Ty21 Posted January 10, 2021 Share Posted January 10, 2021 So does this call mean it would cost $3300 to buy a contract with a strike price of $25, but then I could theoretically then buy the stock for $25 per for $2500 and sell at the $59 per for the current rate for $75 profit? Assuming the stock goes higher than $59, would that be a logical decision? i don’t have the buying power to do any of this right now since it’s all tied up, but I’m just trying to comprehend it. @Shockwave @El Ramster Quote Link to comment Share on other sites More sharing options...
twslhs20 Posted January 10, 2021 Share Posted January 10, 2021 On 1/8/2021 at 1:46 PM, Shockwave said: Was your initial intent to invest or trade it? Did that short call from Spruce Point change your opinion of the company? If you're an investor and you still believe in the company after the report. Well then your mentality should be I thought it was a good buy at $30 it's an even greater buy now at $24. And average down. If you meant to just trade it then you should have had a stop loss either mental or hard in place. I'm like 90% technical trader and to me the chart looks like it's got some previous consolidation/support around 18-20. That's where I'd look to buy in. But given it's only been trading since Aug/Sep it's hard to say if that support is true or would hold. - If you have more then 100 shares you could sell some $35 covered calls for June for some decent premium - You could buy a protective put which will give you cushion if the stock completely tanks - You could sell half the position and lower your risk But really it comes down to what your strategy was when you bought the position and if your opinion of the company has changed Are you classically trained through a university degree program, or just picked this up with years of experience? Quote Link to comment Share on other sites More sharing options...
Shockwave Posted January 10, 2021 Share Posted January 10, 2021 (edited) 42 minutes ago, Ty21 said: So does this call mean it would cost $3300 to buy a contract with a strike price of $25, but then I could theoretically then buy the stock for $25 per for $2500 and sell at the $59 per for the current rate for $75 profit? Assuming the stock goes higher than $59, would that be a logical decision? i don’t have the buying power to do any of this right now since it’s all tied up, but I’m just trying to comprehend it. @Shockwave @El Ramster So those deep in the money calls have intrinsic value as well as time value. Because NIO is trading at 59 and this is a $25 call you're paying the intrinsic value of the difference of the strike to the current price ($3400). If you buy this call you can then exercise it and take on the shares for $25 a share. Your plan works in theory but that 33.25 is the "mid" which is simply the midway point between the bid and ask. To get filled at that number you'd have to be patient. When you have bid/ask spreads that wide you tend to have to edge more towards the ask to buy and more towards the bid to sell. But let's say you got filled at 33.25 ($3,325.00) You exercise the call to take on the shares at $25 You sell them on the open market for $59 You'd profit $75 but.... Things don't happen that bang bang on assignment. You'd have to contact RH and inform them you want to exercise the call. I believe it takes 1-2 days to take on the shares. In that timeframe if NIO drops in value your $75 disappears. Also some brokers have assignment fees which would cut into the profit (although I believe it's free on RH) So it's one of those strategies in theory could work but it's not an optimal way of deploying capital. There is also a bit of skew at the moment because NIO closed at 58.89 and the options market stops trading at 4PM. In the AH on Friday NIO crept up a bit more so the prices of this call will reset and increase a bit on Monday morning (assuming the price stays the same). TL/DR: Yes you could do this. It's taking advantage of wide bid/ask but it takes some legwork on your part to pull it off consistently for small profits. Edited January 10, 2021 by Shockwave 1 Quote Link to comment Share on other sites More sharing options...
Shockwave Posted January 10, 2021 Share Posted January 10, 2021 22 minutes ago, twslhs20 said: Are you classically trained through a university degree program, or just picked this up with years of experience? 10+ years of fiddling with the markets. I've tried just about everything other then Forex. Self taught mostly but also learned a ton from the Reddit Options and Theta Gang forums. 1 Quote Link to comment Share on other sites More sharing options...
twslhs20 Posted January 10, 2021 Share Posted January 10, 2021 7 minutes ago, Shockwave said: 10+ years of fiddling with the markets. I've tried just about everything other then Forex. Self taught mostly but also learned a ton from the Reddit Options and Theta Gang forums. Well I bought some Udemy courses to get up to speed on all of this. My goal is just investing, but I might give day trading a shot if I ever get sick of science. 1 Quote Link to comment Share on other sites More sharing options...
