Sanrith Descartes
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Investing General Discussion
- Thread starter Furious
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Furry
WoW Office
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Airlines often work together by basically letting other airlines run flights for them. You know how you book a flight on american but then you'll get on some different airline's flight at a connection? That's how you'll typically see it as a passenger, on end of the airlines they essentially agree not to compete against each other so they don't get into price wars on routes.
Helps them stay more profitable and makes building a flight for the passenger easier.
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Furry
WoW Office
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And a bit of warning about codeshare agreements. It allows the airlines to agree on a way to cut flights and provide the same (reduced) service. It could be a sign that they are preparing to do some official chopping (*Lots of flights aint going already). In this environment it'll benefit them long term, dunno how the markets would take that.
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It absolutely means AA is going to reduce flying at JFK/LGA/EWR and B6 will take over the slack. AA is shrinking and can't hope to stay competitive on its own north of PHL or west of PHX anymore. Hence why its roping in B6/AS to help. They need to focus on preserving what they have in Chicago and the southeast.
We should of all seen this coming when B6 announced the major LAX and EWR expansions recently. Now we know how they are getting more gates at LAX.
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Means airlines can sell seats on other airlines and they split the revenue by a agreed upon percentage. Your bags and connections are protected between airlines just like if you were booking your fights through one airline itinerary.
Contrary to what Fury said, its illegal to price fix, non-compete, or coordinate schedules with a codeshare partner. Domestically.
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Sanrith Descartes
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I think the next big hurdle we are going to deal with is schools opening or not. Markets absolutely hate uncertainty. I think earnings are priced in already. This isnt a politics thread so I won't go there, but if major population states declare schools closed the markets will puke. Corona or no Corona we have a lot of volatility in play until November. The problem with political type volatility is its almost impossible to account for. Mind your risk the next 3 or 4 weeks.
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Sanrith Descartes
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Question: I dont want write stuff up if there isn't an interest in it.
How many people trade or have the ability to trade options? How many people trade strictly in a retirement account (IRA/Roth, not a 401k as i doubt you can actually trade in it) and/or a brokerage account?
There are some strategies to enhance returns with limited risk during markets like this. I am not talking about naked options, but covered calls and cash covered puts. Neither require borrowed money (margin trading) so your risk is capped.
If anyone is interested in discussing this stuff, speak up.
How many people trade or have the ability to trade options? How many people trade strictly in a retirement account (IRA/Roth, not a 401k as i doubt you can actually trade in it) and/or a brokerage account?
There are some strategies to enhance returns with limited risk during markets like this. I am not talking about naked options, but covered calls and cash covered puts. Neither require borrowed money (margin trading) so your risk is capped.
If anyone is interested in discussing this stuff, speak up.
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LachiusTZ
Rogue Deathwalker Box
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Sanrith Descartes
Veteran of a thousand threadban wars
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Covered Calls - A basic look.
So a couple of strategies to make extra money in sideways or downward market. The first is called selling “covered calls” on stock you already own.
Basically, you sell people the option to buy your stock at a set price (the strike) on a set day (the expiry). You get paid for selling the option contract to buy the stock and keep the money whether they exercise the option or not. The keys here are not to be greedy and you have to be willing to actually sell the stock should it come to pass.
Example:
You own XOM (I feel for you) at a cost basis of 44$ a share. You own 500 shares. XOM has been moving sideways for the last couple of months in trough. So, step one is to look at the “option chain”. Here is the live option chain as of right now… (that little "C" you see is my options that expire tomorrow)
Now the next step is to decide what price you would be willing to sell at. This can be tough. Lets say if you could sell at 46$ you would make a 5% gain on your stock (not counting any dividends you may have collected already). So lets say at $46 you may not like it, but it wouldn’t end your world. Options expire each week on Friday so instead of looking tomorrow, lets look at next Friday (7/24). The bid/ask for next Friday on the call side (the left side of the chain) is on the chart. Look for the $46 strike down the center and then look left. The bid is 0.35 and the ask is 0.37 a share.
