Questions tagged [option-strategies]
The option-strategies tag has no usage guidance.
103
questions
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Bear call credit spread and overall position value
example
https://www.optionseducation.org/strategies/all-strategies/bear-call-spread-credit-call-spread
While both legs are open, wont you see the position as a whole decline as the stock declines ...
0
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2answers
31 views
How to compute IVx (Implied volatility for a specific expiration) and the expected move with options?
By searching online, I have found three methods to compute the expected move of a stock based on option prices and implied volatilities:
Method 1: Extract the price of a Straddle ATM of the front ...
2
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1answer
67 views
Buying and Selling options for the same stock multiple times in a day?
Is it normal that traders buy and sell options of the same stock on the same day multiple times? For example, in an event of a positive earnings release, the CALL options were bought and then sold it ...
0
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1answer
39 views
Option Spread Max Loss Think Or Swim
I used to trade options on think or swim, the trade analyzer used to default to showing you 'Max Loss' on a particular spread, and it does not show this anymore. Does anyone know how to reenable it, ...
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1answer
177 views
Selling deep-in-the-money puts
I bought 1000 shares of xyz stock for $2.70 ($2,700) and it started dropping value soon after to $2.50. I can sell deep-in-the-money puts ($7.00 strike) currently for $4.20 per option. Meaning I would ...
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1answer
46 views
What option exit strategies and history can be used if I want to take the profit before the expiration?
I created a P/L graph for 2 CALL OPTION contracts XYZ Jan 15 2021 120 Call. I want to take some profit before the expiration of January 15, 2021. What technical data that I can use to figure out a ...
0
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1answer
32 views
Strangle Vs Long Call LEAPS for a scenario
The stock price of a stock is now $70. The trader is speculating that the stock price can go to $120, but then there will be pull back to $50. It can happen in the next one year.
Is it a good ...
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2answers
67 views
Choosing an Option Expiration Date
Consider a company going to be profitable in an year and its stock price will go up. In an year it will make a small leap but not a whole a lot. Is it a good strategy to buy its options right now that ...
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4answers
120 views
Option implied volatility and 95% losing trades?
I trade options. Whenever I buy puts or calls, I end up breaking even or losing, sometimes losing a HUGE amount of money even though price has gone my direction and time decay (theta) has been ...
0
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1answer
71 views
What is the effect of a short stock position on the value of an option?
I'm reading the book "Option Volatility and Pricing" by Natenberg and there is a paragraph I'm having trouble understanding.
Chapter 7 (Risk Measurement 1), Page 98, Paragraph 2:
The value of a ...
3
votes
4answers
269 views
Trying to get my head around how options work
A stock X is trading at $215. I bought a put at a strike price $195 for $2.55 premium(paid $255) expiring June 7.
Today the stock is down by $15 to $200.
However, the price of my put is reduced from $...
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3answers
203 views
How to buy a contract for S&P 500 index?
I am researching writing covered calls on S&P500 index. So in order to sell covered call I need to buy a contract for S&P500 index. I've never traded indexes. What exactly I will be buying (...
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2answers
226 views
Delta of a Vertical Spread | Slower than delta of long option?
People often prefer to trade options spreads rather than buying options, since those reduce your cost and have a defined profit and loss but what is the probability of success of a spread?
For example ...
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2answers
66 views
basis adjustment on wash sale on underlying or option
Transaction1: I bought 200 QQQ ( ETF) at about $160 in Jan 2019, paying out about $32k
Transaction2: I sold two calls on QQQ ( QQQ190628C00170000 ) for expiring on June 28, 2019 for a strike price ...
3
votes
1answer
193 views
can closing covered call and opening a new coverd call trigger wash sale
In Jan 2019, I bought 200 QQQ (ETF) at about $160 and also wrote two covered calls for June 2019 at 170 (higher than the last day price) netting a small premium. Now QQQ is at about 185 so it will be ...
4
votes
4answers
277 views
What fundamental value do Options give the economy?
I had been wondering lately what the economic value that financial Options (Calls, Puts, American, Bermudan, etc) give to the economy is. In essence, what good do they give us, vs. simply trading the ...
