Options Questions Safe Haven Thread | May 06-12 2024

What are some of the more successful strategies for long term profit using options? I know nothing is full proof but it seems like a lot of people use options to play earnings or 0DTE which just seems like gambling. The Wheel strategy is one I’ve been looking into, are there other ones like that?

Am I taking Delta too literally?
it’s often written that Delta is the percent that an option will end in the money at expiration.
So if an option has a delta of 75 then it has a 75% chance of finishing in the money.
if you take that at face value, then out of four options that have a delta of 75, three of them will finish in the money and one of them will finish out of the money. (theoretically over the long run).

is it intended to be taken that literally? because while I haven’t kept the formal track of it, it feels like my trades are failing at a greater rate.
Is that just a case similar to a coin coming up heads four times in a row, possible in the short-term but just not likely,
or am I taking that definition of delta too literally when it was just meant to be a rough estimate.

I would like to buy some put options in some companies I think could potentially go bankrupt in case of a financial crisis. Just businesses with no resilience built in for an economic downturn.

I would prefer to exercise my put options when those stocks are selling for pennies on the dollar. However, there was a recent rule change and those bankrupt companies typically move to the OTC Expert Market, from the rule change by Rule 15c2-11, which almost no one has the ability to buy from. So, instead I might be forced to sell my put options by the broker and cannot exercise them. The difference between selling the option and exercising could be hundreds of millions of dollars.

Does anyone know how exercising put options are affected once a stock moves to the Expert Market? Would I have to approach an institutional investor, and pay a fee to them to buy the shares I need to exercise my options?

Is there a website to check the options premium price during aftermarket or estimate the premium at the open?

I know we cant know with 100% accuracy what it would be due to dynamic IV. But is there a way to get rough ball park?

Few situations:

1. I have a call on Lucid. Of course Lucid earnings failed pretty bad. Now I want to estimate what would be my call values (if any) at open, so I can place a limit order rather than market order and sell it quick first thing at opening bell.

2. I had NVDA put at 915, and now NVDA dropped in premarket. But I have no idea if Im making money on it or not since the premiums are not updated.

I am new to options, and I am not from Europe or US. I am from India and the stock and its options are listed on Indian bourses

I have a view of a small company stock that it is going to be doubled over the next 2 years. I want to leverage and capitalize on it as much as possible. The stock has 30DTE, 60DTE, and 90DTE options available at strike prices within the +/- 30% band only.

The way I am thinking of it is, lets say the stock is 100 right now, I am thinking of buying 90DTE calls of as deep ITM as I could, that is of strike price 70. And hold on to them for 30 days, and sell them to buy calls again for 90DTE of as deep ITM as I can find. Is this sensible? It seems to me that this will give me a large leveraged exposure to the stock with a delta of as close to 1 as I could, and I wouldn’t be facing a lot of theta decay (although I understand its not like LEAPS where if I roll 12MTE options every month, I’d face even lower theta decay). The extrinsic premium doesn’t seem to be too high, I can buy the 70 strike price 90DTE calls, for around ~32-34.
Can I apply a better strategy, or leverage more efficiently?

If you delta hedge long put position when market oscillates do you “buy high sell low” stock or do you “sell high buy low” stock? Could someone explain which is the answer? Thank you in advance

I’ve lost some real money this past month trading options and I’m done with it for now. What I’m looking to do now is buy shares to sell option contracts. Does anyone have any pointers on where to begin? I assume stocks with highest iv? I’m trying to cover some lost ground here, but am trying to do it the smart way- not just trade options more lol Thanks so much!

Let’s say you want to invest in SPY options EVERY month as an recurring investment, what would be the best option?

Buy ITM Calls, preferably LEAPS, once every month on a pre-determined strike price, or probably better, fixed delta?

Or roll the option every month to a lower strike price than the previous month with the additional funds and only buy additional LEAPS as soon as there are no lower strike prices available? That would mean less leverage but I assume spread might be an issue here and therefore LEAPS would not be an efficient option for that?

Have monthly investments in Index LEAPS ever been backtested?

Are some stocks more volatile around earnings than others in a predictable way? Are stocks that are more volatile generally also proportionately more volatile around earnings? I’m mainly wondering whether past volatility around earnings has any meaningful predictive power for just how risky an earnings play is for one stock compared to another  (even if all earnings are gambles, are they all the same extent of gambles?)

In my head it makes sense that an established company having a bad earnings report might cause less drastic in sentiment than a more fledging company having an equally bad earnings report, but not sure if that actually makes sense in practice. Or perhaps earnings are more determinative of sentiment for some companies or industries compared to others 

I bought some NVDA calls before prev. earnings (paid 700$). At a point, they were worth 10k, now they are worth about 300$. I was greedy and waiting for 20-30k to cash out.
If US macro (feds decisions) played out as expected, I believe it would have hit my 20-30k goal.

Anyway, my greed is not the point of the story. They expire on 17th of May. When I bought them, somehow I thought they will expire after May earnings.
Can I roll them or something by one week? How much would it cost me/how do I do it?

Its May 17th Call, 1000 strike.

I sold game stock options 12c 5/10 so well ITM- how likely are they to be exercised tomorrow?

[https://i.imgur.com/1Q2IsCs.jpeg](https://i.imgur.com/1Q2IsCs.jpeg)

I’m trying to determine how I should consider the risk/reward profiles for different call credit spreads.

In this image, I have two call credit spreads with identical short strikes. Both spreads are selling the $66 call. One spread is buying the $66.67 strike, the other is buying the $70 strike.

For the sake of being practical, let’s assume I’m comparing a combination of six the narrower spread strikes to the single $4 wide strike.

So in execution, we would be looking at:

Risk: $394, Reward: $5.94
ROR: 1.51%

2.