So, if you choose the $46 strike a buyer would pay you (the bid) of 0.35 cents per share. Options trade in contracts of 100 shares. Thus each contract you sold you would be paid $35.00 . This money is yours no matter what. So for sake of this example, you choose to sell 5 contracts (covered by your 500 shares you own, thus you aren’t borrowing anything) at the $46 strike price. You earn $175. If at the end of the day next Friday XOM stays below $46, the options expire worthless (as the owner wouldn't exercise them and pay $46 a share for stock that I selling for less than $46) and you made $175. On the other hand, if the stock price is above $46 next Friday, lets say it is at $48 a share, you would honor the contracts and sell your shares at the strike of $46 even though they are trading at $48. The trick is, you were OK selling at $46 but in actuality you got $46 plus 0.35 due to the contract premiums you collect.
Now this is an income generator in that each time the contracts you sell expire, you get to do it again and collect more premium. So, in the example above, you paid $22,000 for your XOM when you bought it. Assuming it expired worthless you made $175 free money. That is a return of 0.80% which doesn’t sound like much. But you made it in a week. Lets say you repeat it four times in a row successfully. You have now made a 2.38% gain on a stock that is doing nothing but going sideways or down. Hypothetically, lets say you pull this off for a year. That’s 2.38% * 12 months is a 28.6% return, plus add in the dividends you collect because you own the stock and that’s another 8% for a total of 36.6% yearly return. That’s Apple-like.
The yearly example is a little crazy but not impossible. I use it to demonstrate that taking small little gains repeatedly can really add up and make a dead stock profitable. The real downside is you may end up having to sell the stock. But you get to sell while taking some extra coin along the way. Let me stress, the risk increases substantially if you try this on stock that you are currently underwater on (ie.. your cost basis is more than the current trade price). You really need to think that through. Also, while you are under contract, you cant sell those shares. You would need to buy contracts to cover the ones you sold before you can sell the stock or wait until the contracts expire. That is why I am demonstrating very short-term windows. You can sell contracts that expire next year and make a bunch of money on the contracts… but… you are locked up for a long time holding those shares. Those same contracts out in Jan of 2021 pay over $3.00 a share at the $47.5 strike price. Yep, $3 per share or $300 per contract. But you are locked up for a long time holding those shares.
This is an incredibly basic explanation. The idea is to give you a view as to what it is. Feel free to ask question or clarifications. If you think about doing this, definitely hit me up for a much more detailed look at it before trying anything.
edit - PS.. I forgot to mention this is useful as another strategy aside from just income. That is hedging. I sell covered calls on my DAL stock. I sell them far enough out of the money that I dont think they will exercise, but consider this.. the value of the covered call is correlated to the stock price. So as the stock price goes down, so does the value of a new covered call. Since you sold the covered call, the cost to replace it (buying a new one to close your net short position) with a new one is actually a net profit for you. So as the stock price goes down, the value of your covered call goes up. Example... I lost $134 on paper today with my 100 shares of DAL. However since the stock price went down the value of my covered call went up by $29. Its not a wash by any stretch, but it does eat away at some of the paper loss.
So a couple of strategies to make extra money in sideways or downward market. The first is called selling “covered calls” on stock you already own.
Basically, you sell people the option to buy your stock at a set price (the strike) on a set day (the expiry). You get paid for selling the option contract to buy the stock and keep the money whether they exercise the option or not. The keys here are not to be greedy and you have to be willing to actually sell the stock should it come to pass.
Example:
You own XOM (I feel for you) at a cost basis of 44$ a share. You own 500 shares. XOM has been moving sideways for the last couple of months in trough. So, step one is to look at the “option chain”. Here is the live option chain as of right now… (that little "C" you see is my options that expire tomorrow)
Now the next step is to decide what price you would be willing to sell at. This can be tough. Lets say if you could sell at 46$ you would make a 5% gain on your stock (not counting any dividends you may have collected already). So lets say at $46 you may not like it, but it wouldn’t end your world. Options expire each week on Friday so instead of looking tomorrow, lets look at next Friday (7/24). The bid/ask for next Friday on the call side (the left side of the chain) is on the chart. Look for the $46 strike down the center and then look left. The bid is 0.35 and the ask is 0.37 a share.
