Questions tagged [option-strategies]

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84 views

Do any options strategies make money in the long run?

As far as I can tell, one can only make money in options in the long run under two conditions: You take advantage of arbitrage opportunities You have better insight into the distribution of prices of ...
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37 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 ...
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31 views

How to run a active long vol. strategy

Suppose I'd like to have 10 % of my portfolio allocated to "long volatility" either by rolling straddles or buy x % monthly OTM options when market is up or down y %. Obviously going all in on one ...
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1answer
40 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 ...
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1answer
53 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 ...
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2answers
112 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 ...
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2answers
138 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 ...
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1answer
37 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 ...
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1answer
34 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 ...
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1answer
73 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 ...
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1answer
65 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 ...
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1answer
29 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 ...
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1answer
44 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 ...
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1answer
61 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 ...
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3answers
246 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 ...
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1answer
45 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 ...
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3answers
181 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 ...
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1answer
409 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 ...
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1answer
85 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
891 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
48 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 ...
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1answer
80 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
73 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
229 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 ...
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1answer
74 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 ...
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4answers
291 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
240 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
377 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
68 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 ...
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1answer
266 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 ...
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4answers
417 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
384 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
142 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 ...
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1answer
238 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 ...
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1answer
273 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 ...
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3answers
77 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
283 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
1k 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 ...
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1answer
630 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 ...
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1answer
171 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 ...
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1answer
1k 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 ...
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3answers
180 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 ...
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1answer
145 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 ...
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2answers
344 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 ...
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2answers
163 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....
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3answers
1k 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
57 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 ...
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3answers
2k 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
103 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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1answer
73 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 ...