alanh
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Post by alanh on Jul 8, 2021 12:15:27 GMT
I first sold the 690 put and got $200. Then I swapped it to a PMCC to collect premium. So I bought it back at $205 and realised £623 loss (probably around $900) Then did the following PMCC: - Bought a Dec17 21' 550 call for $159.75 - Sold the Jul16 21' 690 call for $9.35 I must be around £2k losses so far. I was thinking to keep selling 690 call at further expiration date to avoid losing more if the stock bounce back. However I'd collect lower and lower premium as the stock tank lower.... The short 690 call expires in a week. Theres a risk of a spike above this level which would cause you problems, but assuming that doesn't happen you will then just be left with the Dec 550 call, so at least you know that your max downside is limited to the premium paid. If you sell 690 calls against this you need to be aware that you have a maturity mismatch between your long Dec call and short 690 call which introduces more risks - specifically the risk that the stock has a huge rally just as your short 690 call expires which you are then obliged to pay out on. To quantify this you would need to know the delta and gamma profiles of the options you hold.
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cwah
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Post by cwah on Jul 8, 2021 12:30:53 GMT
Yeah I've made sure my leap has a delta higher than my covered call. So if there's any rally I wouldn't be short.
I plan to keep rolling it over to collect premium and hopefully break even..... :/
Why does it have to crash just after I bought?
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alanh
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Post by alanh on Jul 8, 2021 12:48:47 GMT
Yeah I've made sure my leap has a delta higher than my covered call. So if there's any rally I wouldn't be short. I plan to keep rolling it over to collect premium and hopefully break even..... :/ Why does it have to crash just after I bought? If the stock rallies above 690 just before expiry you WILL be short. The 690 call is short dated, it will currently be low delta but will have a lot of gamma around its strike - in simple terms this means it will go from being a low delta option to a near delta 1 option very rapidly as the stock rallies through 690 (if it were to do that). You would then find that you have a short call with a higher delta that your long call - hence you would be overall short.
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alanh
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Post by alanh on Jul 8, 2021 12:51:27 GMT
....and all this assumes you have sold the same number of calls as you bought and do not have it as some kind of ratio calendar call spread
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cwah
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Post by cwah on Jul 8, 2021 13:18:57 GMT
Yes I checked these on the simulator.
My long call has 70 delta and 0.14 gamma. My short call has 9.9 delta and 0.39 gamma which will become 9.6 delta at expiry.
So unless tesla double in price I shouln t be short
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cwah
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Post by cwah on Jul 8, 2021 13:21:53 GMT
The long call was extremely expensive btw. So I can't afford to buy 2 calls. Just had 1 of each
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alanh
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Post by alanh on Jul 8, 2021 13:43:42 GMT
Yes I checked these on the simulator. My long call has 70 delta and 0.14 gamma. My short call has 9.9 delta and 0.39 gamma which will become 9.6 delta at expiry. So unless tesla double in price I shouln t be short At expiry your option delta only has 2 possibilities - it is either delta 0 (if it is out of the money), or delta 1 (if it is in the money i.e. above 690) - it cannot have a delta at 9.6 at expiry. On your option simulator if you put in something like: Date = July 14th (i.e. 2 days to expiry of the short 690 call) Tesla stock price = 725 and you will then find that your short call delta is approaching 1 and will therefore be higher than the long call delta........leaving you net short
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Post by Deleted on Jul 8, 2021 14:07:49 GMT
Why does it have to crash just after I bought? Ok, assuming this is not a rhetorical question. i) You're investing in a very volatile stock. As has been pointed out, high volatility = expensive options, and your 'hunt for premiums' has led you to trade something volatile. Don't be surprised when it then acts in a volatile manner. ii) You are investing in a share which has rocketed by a factor of 10 times in the space of a year, in a broader market which is near record highs, and almost certainly inflated by massive central bank intervention. The scope for corrections should be obvious. iii) Your strategy seems almost random and very emotional. You talk of being happy to own a share at a 30% discount, then panic when it drops 3%. This resembles gambling on a roulette wheel rather than a prudent long-term investment approach. And this is just 'macro'-level stuff. It looks like alanh is exploring the 'micro'-level technicalities of the option market with you. Investing with options is like gardening with a chainsaw. Can be very productive, but also very easy to do yourself a serious injury if you make a mistake.
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cwah
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Post by cwah on Jul 8, 2021 14:17:28 GMT
Yes I checked these on the simulator. My long call has 70 delta and 0.14 gamma. My short call has 9.9 delta and 0.39 gamma which will become 9.6 delta at expiry. So unless tesla double in price I shouln t be short At expiry your option delta only has 2 possibilities - it is either delta 0 (if it is out of the money), or delta 1 (if it is in the money i.e. above 690) - it cannot have a delta at 9.6 at expiry. On your option simulator if you put in something like: Date = July 14th (i.e. 2 days to expiry of the short 690 call) Tesla stock price = 725 and you will then find that your short call delta is approaching 1 and will therefore be higher than the long call delta........leaving you net short Aaah makes sense. It just shows the 2 leg and I select the date in the dropdown to see what happen. Probably the simulator isn't correct. I'll rollover my option as soon as it reach 690 to avoid this. I just want to break even now!
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keitha
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2024, hopefully the year I get out of P2P
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Post by keitha on Jul 8, 2021 16:37:30 GMT
I'm not the expert here on this but don't rollover As I read it you are about 2k down, if you rollover and lose another 2K will you then double your stake to try to get that 4K back.
You are chasing a loss, never ever chase loses
I'm nigh on 2% down on my stock market investment today. But I see it as a long game I'm beating the Interest on a bank account by a factor of 250 over 2 and a bit years.
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cwah
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Post by cwah on Jul 8, 2021 16:44:51 GMT
I'm not the expert here on this but don't rollover As I read it you are about 2k down, if you rollover and lose another 2K will you then double your stake to try to get that 4K back. You are chasing a loss, never ever chase loses I'm nigh on 2% down on my stock market investment today. But I see it as a long game I'm beating the Interest on a bank account by a factor of 250 over 2 and a bit years. Why would I lose another 2k if I rollover? I m just planning to rollover my short covered call.
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iRobot
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Post by iRobot on Oct 9, 2021 19:00:03 GMT
Seeing alanh posting on the Vanguard thread reminded me of his very insightful posts here. cwah - if you don't mind sharing, how did this one play out?
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cwah
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Post by cwah on Oct 14, 2021 12:53:54 GMT
Tesla ended up surprisingly well. I suppose its good luck to be on up trends.
However I didn't realise how much leveraged I was and sold few Baba and Zoom puts. Both of them had their share price halved, which multiplied the losses.
I didn't realise that selling a 400 put for zoom was to put on the line $40,000 to lose.
I obviously got assigned and my margin account is at its limit as I don't have the cash.
So borrowing the money elsewhere to pay back the margin interest and trying to avoid the margin call.
Big mistake on my side. I should have put only in tesla....
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registerme
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Post by registerme on Oct 14, 2021 15:53:11 GMT
Big mistake on my side. I should have put only in tesla.... I disagree. Your big mistake was investing in risky, volatile, complex products that you don't understand . And you can't afford to run the loss making position . I hark back to my first post in this thread .
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Post by Deleted on Oct 14, 2021 15:57:46 GMT
However I didn't realise how much leveraged I was and sold few Baba and Zoom puts. Both of them had their share price halved, which multiplied the losses. And now you understand why short option strategies are often known as 'picking up pennies in front of a bulldozer' You *MUST* fully understand the risks before you use these strategies.
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