Board 8 > Stock Topic 32

Topic List
Page List: 1, 2, 3, 4, 5 ... 8
Sunroof
08/03/21 4:24:55 PM
#1:


The last one got deleted I think? No idea why.

Last post was about HOOD going up 24%. Looks like its because Woods invested. Did anything ever happen with the lawsuit against them?
... Copied to Clipboard!
Menji
08/03/21 4:55:34 PM
#2:


... Copied to Clipboard!
Sunroof
08/12/21 11:33:41 AM
#3:


Up.
... Copied to Clipboard!
Lopen
08/12/21 11:51:03 AM
#4:


My $17.50 ARRY calls looking strong right about now.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
Sunroof
08/12/21 11:55:34 AM
#5:


I had ARRY at one point, cant remember what happened. Probably lost money.
... Copied to Clipboard!
Sunroof
08/12/21 11:56:25 AM
#6:


My $33 RIOT put looking strong, as well. Im going to do it again next week, maybe set the stroke to $31 depending on where its at.
... Copied to Clipboard!
Lopen
08/12/21 12:37:38 PM
#7:


ARRY is good stuff. I may convert these calls into shares when they expire (got 5 for Oct and 5 for Jan 2022). There is a steel bottleneck that is upping their costs but that price is going to level out and the stock price should be back up to the $20-$30 range in no time.

Also Blackrock has apparently pledged to invest 500m in them which should bring the price up-- also suspect it's been being shorted based on the graph so it could spike hard.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
Lopen
08/12/21 12:42:20 PM
#8:


Main one I'm having my eyes on right now is Coupang. The drop seems like a ridiculous overreaction to a one time problem that it seems like they patched very well (huge fire that cost $350 million-- reason I say they patched really well is a lot of the costs came for helping out their small business merchants-- seems like good PR for the company).

I feel like given its presence in South Korea and Korea's overall GDP 100b market cap seems achieveable in the near future which would translate to stock price of $50 or so. I really wanna go with the 2023 40c it looks easily in the money by the time that date rolls around-- may just hold off a bit and go with the 2024s though.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
masterplum
08/12/21 1:43:14 PM
#9:


I'm actually really annoyed at my stock plays on HOOD

I kept getting assigned and margin called which made me try to buy back into the position. I ended up losing several thousand dollars on liguidity issues.

And I was right about my move, I've lost $4000 in liguidity and made $1500 in being correct about the moves. If the liguidity problems didn't happen I would be up big instead of down big.

#BlogFaqs

---
... Copied to Clipboard!
Lopen
08/12/21 1:46:13 PM
#10:


Were you selling naked calls or puts or something? I'm not sure how getting assigned should matter.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
CoolCly
08/12/21 1:46:58 PM
#11:


Why would you get assigned and margin called?

---
The batman villians all seem to be one big joke that batman refuses to laugh at - SantaRPG
... Copied to Clipboard!
masterplum
08/12/21 1:50:24 PM
#12:


Lopen posted...
Were you selling naked calls or puts or something? I'm not sure how getting assigned should matter.

I had sold $30 calls that expired in 2 weeks and bought $30 calls that expired in 3 months, so the spread between them was nearly zero, under the play that as robinhood decresed in value the spread would widen as they gained time value of money

But the short term calls kept getting assigned so I had to keep selling $30 calls which were extremely illiguid

I should have just closed the position entirely and moved into $40 calls instead (which is what half of my calls were) but I kept thinking Surely it wouldn't happen again.

No, it happened 4 days in a row.

So every time it happened I got crushed by the bid ask spread.

After the third time I even got a phone call from TDAmeritrade telling me I needed to fix my position.

---
... Copied to Clipboard!
Lopen
08/12/21 2:04:27 PM
#13:


Yeah uhh I think a lot of that information is readily available if you have the right resources (ie you're a market maker). I don't believe it was a coincidence you were getting assigned.

Lesson to learn there is not do spreads where execution means you lose money ever.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
masterplum
08/12/21 2:36:03 PM
#14:


Lopen posted...
Yeah uhh I think a lot of that information is readily available if you have the right resources (ie you're a market maker). I don't believe it was a coincidence you were getting assigned.