Shockwave Posted January 10, 2021 Share Posted January 10, 2021 (edited) 1 hour ago, Ty21 said: I’m watching a couple options trading for dummies videos and don’t understand why you’d buy a put. They’re just insurance to protect you from losing money? And calls solely lock in a current or ideal cost for a stock to buy later on under the assumption it’ll be higher than that? Are calls only for people that don’t have the money at the moment but will in the future? I don’t understand the point or how all the money is in options Puts can be used as insurance for a position. Like I suggested to another poster about MGNI. Lets say he has a 100 shares at $30 but he fears it could tank on him and he'd lose his entire investment. He could buy a $20 put for cheap and give himself a safety net now limiting his total loss to $10 a share rather then $30. Because if MGNI tanked to $0 that $20 put would have intrinsic value of $2000 that he could sell. But people also use puts to speculate on a stock going down as well. Shorting an equity in theory has undefined risk because there is no limit to how high something could go. If I short Apple at 130 and it doubles value overnight I now have to pay $260 a share to close the position. Where as when you buy shares it can only go to zero so you know your total risk. Instead of shorting people purchase puts which allows them to profit off an equity decreasing in value. The total risk of the position is the price you paid for the put which is a fraction of the capital it would take to short. So if I was sure Apple was going to fall I could spend 1-2K for a high delta put or utilize $13K to actually short the shares for the same amount of return (depending on the greeks, IV, time value, etc). If I'm right and Apple falls that put will gain value in lockstep with the shares to the rate of the Delta. So if the Delta is say .80 then for every dollar Apple drops the put will gain .80 cents in value (x100) because the put controls 100 shares. Edited January 10, 2021 by Shockwave 1 Quote Link to comment Share on other sites More sharing options...
Shockwave Posted January 10, 2021 Share Posted January 10, 2021 5 minutes ago, twslhs20 said: Well I bought some Udemy courses to get up to speed on all of this. My goal is just investing, but I might give day trading a shot if I ever get sick of science. Yea daytrading to me is just a fun daily distraction. I'm profitable but it's not life changing cash. 2019 I made like 10K, last year was like 8K. It's extra spending money I use to fund my other hobbies (videogames and collecting vinyls) 😎 I have large investment accounts I DO NOT mess with lol 1 Quote Link to comment Share on other sites More sharing options...
holt_bruce81 Posted January 10, 2021 Share Posted January 10, 2021 So i got 2 questions here... 1. What are your guys' thoughts on Ethereum? Do you see it continuing to go up? I've seen price predictions kind of all over the place, anywhere from $3k to 20k. 2. Is it better to put your money in an index fund than it is a traditional savings account at a bank? Quote Link to comment Share on other sites More sharing options...
twslhs20 Posted January 10, 2021 Share Posted January 10, 2021 22 minutes ago, holt_bruce81 said: So i got 2 questions here... 1. What are your guys' thoughts on Ethereum? Do you see it continuing to go up? I've seen price predictions kind of all over the place, anywhere from $3k to 20k. 2. Is it better to put your money in an index fund than it is a traditional savings account at a bank? I can't help you with crypto. I want to get in, but I don't understand it. Any investment, especially an index fun, is way better than a savings account. Have an emergency fun, and that's it. Traditionally savings accounts won't out preform standard inflation rates. It's just a bad strategy. 1 Quote Link to comment Share on other sites More sharing options...
Ty21 Posted January 11, 2021 Share Posted January 11, 2021 ZOM jumped 74% already today making me $1400 2 Quote Link to comment Share on other sites More sharing options...
Ty21 Posted January 11, 2021 Share Posted January 11, 2021 Straight up everything I’m in and wanted to go deeper in is way higher today lol Quote Link to comment Share on other sites More sharing options...
Ty21 Posted January 11, 2021 Share Posted January 11, 2021 Warren buffet said something about being okay with 20% gains but sitting at an average of 60% for a couple of mine so far and all I have to say is **** you warren buffet you don’t know me, I’ll burn myself to the ground. 2 Quote Link to comment Share on other sites More sharing options...
Fresh Prince Posted January 11, 2021 Share Posted January 11, 2021 NIO at $65...... keep the train going baby 1 Quote Link to comment Share on other sites More sharing options...
Ty21 Posted January 11, 2021 Share Posted January 11, 2021 18 minutes ago, Fresh Prince said: NIO at $65...... keep the train going baby I put in a buy at just after close Friday for $59 per that I’m starting to think won’t be accepted Quote Link to comment Share on other sites More sharing options...
holt_bruce81 Posted January 11, 2021 Share Posted January 11, 2021 $ETH dropping. Good time to buy? Quote Link to comment Share on other sites More sharing options...
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