Board 8 > Stock Topic 25

(+) Yeah! (+)

Thanks. I understand now.

I will test the waters with puts next!

The main thing to remember about rolling a position is you can roll multiple times.
For example I believe I have rolled a 40 strike to a 36 strike to a 33 strike for fubo making premium each time. If fubo is still around 32 next time the put is about to expire i will just roll it down again. I will basically never get assigned unless I want to.

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Hm.

So I have only loosely been paying attention to covered calls but am I correct if I sell 50 call contracts valued at 13 cents each I'd just make 650 dollars right then and there? Am I... missing something? o.O

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DoomTheGyarados posted...

Hm.

So I have only loosely been paying attention to covered calls but am I correct if I sell 50 call contracts valued at 13 cents each I'd just make 650 dollars right then and there? Am I... missing something? o.O

Opportunity cost of the stock spiking

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Right but let's say this:

I have calls I purchased already for a certain date
I have 5000 other shares

So I could just mitigate that spike risk by simply purchasing more shares with that money... right? And if it super spikes I still make a lot of money on my investment from other avenues.

... Right?

This is literally seeming like free money to me which I like because I have abused this in Pokemon for 2 years now.

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DoomTheGyarados posted...

Right but let's say this:

I have calls I purchased already for a certain date
I have 5000 other shares

So I could just mitigate that spike risk by simply purchasing more shares with that money... right? And if it super spikes I still make a lot of money on my investment from other avenues.

... Right?

This is literally seeming like free money to me which I like because I have abused this in Pokemon for 2 years now.

You still make less in a spike if you had just not sold calls at all. For instance in Thursday I sold a LAZR contract that expires on Friday for $60 that was out of the money, then LAZR shot up 2$ more and so I make the exact same amount of money if LAZR finishes $30.50 or if LAZR ends at $400

I could buy more LAZR to give me an upside, but at the end of the day I still miss out on spikes because I dont have infinite money to invest. The $3000 I have tied up in 100 LAZR shares can never make more than The $60 I sold the call for

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Holy shit.

My accountant looked over my plan and said I could use 50,000 from our primary savings account to play with this. She said 'you are finally thinking like me' :O :O :O

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It is a game changer and we should have been doing it the entire time.

My tips: Always do expiry dates 1-2 weeks out. Anything longer is added risk since your money is held up, and you might as well do multiple 1-2 week calls/puts at a time than one+ month out.

I made this cheat sheet for myself.

you have serial killer penmanship

Should have used crayons bruh

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Cole, I think I saw why I was a bit confused in your example. You had $10,000 but only invested $9,500.

Sunroof posted...

Cole, I think I saw why I was a bit confused in your example. You had $10,000 but only invested $9,500.

Yea, selling a put for 95 takes less buying power than buying 100 shares at 100

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i believe that one depends on if you get assigned or not.

If it expires worthless (or you buy it back for a profit) it should reflect as a realized gain.

If you get assigned it actually will reflect in the cost basis of the stock you buy in a put or the sale price for a call I believe.

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Basically it is a realized gain but how it is actually reflected is weird due to tax reasons afaik.

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Colegreen_c12 posted...

Yea, selling a put for 95 takes less buying power than buying 100 shares at 100

But why not make the scenario selling a put for $100, so that both examples start with the same cost $10,000)?

Colegreen_c12 posted...

i believe that one depends on if you get assigned or not.

If it expires worthless (or you buy it back for a profit) it should reflect as a realized gain.

If you get assigned it actually will reflect in the cost basis of the stock you buy in a put or the sale price for a call I believe.

I think theyre only visibly reflected as realized gains once the expiration date hits.

Sunroof posted...

But why not make the scenario selling a put for $100, so that both examples start with the same cost $10,000)?

Cause you wouldn't sell a put for $100 if the stock price is $100.

Same as you wouldn't sell a covered call for $100 if the stock price is $100

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I see. I am still learning. That is obvious now. Thanks.

So Canada Pacific rail (CP) is buying Kansas City Southern (KSU) this week. KSU Shareholders will get 0.489 of a CP share (worth about $185) and $90 cash, so valued at $275.

