Lurker > red sox 777

On average, selling covered calls is probably the only one of the four that is actually a good investment, for precisely that reason (you are actually investing in a company).

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September 1, 2003; November 4, 2007; September 2, 2013
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Yup. Options is a zero sum game.

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September 1, 2003; November 4, 2007; September 2, 2013
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Sunroof posted...

So when you buy a put, you pay a premium up front? But you also receive a premium if the strike price is not hit at the end?

If you hold until expiration, you make money at the end only if the strike price is hit. The put makes money only if the strike price is hit.

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September 1, 2003; November 4, 2007; September 2, 2013
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Note that you can probably get a very similar range of outcomes with much less capital invested by buying calls, rather than buying shares + puts.

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September 1, 2003; November 4, 2007; September 2, 2013
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If you buy calls, you get the right to buy the stock. If you buy puts, you get the right to sell the stock. You can buy puts on a stock you own as insurance.

For instance, say I own PTON, I bought it at $100, and want to limit my downside on PTON without limiting the upside. I can buy a put at $100 strike for Jan 2022 for about $22. Then if the stock is trading below $100 in January 2022, I can exercise my put and sell the stock for $100. My maximum loss is $22, which is achieved with a share price at $100 or anywhere below. I break even at $122, and above that my profit is $22 less than it would have been if I didn't buy the put.

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September 1, 2003; November 4, 2007; September 2, 2013
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This is ridiculous and unacceptable. Boycott Amazon.

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September 1, 2003; November 4, 2007; September 2, 2013
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Days like today are tough. Finally seeing some signs of life in the market after hours.

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September 1, 2003; November 4, 2007; September 2, 2013
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Yup. You can also buy them as insurance on a stock you do own.

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September 1, 2003; November 4, 2007; September 2, 2013
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Yes, he bought puts rather than sold them.

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September 1, 2003; November 4, 2007; September 2, 2013
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Yeah, you can sell the puts instead of exercising them.

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September 1, 2003; November 4, 2007; September 2, 2013
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Yeah, today is a pretty painful day. SCHW and F are my only green stocks today.

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September 1, 2003; November 4, 2007; September 2, 2013
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Nasdaq just keeps getting pummeled.

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September 1, 2003; November 4, 2007; September 2, 2013
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Nanis23 posted...

A normal stock would act like that, sure
But GME is different. The current price is so disconnected with reality and it's just pure social media hype rally

That would be more like GNUS. GME has some seriously weird fundamentals (short interest and nowadays mostly options interest). GME also has this weird thing where some people are valuing it as a decaying brick and mortar retailer and other people are valuing it as a high growth ecommerce startup.

I actually think that the market in general has gone overboard on valuing ecommerce businesses so much more than brick and mortar retail, and GME is the perfect illustration, since it has people using both valuation approaches with a single stock, creating the dissonance. Like, why is SHOP valued at 449 times its earnings? Why is the business Ryan Cohen started, Chewy, valued at $35 billion? They sell pet food online (and no, they apparently don't turn a profit yet).

Perhaps I'm missing something, but the way I see it, if Gamestop's transition to ecommerce is successful, it should be more valuable than Chewy owing to the greater market size of gaming compared to pet food and higher growth rate of the industry. Maybe twice as valuable looking briefly at the industry sizes? A $70 billion market cap for GME would put the share price at approximately $1,000. So another way of saying this is that the current valuation predicts about a 20% chance of a successful transition (assuming the legacy business is worth basically nothing). Or another way would be- supposing GME's legacy business did not exist, and it was a startup with net equity on its balance sheet (more assets than debts)- I don't think the market would bat an eye at it being valued at $12 billion.

I mean, the answer, again in my opinion, is probably that there is something seriously bubbly about the current market valuation of ecommerce businesses. Shopify, Amazon, etc. I also don't hear many people calling them a bubble, which is itself a sign of a bubble.

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September 1, 2003; November 4, 2007; September 2, 2013
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When you were discussing investing in Chris's business.

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September 1, 2003; November 4, 2007; September 2, 2013
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Sunroof posted...

How worthwhile is this? For a $108,000 investment, Id make $32,000. Granted its almost two years out, but thatd be an average of a 16% gain two years in a row.

Considering that you recently thought a 900% gain or something like that was too low, I'm surprised you're happy with 16% a year now.

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September 1, 2003; November 4, 2007; September 2, 2013
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Nanis23 posted...

GME down 15% after hours despite DFV not selling

This is all backwards. DFV should be the one driving the stock, not the earnings
Wtf

Uh, the earnings should have a much bigger impact than one person with a $30 million-ish position. But more important than the earnings is what wasn't announced - Ryan Cohen as CEO or something exciting like that.

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September 1, 2003; November 4, 2007; September 2, 2013
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Now we're plummeting.