So, if you choose the $46 strike a buyer would pay you (the bid) of 0.35 cents per share. Options trade in contracts of 100 shares. Thus each contract you sold you would be paid $35.00 . This money is yours no matter what. So for sake of this example, you choose to sell 5 contracts (covered by your 500 shares you own, thus you aren’t borrowing anything) at the $46 strike price. You earn $175. If at the end of the day next Friday XOM stays below $46, the options expire worthless (as the owner wouldn't exercise them and pay $46 a share for stock that I selling for less than $46) and you made $175. On the other hand, if the stock price is above $46 next Friday, lets say it is at $48 a share, you would honor the contracts and sell your shares at the strike of $46 even though they are trading at $48. The trick is, you were OK selling at $46 but in actuality you got $46 plus 0.35 due to the contract premiums you collect.
Now this is an income generator in that each time the contracts you sell expire, you get to do it again and collect more premium. So, in the example above, you paid $22,000 for your XOM when you bought it. Assuming it expired worthless you made $175 free money. That is a return of 0.80% which doesn’t sound like much. But you made it in a week. Lets say you repeat it four times in a row successfully. You have now made a 2.38% gain on a stock that is doing nothing but going sideways or down. Hypothetically, lets say you pull this off for a year. That’s 2.38% * 12 months is a 28.6% return, plus add in the dividends you collect because you own the stock and that’s another 8% for a total of 36.6% yearly return. That’s Apple-like.
The yearly example is a little crazy but not impossible. I use it to demonstrate that taking small little gains repeatedly can really add up and make a dead stock profitable. The real downside is you may end up having to sell the stock. But you get to sell while taking some extra coin along the way. Let me stress, the risk increases substantially if you try this on stock that you are currently underwater on (ie.. your cost basis is more than the current trade price). You really need to think that through. Also, while you are under contract, you cant sell those shares. You would need to buy contracts to cover the ones you sold before you can sell the stock or wait until the contracts expire. That is why I am demonstrating very short-term windows. You can sell contracts that expire next year and make a bunch of money on the contracts… but… you are locked up for a long time holding those shares. Those same contracts out in Jan of 2021 pay over $3.00 a share at the $47.5 strike price. Yep, $3 per share or $300 per contract. But you are locked up for a long time holding those shares.
This is an incredibly basic explanation. The idea is to give you a view as to what it is. Feel free to ask question or clarifications. If you think about doing this, definitely hit me up for a much more detailed look at it before trying anything.
edit - PS.. I forgot to mention this is useful as another strategy aside from just income. That is hedging. I sell covered calls on my DAL stock. I sell them far enough out of the money that I dont think they will exercise, but consider this.. the value of the covered call is correlated to the stock price. So as the stock price goes down, so does the value of a new covered call. Since you sold the covered call, the cost to replace it (buying a new one to close your net short position) with a new one is actually a net profit for you. So as the stock price goes down, the value of your covered call goes up. Example... I lost $134 on paper today with my 100 shares of DAL. However since the stock price went down the value of my covered call went up by $29. Its not a wash by any stretch, but it does eat away at some of the paper loss.
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Jysin
Ahn'Qiraj Raider
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Just as an FYI, my 401k is managed by Fidelity. I use their Active Trader Pro software on my desktop. Before active trading, you can go into your usual generic 401k and open what they call a "Brokeragelink" account. You can then actively trade (including options) with your 401k portfolio. No margin account capability though.
I am just starting to dabble in options. Using my regular investing account with E*Trade, you can download their Power ETrade app and do some paper trading. Been messing around with that trying to learn options. In the meantime, my active ETrade account I have simply been day trading and flipping shorts / purchases.
I sold some TSLA shares short at $1760 per share the other day. Just kicking myself for not shorting more. Also shorted some DAL at 28.70 yesterday when it ran up quick on the Moderna hype. Covered those today at 27.40 for a nice quick and tidy profit.
Really happy to read your options advice. Thanks for your posts over the last few months here!
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Jysin
Ahn'Qiraj Raider
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NFLX reported earnings. Missed by a fair bit in EPS. ($1.59 vs. $1.81 expected)
Down nearly 10% in after hours.
**Just a personal thought on Netflix. It will be interesting how Covid will affect 2021. Many productions are on pause for the foreseeable future. Maybe it will hit earnings when people get bored waiting for new (quality) content? Something to think about.
Down nearly 10% in after hours.
**Just a personal thought on Netflix. It will be interesting how Covid will affect 2021. Many productions are on pause for the foreseeable future. Maybe it will hit earnings when people get bored waiting for new (quality) content? Something to think about.
