Stock market.... What are you doing?

[muncie21]

If the stock hits the strike price and they want to buy the stocks - do you have to do anything or does your stock just get sold?

If you sold a call and it gets 'assigned' (expires in the money) the brokerage will typically liquidate your position within 1 business day. You don't have to take any actions.

Also, there are American and European 'style' options that have slightly different rules on expiration and assignment. Read more about the SEC rules on options here: https://www.investor.gov/introducti...alerts/alerts-bulletins/investor-bulletins-63

 

[CHCRandy]

if the covered call drops in price do you ever buy to close and then resell to lock in a gain?

I am going to move to Robin hood for options i think. ameritrade has commission and $20 assignment fee

Yes, you can sell them then if they fall buy them back. I still have not sold my covered calls on TRVN, I think it may get a pump soon, and I would like for it to pop so I could get more for calls. I will sell them soon though regardless.

If you are a frequent trader, you can call TDA and they will lower your option commission. Think I am down to 40 cents now.....and I have never had an option assigned.

Doc, I think I found another good one to do this with. SURF......I have not done my DD yet but I plan on buying this Monday if it dips and selling covered calls, unless I uncover something over the weekend to change my mind. This stock may go to $15+ in the next few months though. ARK funds has been buying it this week, and they usually don't buy losers.

Just a reminder to all. I am not a professional trader or investor and I don't give any investment advice. I am more a gambler and all my thoughts are just that, me thinking out loud. Please don't blame me if you do this stuff and lose money. It is easy to lose a lot of money quickly if you are not sure what you are doing, hell you may well lose if you know what you are doing....I lose all the time, lol. If you are new to options, and determined to try....please start very small until you learn. I don't want people to think this is simple and easy, because it really isn't, the risk is real, very real. It takes a lot of time and heartache to learn and it will drive you insane if you let it. TDAmeritrade and other sites will let you practice trades with fake money/paper trading.......this is a good way to learn without losing your hard earned money.

 

[hoosierdoc]

I sold some VXRT calls at 0.39, they are now 0.15. if I bought to close i would do good percentage wise and then could sell new ones to lock in gains right?

I need to move everything to robinhood. the assignment fee and 0.65/contract annoys me

I'll look st SURF, thanks

I am seeing people sell short and then write a covered put as a strategy. I guess it's the opposite strategy but they seem to like it

https://youtu.be/65JCiEcZqgE

 

[CHCRandy]

I sold some VXRT calls at 0.39, they are now 0.15. if I bought to close i would do good percentage wise and then could sell new ones to lock in gains right?

I need to move everything to robinhood. the assignment fee and 0.65/contract annoys me

I'll look st SURF, thanks

I am seeing people sell short and then write a covered put as a strategy. I guess it's the opposite strategy but they seem to like it

https://youtu.be/65JCiEcZqgE

That is right, you sell them for 39 cents and buy them back at 15 cents....that is like making over 50% on the options. I love trading SPY options even though I lose 100% often. I will only buy and sell daily expirations on SPY, Monday, Wednesday and Fridays usually. The contract fees eat me up, because I like to trade 100 or more contracts per trade.

I have buddies who use the wheel system. They will find a stock they like long, not buy the shares but sell out of money puts that they think the stock will never reach...then they just collect premiums monthly until they lose and get the stock, they will then just sell covered calls....since they are bullish the stock. I don't like selling naked puts or calls, because then they hold the funds in your account to cover the stock....which ties up my money I could be day trading and scalping with. Now that I think about it.....I guess it is no different than holding the stock in my account to use to cover. I may revisit my logic on that one.

 

[hoosierdoc]

so if bullish on TRVN we should sell puts then, right? that's how I feel on BE, VXRT I think has some downside potential so maybe I should keep calls on those

I may try this plan in RH when I get funds in there

 

[Pepi]

I'm almost 67 so I think it's time I get out of the market. The Orange Man has made me a lot of wealth in the stock market.

 

[muncie21]

so if bullish on TRVN we should sell puts then, right?

Correct, as long as you're comfortable with purchasing the stock in the event the option expires in the money. It wasn't clear if you're referring to naked or covered puts. I'd be cautious of the former as your loss is only limited to the stock not being able to go below zero; unless you have a mitigation strategy that limits this potential risk/loss

 

[hoosierdoc]

to avoid a naked put you just short the stock for the same number of contracts you sell, right?

 

[CHCRandy]

to avoid a naked put you just short the stock for the same number of contracts you sell, right?

My idea of a naked put would be if you owned no shares of a stock, and sold either a put or a call......them options would then be "naked" meaning you are securing them with cash in your account rather than shares. The way I understand it is imagine you own no shares of TRVN, but you sell 50 contracts of $2 February puts for .40 each. Now you will get $2000 put in your account, but then you will tie up $1.60 x 5000 shares $8000 buying power. If stock drops you have to buy the stock at $2 minus your 40 cent premium, so $1.60, but then you would just turn and sell covered calls on them shares to lower your average even more.....but if it don't drop below $2 by expiration you keep the $2000 and get your $8000 buying power back and do it again. Now that I am thinking about this....I don't see a difference on a stock like TRVN whether you go naked or covered, with it being so cheap anyway.