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September 1, 2003; November 4, 2007; September 2, 2013
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After hours share price looking good so far. Though I didn't see anything exciting in the earnings report. Conference call coming up in a bit.

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September 1, 2003; November 4, 2007; September 2, 2013
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I bought back a very small stake in GME at $183. I've seen so many articles in the media today confidently predicting it will go down after earnings that I feel like it's probably going up. If it does plunge, not the end of the world. If it goes to the moon I want to have participated, even if it wasn't with very much money.

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September 1, 2003; November 4, 2007; September 2, 2013
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I don't know if it applies to you since you are in Israel. Your tax rules may be different. For a high earner in the US, the tax rate could be something like 15% instead of being in the 35% area if you hold over a year.

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September 1, 2003; November 4, 2007; September 2, 2013
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Today is exactly one year from the market bottom last year. Gamestonk, seeing the recent decline in travel stocks, I am thinking that maybe there were a lot of people who bought in March last year and were waiting for the one year mark to sell.

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September 1, 2003; November 4, 2007; September 2, 2013
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I think the main thing that'll matter is what news they announce alongside earnings. The earnings themselves are in all likelihood not going to justify the $14B market cap. Now if they put out a plan for the transition of the business that fills people with hopes and dreams, and maybe if they announce a new CEO.... that could get interesting. But it's also going to depend on how much that kind of news is already priced in.

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September 1, 2003; November 4, 2007; September 2, 2013
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masterplum posted...

I think last chance to sell before earnings is more likely. I cant see how earnings can help

Well, I said buy because I don't own any GME currently. I don't think most of the topic does either.

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September 1, 2003; November 4, 2007; September 2, 2013
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Last chance to buy GME before earnings tomorrow. The volume is making it look really tempting. We are below 10 million again today - the last time it got that low was the day before that squeeze from $50 to $200.

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September 1, 2003; November 4, 2007; September 2, 2013
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ChaosTonyV4 posted...

https://twitter.com/byyourlogic/status/1374024675722993666?s=21

He's got the perfect sense of hypocrisy to be a true leader.

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September 1, 2003; November 4, 2007; September 2, 2013
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LordoftheMorons posted...

Hmm, I wasnt aware of this

That said I think the reasonable person test kind of falls apart when you have like 25% of the country and the President of the United States buying into the same conspiracy theory

I think a big part of that is going to be whether anyone with decisionmaking power to stop using Dominion machines believed it, so that Dominion would actually lose profits over this. Like, did the Georgia Legislature decide to stop contracting with Dominion because they believed them to be untrustworthy? Did the Michigan Legislature do that? Did any county boards do that?

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September 1, 2003; November 4, 2007; September 2, 2013
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StealThisSheen posted...

So no reasonable person would believe them, but she reiterates more than once than she believes them. And even just arguing that would open her up to frivolous lawsuit penalties, right?

How can somebody be THAT stupid

Like, I know, I know

But really

Well, I think it's relatively clear that the lawsuits were frivolous. I mean, I haven't actually read them myself, but the record of them getting dismissed by virtually every court that considered them, including by judges appointed by Trump, makes them look bad.

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September 1, 2003; November 4, 2007; September 2, 2013
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LordoftheMorons posted...

This is the kind of defense you make when youre Tucker Carlson lying to your nominally-entertainment based shows audience, not when youre making absurd accusations in your court filings

So there is something called litigation privilege which usually protects statements made in a lawsuit from defamation claims. If there was defamation here, it would probably relate to out-of-court statements.

https://www.abi.org/abi-journal/the-boundaries-of-litigation-privilege

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September 1, 2003; November 4, 2007; September 2, 2013
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LordoftheMorons posted...

https://twitter.com/zoetillman/status/1374103466038157315?s=21

I see that she has hired counsel to defend her in that case. Probably a good idea after seeing what happened to the Kraken case.

But uh...... did you believe Sidney Powell's claims? Did you think they were factual? Are you a reasonable person?

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September 1, 2003; November 4, 2007; September 2, 2013
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Where should the US capital be?

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September 1, 2003; November 4, 2007; September 2, 2013
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I say DC can be made a state if it gives up being the national capital. The national capital will be moved to Wyoming, which will get triple representation in exchange for allowing the federal government to use their land. So, Wyoming will get to elect 6 senators.

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September 1, 2003; November 4, 2007; September 2, 2013
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I put in a limit order to buy IGGHY (the American ADR for IG Group, which is traded in London). I guess the ADR is super super illiquid because it's been around half an hour already and I haven't even seen a bid/ask displayed. 230 shares have been traded so far today. A little apprehensive about buying something this illiquid- wish I could just buy the stock traded in London which has an average volume of 1.3 million+.

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September 1, 2003; November 4, 2007; September 2, 2013
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Jakyl25 posted...

