UpstateAg said:

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If you bought it, it expires worthless. And I'm guessing you have restrictions that won't let you sell naked puts.

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Nitpick, there's no such thing as a naked put. A sold put is just covered by cash (or other equities, though, your broker probably will only consider a portion of any other equity positions as sufficient coverage since all equities have some level of correlation). Depending on your brokerage, level of trading account, and the volatility of the underlying, the amount of "coverage" will vary. In basic accounts, you likely have to have the full cash amount in reserve in the event the stock went to zero (you'd have to buy the the shares at the strike price, but immediate liquidation of the shares would produce zero value since the shares are worthless).

A sold call can be "naked" as their is technically no amount of cash (or other equity) that can cover the potential gains that the call could see (i.e. there is no limit on the upper value an underlying stock can theoretically go to). However, just like some brokerages and certain trading account levels do not require "full coverage" on any sold puts, they will often let you sell "naked" calls but require that your account hold a significant amount of cash or other equities to "cover" the position should the underlying move against your position (i.e. stock goes up).

In either case, if the underlying moves against you, the brokerage will likely reassess your "coverage ratio" and if it is insufficient, you will be in a margin call and required to either close the position or post more collateral (cash or equities).

If you buy one contract of SPY call at $1.00 how can you be on the hook for that much? I guess I don't understand. I thought the most you would be out is ~$100

I like where Canopy (CGC) is going. I think it could hit $50 in a year. I got in recently at $14.34 but I'm buying more.

Any of you got thoughts on NBR? I picked up a ton of it a while back and I'm down a bit rn but its history and recent highs have so much upside i'm considering doubling down and buying more.

HP doesn't usually post targets, but MRVL, target is 35, cup and handle formation. He was @ someone, so I wonder if he meant this to be private. It's not now! I might jump into it Tuesday and look at calls.

CrazyRichAggie said:

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If you buy one contract of SPY call at $1.00 how can you be on the hook for that much? I guess I don't understand.

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Selling

BREwmaster said:

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HP doesn't usually post targets, but MRVL, target is 35, cup and handle formation. He was @ someone, so I wonder if he meant this to be private. It's not now! I might jump into it Tuesday and look at calls.

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Bruce at simplertrading Made a lot of people a lot of money on that stock today

I guess I still don't get it..

CrazyRichAggie said:

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I guess I still don't get it..

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Long puts and calls have limited risk, selling puts and calls have huge amounts of risk, unless they're covered.

CrazyRichAggie said:

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I guess I still don't get it..

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If you buy 1 call for $1 premium (ie, $100 cost) you have the right to purchase 100 shares at the strike. As I understand it, if you are ITM at expiration, your broker is going to exercise the call, triggering a purchase. If the strike was $295, you have a $29.5k purchase triggered. Even if SPY is at $297, you have to buy $29.5k of stock before you can sell for $100 profit.

This is why I'm currently too chicken**** to screw with SPY. I even with margin, I don't have enough to get exercised yet.

If you buy a SPY call and you hold it when it expires in the money your broker will exercise your option to buy 100 SPY shares at the strike price unless you expressly direct them otherwise. Today, for example, if you held the 5/22 SPY 295, it would've closed in the money (SPY closed at 295.44), so your broker would exercise the option and buy you 100 shares at $295ea ($29,500)

McInnis 03 said:

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BREwmaster said:

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HP doesn't usually post targets, but MRVL, target is 35, cup and handle formation. He was @ someone, so I wonder if he meant this to be private. It's not now! I might jump into it Tuesday and look at calls.

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Bruce at simplertrading Made a lot of people a lot of money on that stock today

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I'm in the 6/19 $32 calls already.

Gotcha, but if you are ITM why would one hold until expiration? I guess they just forget to sell the contract?

Failure to sell is the only thing I can think of

cisgenderedAggie said:

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CrazyRichAggie said:

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I guess I still don't get it..

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If you buy 1 call for $1 premium (ie, $100 cost) you have the right to purchase 100 shares at the strike. As I understand it, if you are ITM at expiration, your broker is going to exercise the call, triggering a purchase. If the strike was $295, you have a $29.5k purchase triggered. Even if SPY is at $297, you have to buy $29.5k of stock before you can sell for $100 profit.