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Sanrith Descartes
Veteran of a thousand threadban wars
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Covered Calls Follow-up
I thought about this on the drive home and wanted to add some things to the post above. it occurred to me I take for granted some things that I know from experience that needs greater detail on. For instance price discovery. How do you choose that strike price? Throw a dart? You need to look at some charts and do some technical analysis. Here is XOM over the last 90 days...
I added the two black lines to show the trough it has been moving in. I omitted the spike as a one-off event. Now go back to our example above. $46 isnt a sure thing to remain below, but if you draw a line across $46 there is about a 2-week period in June where it closes above it. for the most part, the odds are in your favor of it staying below that strike without a serious market event occurring. So roughly 10 weeks out of 12, it hasn't breached $46.
Also - We have talked briefly about options really being about math. They are called the Greeks. Whatever platform you are using should have some sort of options calculator to assist you in calculating the odds of your option exercising or not and calculating potential profits. Read about the Greeks here...
www.investopedia.com
Selling covered calls while underwater in a position adds risk. That being said it can be used to dig yourself out of that hole. for instance using the above to incrementally make some money which in essence lowers your cost basis. You can also use it to get out of a position. Lets say in the above example your XOM cost basis is 44 and the stock is trading at 40. Yes you could just wait it out, or you can say "if I can get out of here at 46 I would be happy to be out of it". You arent going to make a lot trading deep out of the money calls, but if it does hit, you are out at a profit and made some money. if it doesn't hit, you just rinse and repeat and bank a little bit each contract expiration. If you are down 15% but can make 1 or 2% every few weeks that 15% down starts to dissolve.
I thought about this on the drive home and wanted to add some things to the post above. it occurred to me I take for granted some things that I know from experience that needs greater detail on. For instance price discovery. How do you choose that strike price? Throw a dart? You need to look at some charts and do some technical analysis. Here is XOM over the last 90 days...
I added the two black lines to show the trough it has been moving in. I omitted the spike as a one-off event. Now go back to our example above. $46 isnt a sure thing to remain below, but if you draw a line across $46 there is about a 2-week period in June where it closes above it. for the most part, the odds are in your favor of it staying below that strike without a serious market event occurring. So roughly 10 weeks out of 12, it hasn't breached $46.
Also - We have talked briefly about options really being about math. They are called the Greeks. Whatever platform you are using should have some sort of options calculator to assist you in calculating the odds of your option exercising or not and calculating potential profits. Read about the Greeks here...
What Are Greeks in Finance and How Are They Used?
The Greeks, in the financial markets, are the variables used to assess risk in the options market. A Greek symbol is assigned to each risk.
Selling covered calls while underwater in a position adds risk. That being said it can be used to dig yourself out of that hole. for instance using the above to incrementally make some money which in essence lowers your cost basis. You can also use it to get out of a position. Lets say in the above example your XOM cost basis is 44 and the stock is trading at 40. Yes you could just wait it out, or you can say "if I can get out of here at 46 I would be happy to be out of it". You arent going to make a lot trading deep out of the money calls, but if it does hit, you are out at a profit and made some money. if it doesn't hit, you just rinse and repeat and bank a little bit each contract expiration. If you are down 15% but can make 1 or 2% every few weeks that 15% down starts to dissolve.
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Sanrith Descartes
Veteran of a thousand threadban wars
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Sanrith Descartes
Veteran of a thousand threadban wars
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Gratz on the win, but I cannot stress enough, and I wish
Blazin
wasnt spending the summer out at his mansion in the Hamptons and could reinforce this... Be fucking careful selling short. Unlike being long a position, being short has infinite downside risk. If by short you mean using some put options, ok. But if you mean literally selling short I hope you are really sure. I have been doing this for a long time and I do not sell short. I may be a pussy, but the risk just isnt worth the reward in my opinion. Especially in a momentum stock like TSLA.- 2
Loser Araysar
Chief Russia Correspondent / Stock Pals CEO
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Houghton Mifflin shares were up 30% today on news that they launched some rinky dink remote learning student/teacher software. Id start looking for anyone trying to roll out same service
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Sanrith Descartes
Veteran of a thousand threadban wars
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Isnt that the paper company Steve Carrell worked for in the Office?
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Big Phoenix
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Sanrith Descartes
Veteran of a thousand threadban wars
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Loser Araysar
Chief Russia Correspondent / Stock Pals CEO
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