LMAO at Elon trying to defend his wealth

https://twitter.com/elonmusk/status/1373507545315172357?s=21

The comparison is a little ridiculous. The reason 2 people can have more wealth than the bottom 40% of the country is not so much that those 2 people are that obscenely rich and more that the bottom 40% of the country has basically no wealth because many of them have a negative net worth.

Depending on how we are calculating net worth, YOU probably have a higher net worth than the bottom 30% of the country combined. A homeless person on the street could have a higher net worth than the bottom 30% of the country combined.

The problem is that the poor are poor, not that the rich are rich. If you want to improve the lot of the poor, the entire top 10% and especially the top 2-5% need to be pitching in, but those people are the ones blaming everything on the top 1% and nowadays they are not even focusing much on the bottom 9/10 of the top 1%. So they want to pretend everything is fine and things would be good if only the top 0.1% of the population paid more in taxes. No no no no no, the whole top 10% needs to be called out for what they are.

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September 1, 2003; November 4, 2007; September 2, 2013
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Sunroof posted...

So you own the stock at $90 even though your put was at $95?

You pay $95 for the stock when you get assigned. Now you own the stock, and it is worth $90 per the current market price.

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September 1, 2003; November 4, 2007; September 2, 2013
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Colegreen, what are the rules for holding cash in the account to secure the put? In Moonroof's case, would he need to actually keep 112k in cash in the account or could he invest it in stocks? Or could he secure it with some percentage of the potential liability, like how margin works for shorting?

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September 1, 2003; November 4, 2007; September 2, 2013
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Sunroof posted...

Seems kinda crazy to me to potentially put up $112k in a stock just to maybe get $2,645?

Yes, it's covered with your cash. If you want to hedge the position, you can buy another put. Or you can short the stock so that you make money on the short stock as it goes down (this one introduces unlimited liability if the stock moves up).

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September 1, 2003; November 4, 2007; September 2, 2013
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The Coinbase IPO/direct listing was pushed back a couple weeks to April. I thought a little bit about this and looked at the Palantir direct listing a few months ago. Unlike a traditional IPO, it did not have that first day surge, and actually closed below where it opened on day one and took a month to really get going on its upward movement. I think that makes sense because the stock is opening directly on the market, so there's no phase change between select bank clients being able to buy and the general public. So, I think it might be a good idea to wait a little bit to buy Coinbase.

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September 1, 2003; November 4, 2007; September 2, 2013
Congratulations to DP Oblivion in the Guru Contest!

I feel like it would be really really hard for GME to have earnings justifying the $200 price, but maybe they'll make a major announcement about the direction/strategy of their business.

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September 1, 2003; November 4, 2007; September 2, 2013
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Nanis23 posted...

But who says that the stock will reach your limit price?
If you wanted to buy GME at 198 and set a limit order when it was 198.7 it wouldn't have happened at all because the lowest it got to was 198.25
So what would you do? put your sale limit at 198.5? but then the market buyer would have done it at 198.7? so at best you saved like...20 cents per share?
And risk the purchase order not happening at all?

Yes, you risk the purchase not happening at all. Better for a purchase not to happen than for it to happen at too high a price. If you really want the stock, set the limit for the highest number you are actually willing to pay. Like, if you are actually willing to pay $200 in your example, set your limit order at $200 and it will execute at $198.7.

Basically the only time you lose with a limit order is when the stock is moving at lightning speed and you haven't gotten in your order yet.

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September 1, 2003; November 4, 2007; September 2, 2013
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Nanis23 posted...

What is wrong with market buys

You pay a worse price!

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September 1, 2003; November 4, 2007; September 2, 2013
Congratulations to DP Oblivion in the Guru Contest!

I also think covered calls fits Moonroof's strategy very well. No disagreement there.

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September 1, 2003; November 4, 2007; September 2, 2013
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My point is mainly that it shouldn't be thought of as "free money." Like, there's a reason Moonroof normally closes positions really quickly whether they move up or down. The stop losses allow him to put much higher amounts of money into a position than he would if he were holding for a longer period of time, because his effective amount of money at stake is smaller. If he puts in 25k but is only actually risking 2.5k because he will sell at -10% then he is only really risking as much as someone who invests 2.5k but is prepared to ride it to zero.*

If you take away his ability to stop losses quickly, from a risk management point of view those 25k-100k position sizes he likes are going to be too large. And sure, he can still stop losses by closing the call position as well, and it probably won't be very expensive to do so if the stock has already moved down - but the way I keep seeing these trades talked about, the posts appear to assume that he's going to hold for a long time.

And I agree he'd likely do better by holding for longer, but in that case I think it's quite important that the position sizes get smaller/more diversified as well. Like, 25k on Disney is fine but 100k on something like DNN or EVRI is really pushing the envelope if you are not going to stop your losses. It could be +EV, maybe very +EV, and maybe it'll make you a million quickly, but that would be too much risk for me at least to bear.

