Everything Options

Fogel

Fogel

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Buying power is how much you can buy with whatever leverage your margin account is set for. You also get less leverage with options versus stocks which is why the buying power for stocks vs options is different. This factors in how much cash you need to keep on hand for the margin requirements
 
Sanrith Descartes

Sanrith Descartes

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ShakyJake said:
Well, I'm playing (paper) with vertical spreads for now. And I'm trying to understand the margin required for real trading.

Screenshots from ThinkOrSwim:

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View attachment 378288

Here I'm ordering a vertical spread on Amazon. As the Order Confirmation dialog shows, I could have a max loss of $345. Let's assume for the moment that I have margin enabled -- does that mean my account needs at least that amount available? Also I'm not clear on what "buying power" means.
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Keep in mind a single options contract for AMZN is over $300k in real dollars. Maybe focus on stocks with reasonable stock prices unless you are rolling in Scrooge McDuck money.
 
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ShakyJake

ShakyJake

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Sanrith Descartes said:
Keep in mind a single options contract for AMZN is over $300k in real dollars. Maybe focus on stocks with reasonable stock prices unless you are rolling in Scrooge McDuck money.
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I'm constantly seeing articles and videos about trading credit spreads for small accounts. Vertical spreads being the example above (you also have iron condors, butterflies, etc. etc). That's the thing, though -- if I had "Scrooge McDuck" money I wouldn't be fucking around with these option spreads that net a couple hundred bucks or less. From what I gather is that selling a put + buying a lesser strike price put "cancels" out the massive potential cost of selling a put (or call). Does the broker see that transaction as a single unit or two separate transactions? That's what I'm confused on. If the option expires and one part of it is ITM, what happens? I fully understand you don't let it get to that point, but still, what if...? No one ever mentions this in the instructional videos.

Also, I played around with credit spreads on smaller valued stocks, but the gains are so minimal it's not even worth the effort. Granted, I could be looking at the wrong stocks. I tried Ford and some other stock around 20 bucks that I wouldn't mind owning if the put sell executes...but again, the profit you get from the spread is so tiny who cares.
 
Sanrith Descartes

Sanrith Descartes

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ShakyJake said:
I'm constantly seeing articles and videos about trading credit spreads for small accounts. Vertical spreads being the example above (you also have iron condors, butterflies, etc. etc). That's the thing, though -- if I had "Scrooge McDuck" money I wouldn't be fucking around with these option spreads that net a couple hundred bucks or less. From what I gather is that selling a put + buying a lesser strike price put "cancels" out the massive potential cost of selling a put (or call). Does the broker see that transaction as a single unit or two separate transactions? That's what I'm confused on. If the option expires and one part of it is ITM, what happens? I fully understand you don't let it get to that point, but still, what if...? No one ever mentions this in the instructional videos.
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Selling a put means you have to have the cash collateral or go on margin. Buying a put should not "cancel" the collateral for the put you wrote in my mind. Perhaps someone who plays spreads can chime in.
 
ShakyJake

ShakyJake

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Sanrith Descartes said:
Selling a put means you have to have the cash collateral or go on margin. Buying a put should not "cancel" the collateral for the put you wrote in my mind. Perhaps someone who plays spreads can chime in.
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Yeah, the whole point with these credit spreads is having those option contracts expire OTM.
 
Jysin

Jysin

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I put some throwaway money into SQQQ 7C 29OCT weeklies last night into the close of market with QQQ at all time highs for 6c per contract.

Now I’m wishing I took far bigger size. Hoping we get a bit of a washout sell at the open.
 
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Jysin

Jysin

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Sold half for 100% at the open. Balance is on the house to see if we fall apart being Friday, end of week, end of month and some negativity following AAPL / AMZN guidance.
 
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Sanrith Descartes

Sanrith Descartes

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Thought about writing some more PLTR covered calls and then saw earnings coming up next week. Noped right out of that.
 
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ShakyJake

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Is there some general rule of thumb on how to evaluate the premium of a call or put option? As in, is it overpriced, underpriced, or just right?
 
Fogel

Fogel

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ShakyJake said:
Is there some general rule of thumb on how to evaluate the premium of a call or put option? As in, is it overpriced, underpriced, or just right?
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There's a lot of variables there, you have to consider the following:

IV: The more volatile the stock the higher the premium is going to be
Theta: The closer you get to expiry, the price will move faster as theta decay gets exponential when you get closer to expiry
Delta: This is how much the option price will move for every dollar the stock moves

Option premiums will spike up when there is a gap up in a stock, but then as it consolidates around the same price the premiums will usually come down a bit.

When selling puts or covered calls, I like to get around .5 to 1% return on a weekly for example
 
Fogel

Fogel

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Had FUBO covered call at 30 last week, closed just under at 29.80, its now flirting with 33$, talk about by cutting it close. Just sold the 37$ covered call for .37 11/5 expiry
 
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ShakyJake

ShakyJake

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Well, my first foray into option trading has turned out pretty well (so far). Bought late December calls for F, AMD, VTI, and IWM. Up about a couple grand off a pretty modest investment.
 
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Fogel

Fogel

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Jesus Christ look at the call premiums on the FUBO weeklies, Its at 34$ and I can sell the 42$ call weekly and still make over 1% on premium. I guess they're expecting a big move on earnings

1636383207932.png
 
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ShakyJake

ShakyJake

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Got totally lucky with AMD. I had bought a Dec 17 $135 call a couple weeks back and just sold when AMD hit $150 a moment ago.
 
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