All things STOCKS

[mrorange211]

That's a good question. I would hold off on developing a theory yet until after the next two weeks.

Personally, I think it's telling us that retailers were swindled, continue to hold, and will lose all of it.

Edit: That being said, I'm super bullish for the remainder of the week and have 0DTE calls on SPY at $405 expiry 9/2.

 

[Thunder Good-Oil]

Well, with losing control of CF I'm out of margin debt, at least, and CF is now in plummet mode below where I sold it. I sold a MU 56 Call for September 2 where I meant to sell a Put. You just have to laugh at yourself sometimes. Just noticed right now, thank goodness. Made $30 on it.

The concept is fairly simple. But every time I click on the TRADE button I’m a little anxious that I’ve missed something. Then I immediately check the order status to confirm that the order hasn’t executed since I will set a limit a little bit better than where the contract is trading. I’m seeing MSTR moving so fast that I’m having second thoughts as FILLED shows up almost immediately. But I guess that’s the nature of the limit orders when I split the bid/ask difference.

 

[Velo Vol]

 

[Fun coupon VOL]

If the market is 3-6 months forward looking, then what is it pricing in right now (at roughly 4,000) for the economy in Q1 2023? What interest rate and GDP?

6.75+ on rate IMO. Prime

 

[Velo Vol]

6.75+ on rate IMO. Prime

This part you can actually find in the market. The future economic growth part is unclear.

 

[Fun coupon VOL]

This part you can actually find in the market. The future economic growth part is unclear.

View attachment 485241

Prime is 5.5 now. 125 bps is within reason

Also go look at their charts last year.

 

[Velo Vol]

Prime is 5.5 now. 125 bps is within reason

Also go look at their charts last year.

Is it?

3.4% might be the top of the tightening cycle (I don't know), but I'll be surprised if the Fed about-faces and immediately starts cutting rates.

 

[Velo Vol]

I need a good underlying stock to begin my options activities. Want to do the wheel strategy.

Criteria:

--will not underperform the market

--liquid for trading (tight bid/ask spread)

--moderately volatile

--not hundreds of dollars per share

 

[Thunder Good-Oil]

I need a good underlying stock to begin my options activities. Want to do the wheel strategy.

Criteria:

--will not underperform the market

--liquid for trading (tight bid/ask spread)

--moderately volatile

--not hundreds of dollars per share

Maybe consider:

AMD ($87)
AMAT ($94)
M ($17.75)
MU ($56)
CSCO ($45)
ON ($68)
PLTR ($7.80)
ORCL ($74)
BMY ($67)
BBY ($75)
BAC ($34)
MMM ($125)
PYPL ($92)
BP ($31)
XLF ($33.50)
XLB ($76)
ITB ($56)

NVDA and MSTR work great, but at $155 and $235 that requires $15,500 and $23,500 in cash or buying power to meet the cash reserved put requirement for each contract.

Biggest thing to consider, IMO, is to pick a stock that you don’t mind owning. If you sell that opening put and the share price falls, then you’ll likely have to buy the stock. But then the fun begins as you get to start writing covered calls.

I also like the ones that have weekly contracts as 1-3 weeks out expirations are working well right now.

It’s a trade off with the volatility. Too volatile and you’re probably going to get assigned. Not very volatile and the premiums are tiny. 30%-60% IV.

The Reddit/WSB kids like the tech names. They create volume and liquidity.

Check the dividend yield. If it is high then when writing the covered call consider the ex-dividend date. You might get assigned and have the shares called away just before you’re able to claim the dividend.

 

[Thunder Good-Oil]

Long straddles, long strangles, basic call/put purchases, a bull call spread, and a bear put spread are strategies that don’t include owning the underlying stock.

I’m sticking to the Wheel for now. But I’m approaching it slightly differently. Instead of selling the covered call immediately (after the put is assigned), I’m usually giving more time for things to settle down. That’s a mistake if the share price continues to fall.

I guess I’m more along the lines of just writing puts and calls on stocks that I either want to own or already own. Keeping the expiration close and looking for something that is several strikes below the ATM put and pretty close to the ATM call with a lOT of volatility and a big premium.

What I’m actually doing is shopping my watch list of possible put contracts to sell on down days and shopping my watch list of possible covered call contracts to sell on up days. Sort the lists on the % change that day and the biggest drops in share price are potential put sales and the biggest percent gainers are potential covered call sales.

Instead of writing the covered calls at or above the COST (after subtracting the put premium) I’m trying to find a call contract that is a strike level or two higher than what I’m assigned at (the put strike). Then if the premium isn’t very good I’m looking another week or two out. I’ll take the premium plus another dollar or two capital fain in the shares.

I’m also sticking with just one leg in each order. I’m not comfortable yet with the more complicated orders. I’m still learning the basics as far as how things function. I was assigned for the first time on Friday and had no idea of how that process works. I wanted to sell a call as soon as I figured out that the assigned put was coming. But that would have been a naked call for one day. I don’t think that the broker would have allowed it. So I sold that call on Monday (several dollars above what I was assigned) and also sold another put on that security. The premiums for MSTR are huge right now. I don’t love the stock, but I have zero direct crypto exposure so I figured why not. The stock did /does have a kind of low trading volume.

Sorry. It might be a long while before I can speak the Greek with the stats. IV is a good thing to get though. 30%-60% generally.

 

[mrorange211]

I need a good underlying stock to begin my options activities. Want to do the wheel strategy.

Criteria:

--will not underperform the market

--liquid for trading (tight bid/ask spread)

--moderately volatile

--not hundreds of dollars per share

I think I would try AMD like Thunder suggested, but I like V for this idea too.