This is why I'm currently too chicken**** to screw with SPY. I even with margin, I don't have enough to get exercised yet.

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Different brokerages have different ways of handling it... but what your are describing is buying calls and your exposure is pretty much limited to your premium no matter what.

Selling a call on the other hand (that you don't already own), you are exposed to the difference in the closing price minus the strike price minus the premium X 100. So if the stock sky rockets, you can be on the hook for a lot.

Ok, that make sense. Just don't hold any puts or calls until expiration that you have ITM

AGSmith said:

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If you click on Option Summary, there's a "Tax Info (Year to Date)" tab on the left that includes gain/loss plus dividends and capital gains distributions

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Thank you! That makes me feel a lot better.

willjohnathan said:

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cisgenderedAggie said:

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CrazyRichAggie said:

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I guess I still don't get it..

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If you buy 1 call for $1 premium (ie, $100 cost) you have the right to purchase 100 shares at the strike. As I understand it, if you are ITM at expiration, your broker is going to exercise the call, triggering a purchase. If the strike was $295, you have a $29.5k purchase triggered. Even if SPY is at $297, you have to buy $29.5k of stock before you can sell for $100 profit.

This is why I'm currently too chicken**** to screw with SPY. I even with margin, I don't have enough to get exercised yet.

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Different brokerages have different ways of handling it... but what your are describing is buying calls and your exposure is pretty much limited to your premium no matter what.

Selling a call on the other hand (that you don't already own), your are exposed to the difference in the closing price minus the strike price minus the premium X 100. So if you a stock sky rockets, you can be on the hook for a lot.

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Yeah, I thought buying calls was the question. I'm still curious though, does the order of operations not apply at some brokerages? I thought you would have to have at least margin allowance to cover the purchase when exercised. Also assumed that they may sell of the rest of your **** to make the difference, even before you can order to sell.

I don't know your income or domicile state, but in Texas, you should be safe holding aside whatever percent your marginal tax bracket is on gains. My approach is marginal tax rate plus 2%

cisgenderedAggie said:

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willjohnathan said:

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cisgenderedAggie said:

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CrazyRichAggie said:

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I guess I still don't get it..

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If you buy 1 call for $1 premium (ie, $100 cost) you have the right to purchase 100 shares at the strike. As I understand it, if you are ITM at expiration, your broker is going to exercise the call, triggering a purchase. If the strike was $295, you have a $29.5k purchase triggered. Even if SPY is at $297, you have to buy $29.5k of stock before you can sell for $100 profit.

This is why I'm currently too chicken**** to screw with SPY. I even with margin, I don't have enough to get exercised yet.

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Different brokerages have different ways of handling it... but what your are describing is buying calls and your exposure is pretty much limited to your premium no matter what.

Selling a call on the other hand (that you don't already own), your are exposed to the difference in the closing price minus the strike price minus the premium X 100. So if you a stock sky rockets, you can be on the hook for a lot.

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Yeah, I thought buying calls was the question. I'm still curious though, does the order of operations not apply at some brokerages? I thought you would have to have at least margin allowance to cover the purchase when exercised. Also assumed that they may sell of the rest of your **** to make the difference, even before you can order to sell.

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RobinHood for instance will sell the option an hour before expiration if you don't have the cash to cover it. Others have indicated that they had the remaining stock go into their account after enough was sold to execute the option. Usually you aren't going to let it go to expiration if you don't want to exercise it.

cisgenderedAggie said:

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willjohnathan said:

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cisgenderedAggie said:

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CrazyRichAggie said:

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I guess I still don't get it..

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If you buy 1 call for $1 premium (ie, $100 cost) you have the right to purchase 100 shares at the strike. As I understand it, if you are ITM at expiration, your broker is going to exercise the call, triggering a purchase. If the strike was $295, you have a $29.5k purchase triggered. Even if SPY is at $297, you have to buy $29.5k of stock before you can sell for $100 profit.

This is why I'm currently too chicken**** to screw with SPY. I even with margin, I don't have enough to get exercised yet.