 

[muncie21]

so if bullish on TRVN we should sell puts then, right?

to avoid a naked put you just short the stock for the same number of contracts you sell, right?

Interesting perspective- selling puts or buying calls.
I'm not an options expert, but if I were bullish on a stock (and I didn't own the underlying stock) I'd buy calls. Your risk (loss) is fixed (what you pay for the calls) and profit is unlimited.

Options for this stock don't appear to have a lot of open interest/trading volume.

 

[CHCRandy]

Yeah, SURF is a no go for me I think. Gonna watch it a bit. I am not sure of how good that deal they made with GSK was.....gave away 20% of the pipeline and only got $2 per share guaranteed money. It may pull back when ARK gets done buying it.

 

[hoosierdoc]

I made a stock screener on yahoo to look for stocks with high volatility and low cost. going through them to look at options.

some surprises, SPCE and BBBY

tomorrow gonna sell some naked puts. I can't transfer stocks into RH, and I am selling covered calls on them in TD. gonna have to wait until they expire i guess and sell?

VXRT is best ROI I saw but nervous about it dropping. LI and XPEV I'm afraid of Chinese unaudited Financials

 

[hoosierdoc]

oof. $900B stimulus and the market tanks. interesting.

I did not sell any naked puts yet, fortunately. I'm going to start with FCEL this morning though. one contract and see how it goes

I sold one FCEL for $0.82, Jan 15 $8 strike. 10.2% return based on $800 collateral needed. if stock closes above $7.20 Jan 15 I should be in the money. selling 9.46 now and up on a down day.

 

[muncie21]

With the Dems looking to gain power, I think the market was looking for a boost that had a "T" at the end not a "B"

 

[hoosierdoc]

I cycled my AAL, CCL, and VXRT to lock in gains and push strike date out a week

bought a few SPCE naked puts for 12/31 $24

 

[hoosierdoc]

MVIS took off today and after hours. I'll probably close those out tomorrow

 

[CHCRandy]

I cycled my AAL, CCL, and VXRT to lock in gains and push strike date out a week

bought a few SPCE naked puts for 12/31 $24

Dang Doc! You are on this option thing. I need to get better....yesterday I almost bought SPY daily calls at .05, they finished the day at $2.70. I am an idiot! I didn't do anything yesterday but trade NRZ, tried selling TRVN covered calls but wanted too much for them. I will try again today.

 

[CHCRandy]

Doc, I am adding NRZ Jan $11 calls under a dime today. This is a risky play....but could easily pay 400%+ in next 2 weeks. Every $1000 becomes $19,000 @ $13 or $100 becomes $1000. The reason I am playing this is IPO news could drop any time and send this to $13+...they pay divy next Friday so it should run up a little to that, then maybe dip.....but there is that IPO news I want to be in it big when that happens.

This could be a big loser for me......or a big winner. A true gamble. A casino trade for sure.

 

[JettaKnight]

Doc, I am adding NRZ Jan $11 calls under a dime today. This is a risky play....but could easily pay 400%+ in next 2 weeks. Every $1000 becomes $19,000 @ $13 or $100 becomes $1000. The reason I am playing this is IPO news could drop any time and send this to $13+...they pay divy next Friday so it should run up a little to that, then maybe dip.....but there is that IPO news I want to be in it big when that happens.

This could be a big loser for me......or a big winner. A true gamble. A casino trade for sure.

I've heard mention of NRZ here - is that a good stock to go long with, or just play around for short gains?

 

[CHCRandy]

I've heard mention of NRZ here - is that a good stock to go long with, or just play around for short gains?

NRZ is a really good long hold. They should get back to a $1-2 a year dividend before long......so basically, you own the stock for free in 5-6 years and just collect lifetime royalties. Older guys like to hold it for income in retirement, which is my long term plan, but for now I trade it big, 5000-10,000 shares at a time. If I can just make a dime a day on scalps, that's 500-1000 a day profit. Just have to keep stops, in case it ever dumps again like it did in March. It is worth $13-16 a share, fair value...in my opinion. Book value over $11 and off the book value of $3-6 a share, as soon as this NewRez IPO happens....it should increase book value 30%+.

Be careful though.....housing is scary and a bit risky right now, but this sector is beat up still and not being given true values. May be just as well to play calls and skip getting the divy for now.

Another trade I am looking at is AMPE, very dangerous. Think I will add shares and turn and sell covered Jan. $2.50 calls @ 45-50 cents each. Then use the premium to add some puts on AMPE Jan $1 or 1.50 puts for a 5 to 10 cents.....using the other 30-40 cents to add TRVN and NRZ calls, for free. If I am thinking right.....worse case I should get out even.

Thoughts?