*As I've been saying for ages, there is some risk that the stock gaps down straight past your stop loss and you lose much more. But Moonroof doesn't seem to care, and it's relatively rare in any event.

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September 1, 2003; November 4, 2007; September 2, 2013
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I bet our beloved President Trump would have no problem with a polygraph test. It wouldn't show up as a lie if the person doesn't believes it is a lie. And for a person who truly does not believe in the existence of objective reality, it is impossible for him to tell a lie.

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September 1, 2003; November 4, 2007; September 2, 2013
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Lopen posted...

My point is all risk to you of losing money is introduced by the long stock

Short call reduces risk from your long stock. It itself isn't introducing any extra risk in terms of losses.

If you want to think that you're good enough at timing the market and knowing when to sell that selling a covered call is going to on average lose you profits vs selling somewhat conservative covered calls (I highly doubt anyone in this topic is good enough at that), more power to you, but for most people that wouldn't be the case.

Now in the case of moonroof who on the regular sells stocks for like 0.5% gain, I think the risk of "lost profits" is pretty much a non-factor. He basically gets all the downside from selling ATM covered calls without the profit premium as is. May as well gain some actual decent gains from selling for pennies through contract premiums.

Generally speaking, I agree. Although it is true that most of Moonroof's profits for the last year come from one AMC trade where he got a pretty big percentage gain in after hours.....which would probably have been mostly wiped out if he had sold anything but deep deep OTM calls on it.

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September 1, 2003; November 4, 2007; September 2, 2013
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Sunroof posted...

Lets say on 3/19 a stock is at $8 when you set expiry date of 4/1 and strike price of $10. If the stock hits $11 on 3/20, does the strike hit? Or must it wait until 4/1?
I guess what Im asking is whether the expiry date is the deadline and the strike can hit any point up to that date, or is it basically judgment day?

With American options the holder can exercise at any time but in practice they are rarely exercised before the last day. That's because until the very end, the market price of the option is almost always going to be higher than the value of exercising, so the call holder would rather sell it than exercise it.

I remember from school that there is a mathematical proof showing the very counterintuitive result that given some fairly reasonable assumptions, the difference between American options and European options (that American options can be exercised at any time up to the expiry rather than only at time of expiry) does not actually impact the price of the options. Because no one will exercise before expiry.

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September 1, 2003; November 4, 2007; September 2, 2013
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Lopen posted...

I'm talking about relative gains/losses to just owning the stock.

If you sell the CC and the stock goes down, you don't actually lose money vs just owning the shares. You lost money either way. You probably lose less by selling the CC cause if you panic sell you keep part of your premium received and if you were planning on holding through it you get the whole premium which is more than you'd have if you held through the fall and didn't sell the CC

If you sell the CC and the stock goes up LOTS you still make money, just less money than you would if you hadn't sold the CC.

I guess what I'm saying is I don't consider "lost profits" a risk.

Yes, the risk of selling covered calls relative to just owning the stock is lost profits. Precisely that. I do consider that a major downside. But whether or not you do, that's a different thing from the risk of the whole position (long stock + short call).

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September 1, 2003; November 4, 2007; September 2, 2013
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Lopen posted...

It loses profits but is still a win overall. You can't lose. You only win less

Again, if you are talking about the whole trade, then it loses when the stock goes down by enough to lose more than the option premium you received. You can't have it both ways and talk about only the call when the stock goes down but talk about the whole trade when it goes up.

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September 1, 2003; November 4, 2007; September 2, 2013
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Lopen posted...

The losing trade is owning the shares, not selling the CC. It's pretty much accurate to say selling a CC can't lose (if you choose a strike and expiry that fall into certain low risk windows) it's just that it shouldn't make you overconfident about the underlying shares you own.

I'm talking about the whole trade (long shares + short call), which can both make money and lose money. If you are talking about only the short call, then of course that can lose. It loses a lot of money if the share price moves substantially above the strike price. If you are going to ignore the losses from the long shares part of the trade when the stock moves down, then it's only fair to ignore the gains from that part of the trade when the stock moves up.

Practically speaking, I just don't want Moonroof to think he can buy Peloton or whatever and hold for a year and sell calls and literally have no risk. He does have risk from holding the shares, which is only slightly reduced by the calls.

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September 1, 2003; November 4, 2007; September 2, 2013
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It's not covered calls that's risky, it's the mindset of "this trade can't lose" that's super risky. If you are thinking something is "free money" you're probably missing something. There's almost always a tradeoff.

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September 1, 2003; November 4, 2007; September 2, 2013
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But you wouldn't have - you would have sold for a loss very early on with one of your stop losses.

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September 1, 2003; November 4, 2007; September 2, 2013
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