Questions tagged [option-strategies]
The option-strategies tag has no usage guidance.
132
questions
2
votes
3answers
150 views
What's to stop me from selling Iron Condors one day before expiration?
AAPL is currently trading at ~115. I can construct the following Iron Condor that expires tomorrow. It has close to a 1:1 R/R ratio:
BUY APPL 121 CALL
SELL AAPL 120 CALL
SELL AAPL 110 PUT
BUY AAPL ...
0
votes
1answer
45 views
What Strategy are these option writers following?
This is the option chain from NIFTY Index about a month from expiry.
Apart from speculation what strategy could these option writers be following by writing in the money calls at 10000 or puts at ...
2
votes
2answers
85 views
Is it important to understand option pricing models before trading options?
Options seem to be one of the most complex financial instruments generally available to retail investors. The common advice given to beginners (at least on this site) is that beginners "must ...
0
votes
1answer
50 views
Options strategy that profits from outperformance (or underperformance) relative to a stock index
If I expect a stock to go down, I could buy put options. Conversely, if I expect a stock to go up, I could buy call options.
If I expect a stock to underperform the market (but not necessarily go down)...
25
votes
2answers
5k views
How do I bet that a stock price will not move?
If I believe a stock will go up, I buy the stock. If I believe a stock will go down, I short the stock. If I believe a stock will neither go up nor down, what do I do? How do I profit from a non-...
6
votes
3answers
993 views
How do I replicate a shorted stock and protective call option using options only?
Suppose a stock is currently at $100. I construct the following portfolio:
Short-sell 100 shares at $100
Long a call option — strike price: $105 (protective call)
The protective call option serves ...
3
votes
1answer
45 views
Prices increases leading to call debit spread loss
I recently entered a debit call spread on Apple and I noticed the price of the sold option appreciated at a faster rate than the bought option resulting in a loss even though the stock moved in my ...
1
vote
2answers
80 views
Does increasing value of a still-out-of-the-money option that you wrote (covered) pose a risk to you?
I am a US citizen living in the US. I want to write covered call options to receive premiums. If implied volatility increases and/or the price of the underlying rises, an out-of-the-money call can ...
2
votes
2answers
186 views
Put option lost value when stock price dropped?
I had purchased 3 puts of MNOV yesterday with a strike price of 7.50 when the stock was worth around $11 and it raised as high as $13+
The stock price had dropped as low as $7.15 and is currently ...
1
vote
1answer
34 views
Call Debit Spread Pricing
I bought an AAPL debit spread today with expiration on 8/7. Here the details:
Exp. 8/7
Sold AAPL $365 Call for $32.85
Bought AAPL $360 Call for $36.40
Max Profit = [(365 - 360) * 100] - 400 = $...
0
votes
0answers
41 views
In what ratio should I buy options to preserve the diversification effect of the underlying stock portfolio?
I want to invest in a certain stock portfolio using long down-and-out barrier options. But I am not sure in what ratio to buy the barrier options to retain the same exposure to the volatility of the ...
1
vote
1answer
89 views
Confusing loss on closing options spread
Today I closed a spread on $TSLA, specifically a 3x bull call expiring Aug 7th, 2020. The spread was composed of 2 legs as :
Buy 1330 call
Sell 1360 call
My P&L on the trade before closing looked ...
0
votes
1answer
87 views
What to do with a call I sold
I own 300 shares of NCLH, I sold a call last Monday with strike price of $16 when the stock was at $15.8 for a premium of $115 (for the 3 calls). The Call expires tomorrow and I don't know what I have ...
0
votes
2answers
42 views
Does option “automatic exercise” take commission into consideration?
Automatic exercise is a procedure implemented to protect an option holder where the Option Clearing Corporation (OCC) will automatically exercise an "in the money" option for the holder, ...
2
votes
1answer
77 views
How long does it take to exercise an option?
If I have a call option and exercise it today will I be able to receive the shares immediately to sell them?
0
votes
0answers
61 views
What happens to my Long Put (Bought Puts) when company file chapter 11
What happens to my long put that i buy for Dec 2020 if the company files for chapter 11 in Nov 2020 or before option expiration.