A KSU share is $224, so I imagine the price is jumping up today. Getting in under $275 would mean value if the CP price doesn't tank.

I actually own CP shares so I wonder what the long term impact will be. I think the short term impact is that KSU shares go up to near the $275 value, and probably CP shares go down? There'll be share dilution so I dont think it should go up right now, but maybe later.

They are touting this as the first Canada-US-Mexico train network. Can that possibly be true? KSU is apparently situated to focus on Mexico trade and CP is obviously a Canadian rail so it does make sense for this new combined company to be focused on all three countries I guess

CP also has an up coming 5 for one split coming up and supposed share buy backs coming, so who knows where this stock is gonna end up in 3-6 months.

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Bought PENN at $113 for $50k. Its at a big dip lately. I read some good stuff about it. I then set up a covered call at $115 for this Friday. Got $1550 premium!

If DNN spikes today I am going to make some mad fucking money. LET'S GO

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JetBlue down 7+% two days before I am long on it.

I hate the federal government more than ever at this moment.

So lets say a stock I have a covered call on reaches its strike price and then some, before the expiry date. I have the option of buying to close said covered call (for a fee) so that I can sell the stock for a gain greater than the fee?

You'll never be able to sell the stock for a gain greater than the fee to buy back the call. The floor value of a call is always equal to the value of the underlying stock - the strike (because a buyer can in theory always exercise a call and immediate sell the shares).

Selling a call basically hard caps your upper gains.

If you wait until the expiry is close enough you can basically make them equal though.

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Okay, that makes sense.

So my understanding is that the person you are selling your covered calls to can exercise your option at any time, including before the expiry date. Is this right?

Also, how can I tell when my option was exercised?

Generally the winning play there is to roll the call back a week or two at a higher strike so you can hold onto your shares, or just let the call get exercised if you don't care about the shares. Buying back the call and selling the underlying stock you'd only really want to do if you wanted the funds RIGHT NOW.

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Sunroof posted...

So my understanding is that the person you are selling your covered calls to can exercise your option at any time, including before the expiry date. Is this right?

Also, how can I tell when my option was exercised?

Yes, but it's rarely done.

As for when you know it's done, you'd get a notification by your broker and lose the shares and gain money.

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Got it. Thanks

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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I will warn that you don't be too eager to roll back just because you've sold a call that surged into the money. It could keep going up sure but a lot of times at some time before it's going to expire it's going to come back down.

I'm not really a pro at this or anything-- just saying overmanaging your sold calls can lose you money if you're not doing it right. If you're not sure what to do just let the time burn away on the calls rather than rushing out to roll them. I try not to roll calls until the day they expire generally.

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Yeah, if you over manage sold calls it can lose tons of money. Only sell them if there is literally no time value left, as in the price of the option plus the strike price is equal to the stock price

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

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I am not touching GME because I have lost money every time I have.

I am starting to fear tech stocks. I dont have as much confidence in them as I did a few weeks ago. I am considering buying to close my BAND call ($140, 5/21) and then selling my shares for a slight overall gain.

That way Id be rid of the tech stock and would also have extra funds to play with now that I know how to do covered calls and puts better.

Id do the same with PTON but Im too far down still.

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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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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I agree that there's a significantly non zero chance that whatever they announce causes people to buy for whatever reason, even if it's not rationally supported by value of the business

But the chance isn't non zero enough that I bought

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Microsoft rumored to be buying Discord for 10 billion:
https://www.bloomberg.com/news/articles/2021-03-23/microsoft-said-to-be-in-talks-to-buy-discord-for-more-than-10b

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Crypto got hammered today

#BuyTheDip

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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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That makes sense!

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EVRI sub-$14.50! Get in!

red sox 777 posted...

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.

Is this a valid investing strategy?

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I am asking this because I invested 12k into QQQ and said to myself that I am not going to sell this until end of the year no matter what

So I gave myself a deadline
I am wondering if it's smart or stupid

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Your profit when you sell is taxed differently depending on whether you held onto the stock for more or less than a year.

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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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red sox 777 posted...

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.

Yes. I am losing thousands of dollars an hour because I can't sell until tomorrow if I want to be long. Now I am contemplating just fucking holding at this point.