3
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1answer
274 views
Put Option Payoff Replication (Dynamic Hedging)
We know that we can use the below equation in the link to replicate the payoff of a call option using stocks and bonds.
I am wondering what the equation would look like for a put option instead. In ...
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2answers
126 views
can't find suitable prices for zero cost collar
I was reading about the zero cost option collar strategy and was puzzled by the idea that one can find an at-the-money put option for the same price as an out-of-the-money call.
I've looked at the ...
0
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1answer
174 views
Expected stock price move using IV
From this post https://www.projectoption.com/expected-move-explained/, he uses the following formula to calculate a 1 SD move in the stock:
How do you know which stock option to use for this?
For ...
1
vote
1answer
171 views
Are there any mutual funds tracking equity index put option writing?
Put option writing on equity indices (like the S&P 500) can be a strategy to pick up some small premiums in a rising market while buying some slightly discounted positions in the index during ...
1
vote
3answers
75 views
Are collars really downside protection?
I see collars often mentioned as downside protection for a stock you own. My question is: How?
Let's say you bought at stock at 45 and it is now 50. You can collar the 45 cost basis (one strike above ...
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1answer
207 views
Approach to roll down a Covered Call
If I sell a covered call and the stock declines some time before expiry, what would be a strategic approach to roll down the call to protect the downside, or are there any other approach to do it? Do ...
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1answer
990 views
Deep in the money Covered Calls with high premiums
Take a look at following option chain, it's for some company in Indian markets,
I intend to do a covered call on the stock but I would want a little extra downside protection at the cost of little ...
2
votes
1answer
520 views
Long term option sell short term options against it
Company A is currently trading at $100.
I bought 10 calls at a $110 strike price which expire in six months.
What would be the best strategy (risk to reward) to buy or sell monthly options against ...
0
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1answer
142 views
Why are my funds locked up in my trading account while using bear put strategy?
Today I used a bear put strategy and I was surprised to see that some funds in my trading account were locked up as margin used. It is well known that the potential loss in bear put strategy is ...
1
vote
1answer
846 views
Risk of selling stock cash secured puts and covered calls
I'm trying to determine what the potential downside is for selling call and put options, aside from the obvious loss of money if the stock moves past the strike price of the call or put sold.
Right ...
2
votes
3answers
145 views
What hedging strategy can I use to approximate selling one half of an in-the-money option contract?
Apologies if the question title is confusing; I'll explain:
I have one contract of an expensive call option which is in-the-money and expires next year. It has roughly tripled since I bought it, and ...
1
vote
1answer
139 views
How was the media able to identify that certain VIX put and calls were made by the same entity?
From the article below, how can someone be certain all these trades were performed by the same entity?
To fund it, the investor sold approximately 260,000 VIX puts expiring
in January with a ...
2
votes
2answers
235 views
does naked call option assignment result in stock borrowing fees?
If I write a naked call option which gets exercised early, will I have a chance to purchase the stock to cover the call or will I already owe a stock borrow fee by the time I am notified of the ...
0
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2answers
117 views
Trading a Bull Put Spread when broker does not offer multi-leg orders possible?
Lets assume I would like to trade a Bull Put Spread on a stock from which I think it will go up moderately.
I therefor buy 1 OTM put & sell 1 ITM put option, both having the same expiration time....
1
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3answers
932 views
How can you calculate the POP (Probability of Profit in options strategy)
I'm making a spreadsheet to compare several option strategies. Is there a way I calculate the POP (probability of profit) or the Delta.
A rough estimation will do for me.
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2answers
53 views
Bull call spread
My textbook says the following for a bull call spread.
"In the bull call spread, you sell a call with a lower strike price and buy a a call with a higher strike price. The call spread is a credit ...
3
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3answers
897 views
Why this strategy with options and zero risk is not possible?
I'm learning options and I've seen strategies with graphs like these:
Why is not possible to combine a Butterfly with Straddle to get something like this (green is final result):
I'm very new ...
