The fancy equity derivatives vol arb thread... a.k.a. Options trading extravaganza

[jdhorn92 1545]

15 contracts of amc at $18 strike rather.  Bought $3k worth 

[52-80 19142]

5 hours ago, jdhorn92 said:

15 contracts of amc at $18 strike rather.  Bought $3k worth 

toss a coin to  your witcher when the brinks truck backs up

 

***

 

my new regular trade now is shorting volatility instruments (vxx/uvxy via long puts) when they spike.  its not that pretty or bountiful but its a decent steady gain.  occasionally buy and sit on svxy as well.

 

 

[jdhorn92 1545]

On 5/18/2021 at 3:14 AM, 52-80 said:

toss a coin to  your witcher when the brinks truck backs up

 

***

 

my new regular trade now is shorting volatility instruments (vxx/uvxy via long puts) when they spike.  its not that pretty or bountiful but its a decent steady gain.  occasionally buy and sit on svxy as well.

 

 

so far so good

[52-80 19142]

8 minutes ago, jdhorn92 said:

so far so good

Damn, you multipled on the intrinsic value incrase alone. Congrats for still holding onto them

[bluto 4912]

Couldn’t help but buy puts on RIDE. Shit popped off this week after announcing production cuts, slashing 22 forecasts, and needing more cash. So Effin dumb.

[52-80 19142]

so big F.

50 minutes from market close, saw TSLA was 633 and dropping, so decided to throw a few hundreds bucks at it going lower. 

Bought 5 x 630P , same day expiry.  Cost $0.93 each (=465$ expended).  Was targeting a close at $1.86, to double the gain.

I forgot that broker had long options on auto-exercise.  Meaning if my options went in-the-money, it would put my account short 500 shares, which draws ~$300k free cash balance (ignoring margins)... which i did not have.  So 30 minutes from market close, broker automatically liquidated the options for $1.00 each.

TSLA proceeded to plummet and flatlined at 625.  Option ended up at $5.00.  Would've given a nice $2000 , or a $1.5k return to close the day.  But I got a total of $35 instead.  Less commisions, less tax...barely good for a 6 pack of beer.

 

 

 

 

 

[Archer 474]

Just read the whole thread after a buddy asked me what I knew about options yesterday (nothing). 
 

Every time I thought I started to get a base understanding you guys would say something else and I’d be lost again. I’ll have to start a paper account and play to try and learn a little. 
 

Selling covered call options: If I own a position I’m looking to exit at $X is there any reason (other than the upside risk if it pops hard) not to sell covered calls at the target exit price? 

[Lobwedgephil 1139]

9 minutes ago, Archer said:

Just read the whole thread after a buddy asked me what I knew about options yesterday (nothing). 
 

Every time I thought I started to get a base understanding you guys would say something else and I’d be lost again. I’ll have to start a paper account and play to try and learn a little. 
 

Selling covered call options: If I own a position I’m looking to exit at $X is there any reason (other than the upside risk if it pops hard) not to sell covered calls at the target exit price? 

You can open a td Ameritrade account and paper trade options using ThinkorSwim, great way to learn options, you don't even need to fund it.  As for your covered calls, select a price you would be happy selling at, if it hits you are out plus your premium, if it doesn't, you collect the premium. It is nice being the house, but also sucks if you miss a big run, so need to be happy with the exit. 

Edited May 29, 2021 by Lobwedgephil

[jdhorn92 1545]

On 5/27/2021 at 4:39 PM, 52-80 said:

Damn, you multipled on the intrinsic value incrase alone. Congrats for still holding onto them

yes exactly, i may sell the options soon and re-buy at market...just to lock in.  Dont have enough in the account to exercise unfortunately.  This has been an extremely interesting play.  20% of outstanding are shorted, so i think the cover play will drive it up further.

[jdhorn92 1545]

12 hours ago, Archer said:

Just read the whole thread after a buddy asked me what I knew about options yesterday (nothing). 
 

Every time I thought I started to get a base understanding you guys would say something else and I’d be lost again. I’ll have to start a paper account and play to try and learn a little. 
 

Selling covered call options: If I own a position I’m looking to exit at $X is there any reason (other than the upside risk if it pops hard) not to sell covered calls at the target exit price? 

There is an exercise option vs selling them.   The reason to not exercise is you will have to have enough money in the account to buy them (assuming there has been a big run up). The downside there is in my case I would be re- buying at nearly a 100% markup since i originally bought in.  I have 700 shares plus the 15 options.

Remember options are fractional shares, so to exercise you are buying the whole share.  Now, you may be able to exercise and immediately sell, I am like you and am just learning.

With TD, you have to be approved to trade options, and im not sure of the criteria.  Could be account history or balance or it may just be ceremonial that they require "approval".  My TD account is a rollover IRA, so i have not added to it since the rollover 10 years ago. I have just used it to be more aggressive (all of my other portfolio is indexed with Vanguard).

