The Other Site

AGSmith said:

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Sorry still pretty new here. What is TOS?

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24/7 has a Stock Market thread as well, where we bring some of their numbers and thoughts over here

tam2002 said:

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Trump said at the Ford plant today he thinks we need another stimulus package and they are gonna be working on it

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Going to have a tough time getting that through the senate at this point. Not to mention reconciling with the house. I'm skeptical.

AggiePeeps06 said:

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Ah makes sense. I only had 4 contract so size is probably too small to trade it that way

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You should follow the same principal.

I have $1.67 in Puts X 100 = $16,700 invested.

My 100 calls cost me $1.78 x 100 = $17,800 invested.

Total Calls Plus Puts invested = $34,500

The Puts closed at $2.61 so those are valued at $26,100

The Calls closed at $1.31 or $13,100

Total ending Call + Put = $39,200

So I closed at a net gain of $4,700

HOWEVER - Markets move so when you get a stock at or close to one or the other Puts with 4 days to expiration you don't want to risk losing what you've successfully achieved. So I buy 50% of shares against the Puts. Now take a look at SPY right now. It's trading at $294.93. Guess what that means for your $294 Puts if we open up tomorrow. They'll lose all of your gains plus deterioration factor on premium.

5000 shares purchased x average gain of $0.82 = $4100. Now I also sold a May 22 $294 cover call for $1.64 on those 5000 shares. $164 x 50 covered calls = $8,200

So I just guaranteed $8,200 in gains if SPY closes above $294 tomorrow and those shares will be called out. But what if we close at $293.80 or below? I just earned $8,200 premium. My $294 Puts are in the money. I can write another 50 covered calls on those same 5000 shares earning another $8000+ premium.

Now those are bigger numbers but the principle should be the same. You have 4 options. Even if its 2 calls and 2 Puts. When we got to $294.05 you'd at least buy the stock on one of those. And either 1 covered call on that 100 shares or since smaller i'd have only bought shares. And then when it traded to $294.90+ you can either sell it or wait to see if that buying after hours continues. But you are in a much better leveraged position.

When I'm laying out $34k in options that have a designated lifespan of 5 days you think I'm going to just wait and see if we tank from $294.05 close? Neither should anyone.

Awesome info. Thanks OA! This thread is more educational than a Full semester in options class