Lesson to learn there is not do spreads where execution means you lose money ever.

Eh, that's probably not true. In theory assignment should be good for me as it makes the intrinsic value of my short options zero.

The issue was that it was so far out of the money the long options intrinsic value was also zero

---
... Copied to Clipboard!
Lopen
08/12/21 2:55:00 PM
#15:


The thing is I think they know that. It's not digestible by you and I but all transactions are public record to my knowledge and market makers can see vulnerable positions like that

Like all these spreads you have are in plain view as I understand it if you can sift through all the buys and sells made in a day

If they can force you to exercise long calls to cover that is a net positive to them as the premium you pay for the long calls is higher than the premium you receive for the short ones.

I mean you can think it's "luck" but I think if you keep doing that you're going to get burned every time-- better to just use this to learn instead

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
red sox 777
08/12/21 2:56:53 PM
#16:


Generally you will pay large costs every time you run into liquidity problems.

---
September 1, 2003; November 4, 2007; September 2, 2013
Congratulations to DP Oblivion in the Guru Contest!
... Copied to Clipboard!
masterplum
08/12/21 3:10:22 PM
#17:


Lopen posted...
The thing is I think they know that. It's not digestible by you and I but all transactions are public record to my knowledge and market makers can see vulnerable positions like that

Like all these spreads you have are in plain view as I understand it if you can sift through all the buys and sells made in a day

If they can force you to exercise long calls to cover that is a net positive to them as the premium you pay for the long calls is higher than the premium you receive for the short ones.

I mean you can think it's "luck" but I think if you keep doing that you're going to get burned every time-- better to just use this to learn instead

I somehow doubt anyone is singling out me trying to earn $500 a pop in liquidity. That seems not worth someones time.

But who knows.

---
... Copied to Clipboard!
Lopen
08/12/21 3:18:50 PM
#18:


The market maker probably has algorithms watching for stuff like that. Just comb the data and look for people who think they're smarter than they are, punish them for it.

$500 is small fry but it's literally free money as they already have the data analysis running. It's not an issue of being worth the time. They aren't exerting any effort to take your money.

Like I am probably coming off as a jerk here but you're playing off something as bad luck when it happened 4 times in a row and lost you money on paper every time. I'm just trying to save you from losing money again. If your strategy has a hole particularly in low volume holdings you're going to get pushed into that hole you dug for yourself every time.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
Forceful_Dragon
08/12/21 3:47:51 PM
#19:


I feel like i need more information about what exactly is happening.

"I had sold $30 calls that expired in 2 weeks and bought $30 calls that expired in 3 months"

So just to clarify this means that

1) Someone paid you X for a $30 call that expires in 2 weeks.
and
2) You paid someone else Y for a $30 call that expires in 3 months.

And then what? 2 weeks elapses and the calls are getting exercised? Or the positions are being closed before the 2 weeks even happens?

And did you already own the underlying stock going in or are you having to purchase them at cost to sell to someone else for $30? Is that where the money is being lost?

I'm just trying to find where your benefit in the scenario is supposed to materialize. Is it from selling off your 3 month option to someone else?

I'm still in the 'accumulate wealth' phase of investing before I have enough money to play with stock options so I have only a basic understanding of them.

---
... Copied to Clipboard!
Lopen
08/12/21 4:16:54 PM
#20:


The thing is when you buy or sell options it's generally not going directly to a person but rather through a market maker who fulfills both ends of the contract.