In my case, i will likely sell the options, then re-buy unless i get educated enough to exercise and sell in one transaction.  I am going to call them and go through my options, no pun intended. 

Edited May 29, 2021 by jdhorn92

[52-80 19142]

Either I missed something completely, or this was just recently added to my broker:  the ability to trade options on the actual VIX index (a product from chicago board of op ex)

The VIX is commonly used as a portfolio hedge -- they go UP when the SP500 goes down.  The ability to trade VIX, instead of products that tracked the VIX (like tickers VXX, UVXY) has important distinction: it retains its value and market-inversing behavior better.

VXX/UVXY/similar constantly rolls over their holding basket with VIX futures.  Because futures curves are typically in contango, the result is that VXX/UVXY/similar suffers from perpetual erosion of value.  If you look at long term chart, these things are on a perpetual downslope, with small spikes when SP500 gets disturbed.  (This behavior actually makes it great for a separate trading strategy.) 

The VIX itself doesn't have those perpetual downslope (it is mean-reverting), and it has much larger spikes.   So if you buy VIX options to stabilize against SP500 disturbances, youre gonna get a much greater effect.

 

Shits useful

https://cdn.cboe.com/resources/vix_options/VIX_fact_sheet_2019.pdf

[bluto 4912]

I gotta take a second and lap this shit up. $RIDE

Release financial statements saying hey we’re in trouble, need cash, a few wks ago. A day later the most recent meme moon shot began and swept it up in the current so I bought puts thinking reality has to hit. It just kept mooning since, my puts down 95%.

Then this hits today and in minutes I’m up 30% with options exp Friday.

[Lobwedgephil 1139]

That is some serious diamond hands. 

[Muy Frio 182]

 

[52-80 19142]

Short SPY 400P expiring last day of the year - pays around ~6.5$

Long SPY 20x500C expiring last day of the year - costs about 32c each or 6.4$ total.

Total cash outlay is zero, the credit from the short "pays for" the long.  But it will occupy about ~$5k in buying power (/collateral) depending on your broker and their requirements.

If SPY drops 395 or so, you are at breakeven.  It takes an 12% drop and some anti-American wishfulness for that to happen.  If it drops further, you are barely to scratch loss territory.

If SPY grows moderately, you win.  If SPY grows at the same damn pace it has for the last 6 months.... *rocket emoji* *rocket emoji* *rocket emoji*

 

[Lobwedgephil 1139]

2 hours ago, 52-80 said:

Short SPY 400P expiring last day of the year - pays around ~6.5$

Long SPY 20x500C expiring last day of the year - costs about 32c each or 6.4$ total.

Total cash outlay is zero, the credit from the short "pays for" the long.  But it will occupy about ~$5k in buying power (/collateral) depending on your broker and their requirements.

If SPY drops 395 or so, you are at breakeven.  It takes an 12% drop and some anti-American wishfulness for that to happen.  If it drops further, you are barely to scratch loss territory.

If SPY grows moderately, you win.  If SPY grows at the same damn pace it has for the last 6 months.... *rocket emoji* *rocket emoji* *rocket emoji*

 

I like it for a fairly low risk trade. Not my style of trading, but I do sell a lot of naked puts. 

[Chapo 104]

21 hours ago, 52-80 said:

Short SPY 400P expiring last day of the year - pays around ~6.5$

Long SPY 20x500C expiring last day of the year - costs about 32c each or 6.4$ total.

I LOVE THIS!

[52-80 19142]

13 minutes ago, Chapo said:

I LOVE THIS!

lets get this bread

[52-80 19142]

On 9/16/2021 at 6:57 PM, Chapo said:

I LOVE THIS!

the short 400P was pretty much guaranteed to be a winner.  (i closed it at ~$4.80 profit out of the possible $6.5)

the long 20x500C was in the hole for a long time... it dripped down to the 10cent range for most of october, and now at 59cent (original price 32c) for almost 100% profit.... with open skies ahead!!!!!!

 

[Chapo 104]

14 hours ago, 52-80 said:

the short 400P was pretty much guaranteed to be a winner.  (i closed it at ~$4.80 profit out of the possible $6.5)

the long 20x500C was in the hole for a long time... it dripped down to the 10cent range for most of october, and now at 59cent (original price 32c) for almost 100% profit.... with open skies ahead!!!!!!

 

Lol, great minds.... I closed the puts today also. Was tempted to bank the calls profit too but YOLO. We are playing with house money now!

[4thgenhorn 38]

Wrote some covered calls this week:

AAPL: Jan 28 $195 @ $ 2.25

ABNB: Feb 18 $190 @ $ 3.80

AMAT: Feb 18 $180 @ $2.85

 

Pays for some Xmas gifts for sure. Now I need to learn to not look at them for a bit. 
 

I usually look for > 8% OOTM, 60-80 days to exp, > 1% return, and hopefully near all time highs.