Would I be able to sell those long puts to get maximum reward for ...
0
votes
1answer
42 views
If after buying puts, you're uncertain if the price will drop in time, should you straddle by buying call options?
My grandparents surmised that SPY would drop to 200 because of COVID-19, and bought on Mar 1 2020 2 (they've sold the rest) SPY Put Options at $230 strike expiring on:
May 15 2020.
June 19 2020.
Now ...
0
votes
1answer
126 views
negative delta for bull put spread
I am working on bull put spread. Currently the spot is way below both the strike prices. So one strike is deep in the money and other is in the money. Net position delta retrieved from Bloomberg for ...
0
votes
2answers
155 views
Is Robinhood good enough for successfully day-trading relatively large positions ($20k~30k)
After I deposited all my money in robinhood to start day trading options, I was told that robinhood execution speed might not be good enough for successful day trading. My plan was to profit off the ...
1
vote
2answers
167 views
How could I calculate the probability of getting wiped out?
Last year I ran a mildly stupid/naive options strategy.
It involved picking 10-15 random companies, and then setting up put credit spreads on each one, expiring 1-2 weeks out. I prioritized high ...
0
votes
1answer
149 views
Interactive Brokers Performance Profile P&L Graph
I'm trying to decipher the following view from a trade I've made on IB. I think I'm missing something important with respect to how trading this option works.
Trade P&L.
I understand that the ...
1
vote
1answer
50 views
How to think about correlation between multiple outstanding options trades
I'm just getting into trading options. I think it would be sensible to ensure that my multiple outstanding trades at any given time are not correlated so that if I lose on one, I am not more likely to ...
2
votes
1answer
85 views
Hidden risks of “limited risk” option strategies
Some option strategies such as bear put spread are inherently "loss-limited", meaning that you know in advance your maximum loss.
As an example, if I buy 10 put options for $100 and sell 10 put ...
0
votes
1answer
114 views
Calculations Check on $SPY Strangle
I'm researching options strategies and I started paper trading a $SPY options. Here's my strategy:
Set up a strangle 5% above and below the market price expiring a month from the day of trade. 12 ...
0
votes
1answer
30 views
Short put above strike price
Today I noticed put options on a number of stocks with an ask price greater than the strike price. One example was USAC Sept-2020 @ $2.50 with an ask price of $4.80 around 2PM EDT.
Is their any ...
0
votes
1answer
51 views
Bear call spread break even
So I opened my first position last week, a small min risk one to try and see what I don't understand, and it's took a while to improve but things look ok now: https://imgur.com/a/9NKDVVr
For ...
0
votes
1answer
80 views
When is the best time to apply Straddle stock option strategy?
I have read that option traders use the straddle option strategy before the earning call approaching for a company. How many days close to the earnings call, the traders will buy the options? Is it ...
0
votes
2answers
74 views
Closing out an in-the-money equity option spreadtrade
I put on a debit weekly diagonal ITM put spread trade on stock A selling at $45 : I Buy back week put strike 55 sell front week put strike 50. I am assigned overnight and have to purchase 100 shares ...
-2
votes
3answers
471 views
Selling covered calls does not make sense
I have one bitcoin and was thinking about selling call while owning the asset.
However after some pondering I came to the conclusion that if price drops then the strategy can only be performed one ...
0
votes
1answer
47 views
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
votes
3answers
677 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
votes
1answer
1k 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
votes
1answer
154 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, ...
0
votes
1answer
2k 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 ...
0
votes
1answer
53 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
votes
1answer
183 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 ...
0
votes
2answers
84 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 ...
0
votes
4answers
341 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
votes
1answer
109 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
318 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 $...
1
vote
3answers
257 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 (...
1
vote
2answers
728 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 ...
1
vote
2answers
78 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 ...
4
votes
1answer
630 views
Can closing a covered call and opening a new covered call trigger a 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
598 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
votes
1answer
456 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 ...
0
votes
2answers
154 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
votes
1answer
317 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
359 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
78 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 ...