 

[Thunder Good-Oil]

I think I would try AMD like Thunder suggested, but I like V for this idea too.

V is $200. Need $20k or in the account or $10k and a margin agreement to write a put contract.

V is also on the low end of volatility - but if it has a large premium but isn’t volatile enough to justify it then it could be a good candidate.

 

[Thunder Good-Oil]

BP, OXY, and M are down 3.6%, 2%, and 2.25% this morning. Candidate to sell puts.

AMD is down 1.5%.

 

[Thunder Good-Oil]

PLTR is up 2%, BUT it might be bouncing up off of support which means it’s a put sell candidate (IMO).

 

[Thunder Good-Oil]

BMY and MMM would have been good puts to write YESTERDAY.

 

[Thunder Good-Oil]

BBY 9/2, 9/9, or 9/16 (write puts). Near 5% dividend w 9/19 ex date, so be careful with the covered call.

 

[Thunder Good-Oil]

Way out of the money MSTR puts have very large premiums. But the stock is very volatile right now as well.

 

[Thunder Good-Oil]

MSTR 220909 P 212.5 is $30 out of the money. About a $5 contract.

Edit: it’s 9/9, not 9/2

 

[Velo Vol]

Instead of writing the covered calls at or above the COST (after subtracting the put premium) I’m trying to find a call contract that is a strike level or two higher than what I’m assigned at (the put strike). Then if the premium isn’t very good I’m looking another week or two out. I’ll take the premium plus another dollar or two capital fain in the shares.

Thanks.

The wheel seems easy enough (even for a beginner) in a flat or appreciating market. My one concern is what if (and I think this is a substantial possibility) I do this now and then the market has a bad September/October. Even a good stock could easily be 10%+ underwater. You certainly don't want to risk selling below your cost basis, so then what? Not the end of the world, but a risk.

 

[Velo Vol]

Sorry. It might be a long while before I can speak the Greek with the stats. IV is a good thing to get though. 30%-60% generally.

Saw this in an old video. The gist is that the higher the IV, the more you tend to make in the trades, even if the win % isn't that much better.

 

[Thunder Good-Oil]

Saw this in an old video. The gist is that the higher the IV, the more you tend to make in the trades, even if the win % isn't that much better.


View attachment 485422

I literally mean the Greeks. Vega, delta, gamma, theta, and rho. They might represent variables that I write several sentences trying to explain. I kind of get where the IV measurement is coming from.

There are the inverse (bear) ETFs if you’re expecting a protracted fall in share prices. But with weekly contracts, there are opportunities even within an overall bear market. The risk is picking the wrong security, having it fall hard after placing a buy limit order on a put, and then see it continue falling long after being assigned. So it is important to pick a stock that you want to own. You could be sitting out for many months if waiting to only write calls that guarantee a profit. But you can still write covered calls for smaller bites of premium or write them even if the result is being assigned at a loss. You’d get (less) capital back but would then be able to cycle through the wheel again.

A bear put spread could be assembled when expecting a moderate fall in stock price. Buy put, sell another put at a lower strike. Don’t have to have the capital to buy shares. Profit is limited though.

A long straddle profits with big moves in either direction. Buy put and call at the same strike and expiration. Profit is potentially unlimited. Loss is capped at the cost of the options.

 

[Thunder Good-Oil]

Another approach to get your feet wet is to just start with a stock that you want to buy today anyway. Write a put with a strike for a bit less than the current market price and collect a percent or 2 of premium. Or write it with a strike further out of the money, get a better price if assigned, but less premium. Plan on being assigned. Same effect as writing a buy limit order on a stock several percent lower. If the stock happens to go up, you collect the premium and the obligation to buy goes away at expiration. Then you can do it again. When you place a buy limit order too low and it fails to execute, you don’t get paid anything. The downside is that your investment capital is tied up as soon as you write the put contract. If you can make a 0.5% premium every week though, that is a great annualized return. Even a 0.25% per week return is very good and you can get that by going further out of the money.

 

[Thunder Good-Oil]

I sold a NVDA 220902 P 152.5 a couple of days ago. NVDA fell under $150 today and has been under the strike for hours. I’m anticipating being assigned early - but it’s been slowly rising. I actually also own shares, so I might sell them if we get up to $153 or $154 before the Friday closing bell. Then get assigned replacement shares for $152.50.

One thing that I don’t know, that one of the experienced traders would, is what the notification timing is for being assigned early. It took many hours to be notified after the Friday expiration - but you’re automatically assigned if the contract is even $0.01 ITM. So I already knew that I was being assigned and didn’t need the notice to let me know. I really have no idea if/when I get notice of early assignment. I ASSUME that if their platform allows me to BUY TO CLOSE the option I wouldn’t be assigned early if I bought the contract back.

Lots and lots to learn.

 

[Firebirdparts]

I've never been assigned early. I have, however, had one close ITM and it never executed. Some percentage of option holders decline. That percentage might be pretty high if you have ended up one cent ITM.

As far as assignment, they usually have all night for the back room to execute it. If somebody did execute one in the middle of the day, it would be somewhat at a random time after that they find somebody to assign it to. They could create a short position in your account that way, so that is probably the most complex situation where a bunch of other things might or might not happen depending on the broker, your level of danger/stupidity approvals, the available stock to short, and your available margin. If it's a long position, that's simpler.

 

[Thunder Good-Oil]

MSTR is all over the place. $227.12 - $251.50 today. About $230 right now. At one point I thought that the 262.5 call that I’m short was about to be ITM. Now it looks like the 225 put that I’m short will be.