunder Good-Oil]

It’s so much less confusing to simply research an equity and go long.

 

[Thunder Good-Oil]

MicroStrategy (MSTR) is a top short squeeze candidate. In my opinion the core business results are being distorted by the massive Bitcoin losses and write downs. As long as the software side is profitable as a stand alone business that generates a hundred million or more, the declines in their Bitcoin holdings are being over emphasized. But there is $2B of long term debt on the balance sheet. A 75% drop in Bitcoin (to around $5,000) would make it challenging to meet their debt obligation.

It’s certainly not a sure thing and still has a lot of risk. But the stock is moving at 3x or 4x the price of Bitcoin while the profitable core business should mean that the shares would be LESS volatile than the crypto alone. What am I missing here?

I’m going to try to sell a couple of put contracts if the markets follow the after hours move (down about 0.5% ATM).

======================================

Other Stocks To Watch: Past the top five short squeeze candidates, two stocks made big jumps this week into the top 15 and could be short squeeze candidates in the future.

Outdoor cooking company Weber Inc. (NYSE:WEBR) jumped 31 positions to 11th place. Data shows 58.2% of the float short and a cost to borrow of 60.3%.

Software company MicroStrategy Inc. (NASDAQ:MSTR) jumped 44 positions to 12th place on the leaderboard. Data shows 37.1% of the float short and a cost to borrow of 10.6%. The company is a large holder of Bitcoin (CRYPTO: BTC) and a popular short candidate for those believing the price of the leading cryptocurrency will keep falling.

Copyright © 2022 Benzinga (BZ Newswire) 7/11/2022 09:54 AM ET

 

[tbh]

It’s so much less confusing to simply research an equity and go long.

For me, absolutely. I have very little idea of the whole put/call world, but I feel like I can research and be patient. When it comes to puts, calls, options, etc...I can't brain good, haha.

 

[Rocky_Top_Vol13]

So I'm a novice trader at best and have a question for the more experienced peeps in the thread. One of the companies I'm invested in filed the other day a Preliminary Prospectus for Sale of Shares. What exactly does this mean? When I try to research this topic it keeps talking about IPOs but I already own stock in this company. Just confusing at times...

 

[Thunder Good-Oil]

So I'm a novice trader at best and have a question for the more experienced peeps in the thread. One of the companies I'm invested in filed the other day a Preliminary Prospectus for Sale of Shares. What exactly does this mean? When I try to research this topic it keeps talking about IPOs but I already own stock in this company. Just confusing at times...

You can own stock in a company that isn’t publicly traded yet. It sounds like it is a private company that is planning to become public. This greatly expands the universe of potential purchasers of the shares of stock.

 

[Ernest T. Vol]

Big ugly red candle on MSFT today.

 

[Rocky_Top_Vol13]

You can own stock in a company that isn’t publicly traded yet. It sounds like it is a private company that is planning to become public. This greatly expands the universe of potential purchasers of the shares of stock.

How is this even possible. I own stock in the company so by definition, wouldn't that make it a publicly traded company?