So you're buying the right to buy 100 shares at $30 for 2 months
You're also selling the right to have someone buy 100 shares at $30 for 2 weeks

In the buying case you have the right to exercise at any time, even though you generally wouldn't before expiry
Similarly for the selling, they have the right to exercise against you. For in the money options, while it could cost them a small amount of profit to do so, it doesn't cost them money to do it as they're getting shares at cheaper than market value, and they are sending the value of your purchased contract to 0 by doing that

The gist is if they can force you out of your bought 2 month position for less cost than you spent on the contract they will as they make money doing so, since they're both the buyer and the seller of the contracts

Basically the market maker's whole goal is to make options make you lose money since that money goes straight into their pocket. Manipulation of stock price by short selling is one way we've heard a lot of as of late but forcing early exercise of contracts with a lot of time on them is certainly a thing they can do too.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
Menji
08/12/21 4:24:57 PM
#21:


Disney finally paying off

---
... Copied to Clipboard!
Forceful_Dragon
08/12/21 4:26:38 PM
#22:


Lopen posted...
For in the money options, while it could cost them a small amount of profit to do so

Is this because there is some kind of premium with closing a position early? Or is there no premium and they could potentially lose versus waiting and exercising the call when the price is higher?

But I guess what i don't understand is that if the price goes to $40 and if the 2 week calls get exercised, couldn't plum just exercise the 2 month call and turn the whole thing into a wash?

Lopen posted...
The gist is if they can force you out of your bought 2 month position for less cost than you spent on the contract

So it's not individual A or individual B that he has an agreement with for the 2 week and 3 month calls, but rather "market maker entity C". And it's this entity that is aware of both of your positions and sees the opportunity to force your hand? Does that means for many options trades you couldn't simply trace your transaction to another individual on the other side?

---
... Copied to Clipboard!
masterplum
08/12/21 4:32:18 PM
#23:


Forceful_Dragon posted...
I feel like i need more information about what exactly is happening.

"I had sold $30 calls that expired in 2 weeks and bought $30 calls that expired in 3 months"

So just to clarify this means that

1) Someone paid you X for a $30 call that expires in 2 weeks.
and
2) You paid someone else Y for a $30 call that expires in 3 months.

And then what? 2 weeks elapses and the calls are getting exercised? Or the positions are being closed before the 2 weeks even happens?

And did you already own the underlying stock going in or are you having to purchase them at cost to sell to someone else for $30? Is that where the money is being lost?

I'm just trying to find where your benefit in the scenario is supposed to materialize. Is it from selling off your 3 month option to someone else?

I'm still in the 'accumulate wealth' phase of investing before I have enough money to play with stock options so I have only a basic understanding of them.

So I want to clarify before I post this, this is total plum theory and its possible this isn't the optimal way of doing this. I've made a lot of money doing it.... most of the time.

So here's the scenario: A meme stock shoots up from $30 to $60. You know historically meme stocks eventually fall back to earth as people lose interest so you want to bet on it going down. You have a few options

  1. You could just short the stock, but that requires you to borrow money and you have high risk if the stock keeps soaring
  2. You could buy at the money or out of the money options that it would go down, but those are ticking time bombs and could be extremely expensive
  3. You can do what I did, and buy long term calls way in the money, and sell short term calls at the same price.


Why do you do this? Because options have two sources of value
  1. The value of the underlying stock. Or in other words, if you have an option for $50, and the stock is $100, the option is worth at least $50, the difference.
  2. The time value of the option. If the option expires in a month then its worth more than if it expires in a week because American options can always be excercised early.


The strategy is to buy long term and sell short term options where the value of #2 is pretty much zero. You can think of it this way, for an option way in the money, when the option expires is fairly irrelevant. It could expire now or in a month and the options is still going to be the price of the stock - the price of the option.

BUT

If the stock decreases sharply in price then the value of #2 starts increasing. Suddenly it starts to matter if the stock has time value left as the stock price inches closer to the option price.

What this means is the spread between the option you bought and the option you sold starts to widen.

In theory if the stock doesn't move much or goes the wrong direction, you will be out prety much nothing. You bought something that the option market valued to be nearly worthless, and it still is nearly worthless.

But if it moves in the direction you think it is going to then you start making a lot of money as your worthless spreads start exponentially increasing in value.

---
... Copied to Clipboard!
masterplum
08/12/21 4:33:30 PM
#24:


Forceful_Dragon posted...
Is this because there is some kind of premium with closing a position early? Or is there no premium and they could potentially lose versus waiting and exercising the call when the price is higher?

