Questions tagged [option-strategies]

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1answer
48 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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5answers
3k views

Why naked call writing is risky compare to Covered call?

I know that with a covered call you own the underlying and sell a call and with a naked call you don't own the underlying. Either way, if the underlying finishes in-the-money, you are assigned and ...
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1answer
169 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
55 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
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 ...
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2answers
1k views

Risk involved in buying LEAP put and selling short term puts against it?

Let's say company A is currently trading at 100. I bought to open 10 puts for company A at 100 strike price in Jan 2015. What risk am I exposed to by selling shorter term weekly puts (strike < ...
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1answer
209 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
90 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
391 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 ...
5
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8answers
10k 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 ...
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1answer
2k views

How many naked option contracts can I write if I want to use maximum margin

Let us say I want to write a naked option on SPX in my interactive brokers margin account. If this is the only position I wish to hold in my account, and I want to use maximum margin, then what is the ...
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5answers
4k views

Why buy a vertical spread if I could instead buy a naked call?

If I believe a stock will go up, say from a price of $100, and I wish to execute an options strategy that would make me money if the stock were to rise, why would I want to setup a vertical spread ...
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4answers
327 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
263 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
821 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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1answer
785 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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2answers
91 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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2answers
380 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 ...
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4answers
674 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 ...
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2answers
158 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 ...
3
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1answer
499 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 ...
3
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1answer
131 views

Are there option strategies that exploit mergers and acquisitions events?

Are there any option strategies that can profit from mergers, acquisitions and buyouts? I don't mean insider trading. I mean after the news is out but the deal has not taken place yet, are there any ...
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4answers
659 views

Is a naked put really that risky

The word 'naked' in relation to options is synonymous with unlimited risk. But 'naked' puts are limited risk, the risk is limited to the strike price. So , why is it classified in the same category by ...
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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 ...
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1answer
483 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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0answers
123 views

Using options to profit from underlying stock and warrants

I'm a suffering shareholder and have underlying stock and warrants (3 years remaining) and want to know how to profit from them using a option or hedge strategy. The current stock price is 30% below ...
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4answers
857 views

Shorting versus selling to hedge risk

If you own 10K shares of stock XXX and you want to hedge your investment, isn't shorting some of your XXX identical to simply selling some of your XXX? Doesn't either approach reduce your risk in the ...
2
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2answers
602 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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1answer
119 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 ...
2
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1answer
2k 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
1k 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 ...
2
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2answers
568 views

Does dividends lead to early assignment of put option, or just call option

Is it correct to say that I risk early assignment only when I am short calls, not short puts? Because the option owner will want to buy stock to capture the dividend, he can only buy it by exercising ...
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2answers
1k 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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2answers
4k views

What happens if futures contract seller defaults?

I'm considering buying a put future to hedge against interest rate increase. I know there is a certain level of protection from default as required by the contract, but I assume the risk is not zero. ...
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2answers
1k views

When does selling (writing) options count for tax purposes?

Let's say I sell an option (say a naked put) that expires in January. If I wait until January to let it expire, does that mean the profits will count towards next year's taxes? Or since I actually ...
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2answers
234 views

Do I have to pay MLP distribution if short via option?

If I sell a naked put on VLP, do I have to pay the partnership distribution if I'm holding the option when the distribution is declared?
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4answers
807 views

Comparison between buying a stock and selling a naked put

Suppose one wants to invest in company X, whose stock is selling for, say, $100/share. What are the differences in profit potential between buying 100 shares and repeatedly selling a naked put at ...
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1answer
220 views

Covered call vs naked put in online brokerages

If a covered call has same risk profile as naked put, how come brokers allow covered call but only allow naked puts to experienced traders?
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1answer
7k views

Difference between naked put, covered put, protective put

If I buy a long put without holding the underlying, does it amount to a naked put? If I hold the underlying and buy a put, is that a covered put? Also if I hold the underlying and sell a put, is that ...
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1answer
38 views

optimal OTM option

Lets say ABC is at 200. If I expect that ABC will be 180 by December, and I can only purchase 1 put option, what would be the most OPTIMAL put option to purchase? This is a question I've had - im ...
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1answer
306 views

What does this mean? SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT

can someone please explain what does this quote mean? SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT what is Vertical what is -10 what the 32/34 stands for? what is LMT
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2answers
722 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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3answers
2k views

Dividend arbitrage using in the money puts

I was looking at dividend arbitrage It seems all I need to do is find stocks with a nice dividend(e.g KO). Then find an in the money put where the time premium is less than the dividend to be paid. ...
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2answers
317 views

Option settlement for calendar spreads

Hypothetical: let's say it's Jan 17, 2015 and AAPL is at 100. My portfolio contains: Long 1 Jan 23, 2017 Call Option for AAPL at 60 Short 1 Jan 17, 2015 Call Option for AAPL at 90 20,000 USD cash ...
2
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1answer
693 views

Am I doing the math for this long straddle strategy correctly?

I'm looking at making a long straddle trade, and I'm trying to make sure I have the math correct before making the trade. Here are the details in the example I want to work out: I'm using options on ...
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0answers
177 views

How to consider the effect of margin call risk in a gamma scalping strategy

I am trying to tippy toe into volatility trading and volatility strategies. So I was reading Sheldon Natenberg where he starts off with a portfolio of long ATM call and short 50 shares of stock to ...
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3answers
1k views

Fund or ETF that simulates the investment goals of an options “straddle” strategy?

With all the market volatility of late, I was thinking that it might be a good short term strategy to employ a straddle approach. For those not familiar with Options trading: This is a strategy ...
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2answers
274 views

Trading intraday fluctuation vs. volatility-based option

Recently a question was asked about actively trading stocks based on small fluctuations in price. It seems like if you wanted to do the strategy described here, you might as well buy an option like a ...
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1answer
74 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 ...
5
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1answer
198 views

How do straddles that involve selling options protect against early assignment?

When doing a covered straddle in options trading, it involves selling put and call options when entering the straddle. But there is no way of guaranteeing that your options won't be assigned before ...