Risk: 6x for a total of $396, and Reward: $5.64
ROR: 1.42%

Robinhood charges .03 per contract, so I’ve removed that from the values shown. I’ve taken the bid price on each spread for the lowest possible credit.

The risk / reward is almost identical for the two trades except for the higher efficiency in the wider trade since less money is lost to fees.

I’m wondering how you might view these two trades in case of the worst case scenarios where your short strike is breached, or both strikes are breached.

I’m assuming that all contracts will be held until expiration, and not closed early for a profit or to avoid a loss.

Since maximum loss is achieved only when both contracts are breached and in the money, is it not safer to utilize a spread with more width between the two strikes, since the underlying will have to make a greater move against you in order to reach max loss?

The idea is that you have better odds of the underlying landing between your two wider strikes in a worst case scenario, whereas if you have narrow strikes, it’s quite possible for the stock price to land outside of both of them.

So when you have two trades with identical short strikes, but different long strikes, and identical total risk and rewards, is it better to go wide or narrow when you plan to hold until expiration?

I have 50k to invest that I want to use for 2 things:
1) buy stocks I am long on (SOFI or PLTR)
2) collect covered call premiums along the way, opting for about 1 month out expiry with .2 delta

Any advice or things I should look out for? At this point, I have only dabbled in covered calls and will not be doing any other kind of options.

Which stock would you buy?

I’m thinking 7k shares of SOFI, or 2k shares of PLTR and 1k shares of SOFI, or 1k PLTR and 4k SOFI

Thanks!

Edit: I plan to reinvest the premiums for more shares.

I have chosen SOFI and PLTR because I want to hold these stocks long term but believe there are CCs to pick up along the way

I want to start the SPY wheel but I cannot seem to find the courage to pull the trigger because I am not sure that this is the right period to start writing CSP. The market is slowly grinding up and I get the feeling that it can go down any day now. What is the general approach? Sell the CSP on the way down and avoiding (as much as possible) assignment, or on the way up?

I’m only doing long calls and long put the past months with IBKR paper trading. Doing the US options from the EU. I don’t want to own the stock (buying 100 stock is a nope) so I never exercise, and I always sell before expiration.

My maximum loss should be the premium I paid, but then I seen some people with huge debt because the platform auto exercised. (hi TSLA OTM short 2020)

1) 0DTE or more days can be autoexercised before the market close at 4:00 p.m ?
2) Is there any way to prevent the platform to auto exercise and force to sell? Mail or some document to sign?
3) I’m doing more than 4trades a day, will I be marked as a “Pattern Day Trading” if I”m not from the US?

I recently got approved for level 1 & 2 on robinhood, so I’m trying to learn the ropes.

Right now I’m just using their nice UI to find price to premium relationships.
Question I have – I’m looking at selling an SPY put (785$, 12/28/2026, Ask is 262). Let’s just ignore the volume and likelihood of it being filled – Robinhood is giving it a 55% chance of profit. Let’s say I already own the 100 shares of SPY underlying (let’s say at 450$). Isn’t this just guaranteed profit? SPY would need to fall substantially to reach 450 (and let’s assume the free fall levels there), so I would be collecting a massive premium, and since I own the underlying, I’m just getting a net profit on the shares of 0$.
This seems sort of too simple and I feel like I’m missing something. Could someone explain? Not home so I can’t simulate this with ToS Papermoney

Wash sale question – Suppose I profit $1000 on scalping a long call option for NVDA strike $900 expiration 5/17. I then immediately turn around after a dip, buy the same option strike/expiration, but this time the trade goes against me and I lose -$2000. So now I have a net loss of -$1000 for this instrument. Would this be considered a wash sale in that I cannot consider my cumulative P/L as -$1000 since I used a substantially similar instrument within 30 days? Meaning I lose $2000 AND still have to pay capital gains tax on the original $1000 profit?

I bought 16 contracts of SPY Puts at around 3pm. It says I’m at +$112 currently, but since I can’t sell, my simulated returns go to basically zero by the next market open unless SPY drops another 60 cents. Am I basically fucked or is there any way to hedge?

I’m new to options and am interested in developing a trading plan for long straddles. Do others have an opinion on what a good plan would be as far as what percentages to take profits/cut losses at?

I’m a little confused. I understand that when one buys a call option that a premium is paid to own it. And that if the strike price of said call option is exceeded greatly by the current stock price, then the buyer can close the option and realize the profit minus the premium paid. It is the closing of the option that I don’t fully understand. One can either exercise the option, which means to purchase the full 100 shares of the option, which would be pretty expensive, or resell the option. Would the buyer somehow now be responsible for paying out the option if whomever it is resold to chooses to exercise it? Or is it the original creator of the option that is still responsible? For it would seem prohibitively expensive to even engage in just buying options since there would always be the risk of actually having to purchase 100 shares. Is there something I’m missing? Does this somehow carry over to buying index options as well? I’m just looking for a way to dabble in the simple side of options, just through purchasing one and seeing how it goes. But if there is the risk of me being responsible for purchasing 100 shares if it does well, no matter how I close it, then financially that wouldn’t really make sense for me to actually try options in the first place. Thanks for the help.

I buy 0dte SPY call options. Robinhood sells them automatically at 3:30 pm ET to avoid the possibility of exercising them as I don’t have adequate collateral. They did this again and sold at a loss at 3:30 pm, when they were rising and I could have made a decent profit by 4:15 pm (late close).

I told them I plan to sell these calls at a profit and not exercise them, but they say policy allowed them to sell even if it is a call (so not an obligation to exercise). A DNE cannot be applied to these options either, and a margin account would not have prevented this as well.

Frustrating! Are all brokers like this?