Yes, which is why I got screwed over by illiquidity. I kept trying to get back into my position costing me a few hundred dollars each time.

If I had just given up I wouldn't have lost much

---
... Copied to Clipboard!
Lopen
08/12/21 4:36:00 PM
#25:


Forceful_Dragon posted...
But I guess what i don't understand is that if the price goes to $40 and if the 2 week calls get exercised, couldn't plum just exercise the 2 month call and turn the whole thing into a wash?

The point is Plum paid a considerably higher amount for the 2 month call than he received for selling the 2 week call

It is ultimately about reducing risk if the stock price moves up. If the market maker can force purchased 2 month calls to be taken out of play for the price of a 2 week call, they will do so. It takes away Plum's ability to make gains when the stock price goes up after the 2 week window expires-- it also takes away his ability to sell more calls.

I mean ultimately the math is that he paid X and received Y, and Y is a few hundred dollars lower than X, and market maker knows this as this information is available to them if you're and is just going to take the difference between Y and X because it's free money to do so. Risk free money is always better.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
masterplum
08/12/21 4:37:57 PM
#26:


Lopen posted...
The point is Plum paid a considerably higher amount for the 2 month call than he received for selling the 2 week call

Not really, which was the problem. They were nearly exactly the same which made buying and selling them illiquid. Usually people don't touch options that far in the money.

---
... Copied to Clipboard!
Forceful_Dragon
08/12/21 4:39:58 PM
#27:


But by selling 2 week calls in the money doesn't it stand to reason that those calls are always going to get exercised because they are already in the money?

So how do you make many if you receive X for a 2 week call but you will invariably lose a chunk when the already-in-the-money option gets exercised?

I guess I just assumed if you were buying or selling a call it would be for a price target that hasn't already been reached.

---
... Copied to Clipboard!
masterplum
08/12/21 4:41:59 PM
#28:


Forceful_Dragon posted...
But by selling 2 week calls in the money doesn't it stand to reason that those calls are always going to get exercised because they are already in the money?

So how do you make many if you receive X for a 2 week call but you will invariably lose a chunk when the already-in-the-money option gets exercised?

I guess I just assumed if you were buying or selling a call it would be for a price target that hasn't already been reached.

They usually don't get excercised. There are reasons to buy in the money calls where you want to hold them. For example I bought some deep in the money cracker barrel calls as a form of leverage. Instead of buying 15 shares for $2000, I bought a $2000 deep ITM call which means I'm getting 6X leverage back for my money

---
... Copied to Clipboard!
greengravy294
08/12/21 4:43:46 PM
#29:


Isn't this a diagonal spread lol

---
... Copied to Clipboard!
masterplum
08/12/21 4:43:47 PM
#30:


My $40 HOOD calls for example never got excercised even when HOOD was at $60

Maybe I just went too far in with $30 calls. I don't know

---
... Copied to Clipboard!
masterplum
08/12/21 4:44:14 PM
#31:


greengravy294 posted...
Isn't this a diagonal spread lol

No, its not diagonal. It's a deep in the money calendar spread

---
... Copied to Clipboard!
Lopen
08/12/21 4:45:36 PM
#32:


That's the gotcha yeah

If you sell a call that's deep in the money, the value of letting it run out is very small as there isn't a realistic risk of it falling to that level-- it's better as the market maker to exercise and lose the value and use that to kill longer options

So this supposedly "not really" difference is lost. I have a lot of doubt that you have made a lot of money doing it because it doesn't seem like something that should work very often unless the stock price IMMEDIATELY drops down. I mean maybe that has always happened in which case I'd probably consider that you being lucky rather than the strategy being particularly good, because this hole is literally always baked in there and they know the options you hold.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
Forceful_Dragon
08/12/21 4:47:15 PM
#33:


masterplum posted...
They usually don't get excercised. There are reasons to buy in the money calls where you want to hold them. For example I bought some deep in the money cracker barrel calls as a form of leverage. Instead of buying 15 shares for $2000, I bought a $2000 deep ITM call which means I'm getting 6X leverage back for my money

But then you still have to have enough cash on hand to pay for 100 shares when it's time to exercise, right? And you have just as much risk associated with the price falling, right? Even if it doesn't fall out of strike range because of how far in the money it was, you are poised to gain much less.