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1answer
90 views
Hedging a portfolio using Bull Call Spreads
I'm having some difficulty understanding how one would hedge a portfolio using bull call spreads as outlined in the following paragraph (
Today is also a good day to revisit my suggestion for a ...
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votes
1answer
72 views
Ratio Write and Income Taxes
Imagine that an investor owns 500 shares of the XYZ stock with a current value of 50 and a cost basis of 30. He then sells 5 call contracts with a strike of 65 for 2 dollars. Latter he buys back the ...
1
vote
3answers
477 views
Options: Trying to close a naked call position after the underlying drops in value
I'm having some difficulty understanding how this sort of a trade example would play out. Some input would be very much appreciated!
Let's say $FB is trading at $184 today.
I write OTM naked ...
3
votes
2answers
504 views
Inverted strangle
I am researching inverted strangles and feel like I’m missing something. Suppose I buy 100 shares of XYZ @ $50. I then sell one deep ITM call at $45 for $6, resulting in a $1 profit. At the same ...
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1answer
502 views
Writing OTM puts and calls with strike prices beyond reasonable
I have a flaw in my logic that I am hoping someone could help catch since I am certain it's flawed.
Suppose AAPL is trading at $200 (it's $179 but i want to round it off for simplicity) right now.
I ...
2
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2answers
486 views
Stock options: payoff diagrams assume European style exercising
Most literature on stock option strategies expresses payoff outcomes in terms of European options -- namely, ones that can only be exercised on the expiration date.
See this Iron Condor payoff ...
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1answer
476 views
Naked calls and buying the stock later
I've been thinking about naked call lately. Let's say I sell an OTM naked call with a strike of 10. The stock trades at 9.5. The risk is that if the stock shoots past 10, when I am called I have to ...
2
votes
3answers
329 views
Options “Collar” strategy vs regular Profit/Loss stops
I just found out about the option "collar" strategy which is implemented with a long put and a short call. My understanding is that a collar limits the profit as well as the loss on the underlying ...
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vote
2answers
994 views
Why doesn't someone choose the lowest Strike Price when choosing an CALL option?
When choosing a call option, there are usually a number of strike prices that are in-the-money. My understanding is if a buyer chooses the lowest strike price, he will pay a higher premium but the ...
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8answers
7k views
Why would someone want to sell call options?
I'm having trouble understanding why someone would want to sell call options. For example, if the writer of a call option owned the shares and they expected the share price to fall, why wouldn't they ...
1
vote
2answers
191 views
Selling an Iron Condor vs Selling the Put and Call as individual pieces
Is there any advantage to selling an Iron Condor over selling the Call and Put Vertical Spreads that make up the Iron Condor. In TOS I can not figure out how to adjust one side of the Iron Condor ...
2
votes
2answers
337 views
Closing out a Short Guts position where the put side has 0 volume and 0 OI
This spread may not even be available after the holiday is over, but here's my question:
I found a high paying high probability guts trade. If you don't know, a short guts is selling an ITM put and ...
0
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1answer
2k views
What does a high theta mean for an option position?
I have a Call Spread for a position in TSLA that has a theta of 15.67 with 43 days left till expiration. I can see that it's comprised of a 64.71 and a -49.04 theta.
How can I best understand what it ...
2
votes
1answer
141 views
What is a call spread and how does it work?
First let me apologize in advance, I am an amateur in this world at best, and my terminology is a little weak. However this phrase "buy/sell a call spread" seemed pretty light on description every ...
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2answers
811 views
Break Even On Options Contracts
Given a calendar options contract (sold 1 month out, bought 2 months out same strike price) and someone says to look to adjust/close out the position at the break even points.
Do they mean break even ...
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1answer
106 views
How to interpret these explanatory graphs (about option strategies)?
I was reading about different option strategies at TradeKing and although I think I understand how these strategies work, I don't see how they are explained by the accompanied graphs.
So just to take ...
3
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1answer
306 views
Is there a regulatory reason that only AEX has daily options
There is a lot of press over the years about the success of daily options contracts and expirations on the AEX-index.
AEX is Amsterdam's stock index, an economic indicator for the Netherlands share ...