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Different brokerages have different ways of handling it... but what your are describing is buying calls and your exposure is pretty much limited to your premium no matter what.

Selling a call on the other hand (that you don't already own), your are exposed to the difference in the closing price minus the strike price minus the premium X 100. So if you a stock sky rockets, you can be on the hook for a lot.

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Yeah, I thought buying calls was the question. I'm still curious though, does the order of operations not apply at some brokerages? I thought you would have to have at least margin allowance to cover the purchase when exercised. Also assumed that they may sell of the rest of your **** to make the difference, even before you can order to sell.

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If you hold a call that expires in the money most large brokerages will exercise then unless you direct them otherwise. It's a Reg T "freeriding" violation to sell shares that were purchased without the settled cash to cover the purchase. A Reg T violation can result in a 90 day account freeze

Don't forget if you're the writer of an option that's itm, it CAN be exercised early. Assignments can happen early.

So is mine but they send 1099s with summary's of short term and long term gains and losses. Shouldn't be too complicated right?

Every knee shall bow and every tongue shall confess

AGSmith said:

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If you buy a SPY call and you hold it when it expires in the money your broker will exercise your option to buy 100 SPY shares at the strike price unless you expressly direct them otherwise. Today, for example, if you held the 5/22 SPY 295, it would've closed in the money (SPY closed at 295.44), so your broker would exercise the option and buy you 100 shares at $295ea ($29,500)

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Not necessarily. They will exercise the option, but then you will be in margin call and forced to liquidate the shares. So, there is risk in that if the stock drops over the weekend and opens down, you will only be able to sell the shares at a lower price.

Example: Buy 1 $295 SPY call
SPY closes at $296 on expiration Friday. You don't close the the position by selling the call before Friday Close. You will be assigned 100 shares at $295 a share so if you don't have $29,500 in your account, you will be in a margin call, meaning you must liquidate the position immediately or post additional collateral (cash), if you don't, the brokerage will forcefully sell the shares at whatever the opening price of SPY is on Monday morning. Thus, if Covid-19B pops up over the weekend, S&P plummets, and SPY opens at $285, you will only receive $285 a share vs the $295 you "paid" when the option exercised. Even though you never had the cash in the first place, think of it like a bank loan. The bank loaned you $29,500 to buy the shares. And on Monday, you were only able to pay back $28,500 of the loan, so you will have to pony up the additional $1,000, i.e. you lost a $1,000.

Likewise, if the S&P went up and SPY opened at $305 a share, you would be able to sell those shares for $30,500 but only have to pay back $29,500, giving you a gain of $1,000.

They way I have seen it play out in my account if you sell before the contract expires your net gain or loss is just the difference between what you paid for the contract and what the contract price is currently trading at when you sell.

Every knee shall bow and every tongue shall confess

Orlando Ayala Cant Read said:

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I like where Canopy (CGC) is going. I think it could hit $50 in a year. I got in recently at $14.34 but I'm buying more.

Any of you got thoughts on NBR? I picked up a ton of it a while back and I'm down a bit rn but its history and recent highs have so much upside i'm considering doubling down and buying more.

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I hope you are right. To me, it seemed to break out today. If you look at the daily chart, it broke out above the 4-28 resistance on good volume. I have calls I bought when the stock was around 11 that don't expire until jan 2022. If it's 50 by then, which it's been there before, I'm gonna be reeeeeal happy. 20 Call contracts, 20 in Cron, and shares as well. Both of those co's have deep pocket backing.

I think the govt is going to get a little more lax on weed in the US to help bring in Tax Dollars sooner rather than later. Plus the article talking about how CBD can help prevent covid doesn't hurt....

See you at 50

AGSmith said:

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I don't know your income or domicile state, but in Texas, you should be safe holding aside whatever percent your marginal tax bracket is on gains. My approach is marginal tax rate plus 2%

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Thanks. I'm in NC, so I do have state income tax. It's not that bad, 50% is probably just being overly conservative and not tremendously sophisticated yet.

McInnis 03 said:

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Do y'all realize we are finally discussing something OA knows nothing about?

Not having enough moolah to cover your position.....

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What do you mean you can't cover your calls? Peasants. -OA probably