All in all this has been fairly enlightening, but when I do have the funds to consider stock options I think I'm going to start simple and simply sell puts on stocks that I (A) can afford and (B) would not mine owning at a discounted price should the strike occur.

---
... Copied to Clipboard!
masterplum
08/12/21 4:48:52 PM
#34:


Lopen posted...
So this supposedly "not really" difference is lost. I have a lot of doubt that you have made a lot of money doing it because it doesn't seem like something that should work very often unless the stock price IMMEDIATELY drops down

Worked on Gamestop, AMC, and would have worked on Robinhood if I didn't screw up.

Like I'm not suggesting this is an everyday strategy, its specifically for meme stock type rallies

---
... Copied to Clipboard!
Lopen
08/12/21 4:49:14 PM
#35:


masterplum posted...
They usually don't get excercised. There are reasons to buy in the money calls where you want to hold them. For example I bought some deep in the money cracker barrel calls as a form of leverage. Instead of buying 15 shares for $2000, I bought a $2000 deep ITM call which means I'm getting 6X leverage back for my money

BUYING calls does not have the same risk you're describing as you're not at the mercy of anything being exercised

Have you SOLD deep in the money calls often when your collateral was long calls and not shares? It seems like something where you should get punished every time unless the stock price immediately moves down.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
Forceful_Dragon
08/12/21 4:50:39 PM
#36:


Lopen posted...
I mean maybe that has always happened in which case I'd probably consider that you being lucky rather than the strategy being particularly good, because this hole is literally always baked in there and they know the options you hold.

Is it possible to deliberately go through different market makers for each side of the 2 week/3 month equation? Or does that not matter because it will all still be visible to all of them?

---
... Copied to Clipboard!
Lopen
08/12/21 4:51:12 PM
#37:


masterplum posted...
Worked on Gamestop, AMC, and would have worked on Robinhood if I didn't screw up.

Robinhood's volatility never touched either of those two though. Like I think the only reason it worked for those two is because the time value on those two for shorter term options is significantly higher than Robinhood's ever was.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
masterplum
08/12/21 4:51:25 PM
#38:


Forceful_Dragon posted...
But then you still have to have enough cash on hand to pay for 100 shares when it's time to exercise, right?

Nope. Your option just gets excercised and your shares get sold at the same time. You get the difference. You only need the initial cost of the option.

Forceful_Dragon posted...
And you have just as much risk associated with the price falling, right? Even if it doesn't fall out of strike range because of how far in the money it was, you are poised to gain much less.

Correct. Its leveraged 6X in both directions, just like leveraging any other way. With the caveat that if it falls enough you get a little cushion because you start getting time value of the option back.

Forceful_Dragon posted...
I think I'm going to start simple and simply sell puts on stocks that I (A) can afford and (B) would not mine owning at a discounted price should the strike occur.

This will 100% be less stressful and a good plan.

---
... Copied to Clipboard!
ChainLTTP
08/12/21 4:55:41 PM
#39:


sold GVSI for some nice gains yesterday

might swing trade this one
... Copied to Clipboard!
red sox 777
08/12/21 4:56:50 PM
#40:


masterplum posted...
Worked on Gamestop, AMC, and would have worked on Robinhood if I didn't screw up.

Like I'm not suggesting this is an everyday strategy, its specifically for meme stock type rallies

Why would you consider Robinhood a meme stock rally?

---
September 1, 2003; November 4, 2007; September 2, 2013
Congratulations to DP Oblivion in the Guru Contest!
... Copied to Clipboard!
Lopen
08/12/21 4:58:09 PM
#41:


Forceful_Dragon posted...
Is it possible to deliberately go through different market makers for each side of the 2 week/3 month equation? Or does that not matter because it will all still be visible to all of them?

I am pretty sure all the data is available to all market makers

Maybe all people too, if you're looking in the right place.

That's why we can see things like open interest on options and institutional ownership and stuff like that.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
masterplum
08/12/21 5:29:29 PM
#42:


red sox 777 posted...
Why would you consider Robinhood a meme stock rally?

Not necessarily a meme stock, but similar rallies have happened in other trendy tech stocks. They spike and then gradually decline before spiking again.

It's pretty consistent behavior for many of the overpriced tech stocks. Robinhood was valued more than Charles Schwabb. That's insanity.

---
... Copied to Clipboard!
Lopen
08/12/21 5:42:56 PM
#43:


It's SIMILAR but I suspect this strategy would have been punished in all but the most extreme cases of volatility, and that includes stuff like the Chinese EV fad last year. It really shouldn't work. I know you're probably thinking I'm tinfoil hatting but my first job out of college was to help design a machine learning algorithm to game when to buy and sell options based on volatility and a bunch of other factors.

There are plenty of automated algorithms out there and if you think you're getting free money with a pure options play it's pretty unlikely you actually are. If there's no risk you're going to get destroyed like this every time, and if you aren't getting destroyed there's probably more risk to what you're doing than you're aware of and you just happened to pick right.

(Note said work was not for an actual market maker, just a random dude with a ton of money, but he had a lot of data to work off of! I'm sure market makers have that much more to devote to automation based on whatever)

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
masterplum
08/12/21 5:50:05 PM
#44:


Oh of course there is risk. Its just lower risk betting against a stock then naked shorting or put options

---
... Copied to Clipboard!
Lopen
08/12/21 5:54:33 PM
#45:


I think puts are probably safer since you're not dangling literal free food in front of market makers and hoping they're too greedy to just take the free money. I really don't like being at the mercy of anything beyond the stock price seems like you're just layering more risk on something that's already more risky than a standard investment to begin with.

---
No problem!
This is a cute and pop genocide of love!
... Copied to Clipboard!
red sox 777
08/12/21 5:59:24 PM
#46:


masterplum posted...
Not necessarily a meme stock, but similar rallies have happened in other trendy tech stocks. They spike and then gradually decline before spiking again.

It's pretty consistent behavior for many of the overpriced tech stocks. Robinhood was valued more than Charles Schwabb. That's insanity.

SCHW is actually my 2nd biggest holding, so I'm pretty sure Robinhood was not valued more highly than it at any point in its rally.

But um, GME (and probably AMC, I'm not sure) was really different from rallies in trendy stocks. The amount of options being traded on GME relative to the amount of stock in existence was insane. I think the number of shares necessary to secure all the GME options was like at least 200% all of the shares in existence. Meaning, most of the calls were being secured by other calls at different strikes/expiries.

With most stocks, the stock price drives the options price, and with GME it was the other way around. The options drove the stock.

---
September 1, 2003; November 4, 2007; September 2, 2013
Congratulations to DP Oblivion in the Guru Contest!
... Copied to Clipboard!
ChainLTTP
08/13/21 9:53:26 AM
#47:


Cardano is back over $2! Thanks Extha!
... Copied to Clipboard!
neonreaper
08/13/21 10:01:31 AM
#48:


I love opening coinbase every morning

---
Donny: Are they gonna hurt us, Walter?
Walter: No, Donny. These men are cowards.
... Copied to Clipboard!
Forceful_Dragon
08/13/21 10:09:01 AM
#49:


ChainLTTP posted...
Cardano is back over $2! Thanks Extha!

There was a positive announcement about smart contracts today for cardano which are scheduled to go live in a month (Sep 12) so cardano is going to be riding high for a bit.

I'm not sure if there will be a pullback after the smart contract bump or if we're just going to go full steam ahead into a new magnitude of valuation, but there is definitely still room to run.

---
... Copied to Clipboard!
Sunroof
08/13/21 10:23:45 AM
#50:


neonreaper posted...
I love opening coinbase every morning

... Copied to Clipboard!
Topic List
Page List: 1, 2, 3, 4, 5 ... 8