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Brewmaster
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In reply to agdaddy04 • 2:14p, 2/28/21
AG
agdaddy04 said:
So is this referring to selling off or hedging?
Foggy I think is spot on... "I interpret that tweet to say "should we have a rally into Fed news and the stimulus bill being passed, trim your positions and engage hedges"

-------------------

if we rally, that could result in model T recovery on many names (50% up from drop). That's when you engage hedges, near or at the top of recovery. "false breakout"

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Ukraine Gas Expert
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In reply to Brewmaster • 2:17p, 2/28/21
AG
That's the next level I need to learn is hedging.
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Aggie118
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In reply to Ukraine Gas Expert • 2:19p, 2/28/21
AG
Ukraine Gas Expert said:
That's the next level I need to learn is hedging.


I'm in the same boat
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Mostly Foggy Recollection
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2:27p, 2/28/21
Engaging hedges at key levels is very important.

To make it simple, I'll use one of the SPY zones from last week. 381.50 - 385.50

On a weekly basis (this week being Mar 5), I would watch this zone and if we were rejected at 385.50 I'd engage 380 puts (some might do 377s as well as this is the next support down).

Then if we defended 381.50, I'd enter a weekly 385 and/or 388 call (next resistance up)

This is on a weekly basis. As for Monthly hedges (on anything), I'd look at ATR... if we got between + 2 and 3 ATR I'd be taking out hedges on the +1 to -3

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agdaddy04
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In reply to Mostly Foggy Recollection • 2:39p, 2/28/21
AG
In order to hedge that, you have to have shares of it, correct?
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Prophet00
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2:47p, 2/28/21
AG
You don't have to have shares, but I believe you have to have the cash in account in case you were assigned. If you bought the 385 put, you'd have to have $38,500 available if assigned, correct?
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Mostly Foggy Recollection
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In reply to agdaddy04 • 2:56p, 2/28/21
No.

If you own one call option with a 100 strike price and the stock closes at $100.01 (on expiration day) your option is automatically exercised; come Monday morning, you now own 100 shares of stock. You will get a margin call from your broker if you do not have enough money in your account to pay for the stock if you are on margin. If you are straight cash, you will lose the option gain and commission.

In that case, you must sell the stock to close out the trade. If the stock sells below the exercise price, the loss comes out of your trading account. You can avoid this mistake by closing out your open option positions before the market closes on expiration day.


Buying call options with the goal of owning the stock when the options expire is counterproductive. You buy call options to make money when the stock price rises. If your call options expire in the money, you end up paying a higher price to purchase the stock than what you would have paid if you had bought the stock outright.

You are also out the commission you paid to buy the option and the option's premium cost. If you really must have the stock, buy it outright to avoid unnecessary costs and fees.
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Bobcat-Ag
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2:56p, 2/28/21
Should we just target positions that would perform in a bear market
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TMOOSE
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In reply to Mostly Foggy Recollection • 3:03p, 2/28/21
Mostly Foggy - so appreciative of your insight. Do you place daily SPY puts as well?
Let it Ride
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Mostly Foggy Recollection
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In reply to Bobcat-Ag • 3:03p, 2/28/21
That's one way. I.e. buying shares of SPXU or SQQQ

But understand that it's a short term bear play. It's meant to be traded because of decay.

Buying at market highs (or near) and selling on market dips and rinse/repeat
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Mostly Foggy Recollection
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In reply to TMOOSE • 3:06p, 2/28/21
I do weeklies. I don't do daily expiration plays 98% of the time because I have a day job too.

With weeklies, I can manage it better
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Ornithopter
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In reply to Mostly Foggy Recollection • 3:13p, 2/28/21
AG
At what point do you switch from the current week to the following week for weeklies?
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Mostly Foggy Recollection
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3:14p, 2/28/21
Alright, 10U playoff basketball time. See y'all later.
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FJ43
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In reply to Prophet00 • 3:19p, 2/28/21
Prophet00 said:
You don't have to have shares, but I believe you have to have the cash in account in case you were assigned. If you bought the 385 put, you'd have to have $38,500 available if assigned, correct?
Remember when you buy on the option side you have no obligation. Selling is the opposite. You sell a call you are obligated to sell the shares. You sell a put you are obligated to buy the shares.
Wealth gained hastily will dwindle. but whoever gathers little by little will increase it.
Proverbs 13:11

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Ukraine Gas Expert
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In reply to FJ43 • 3:29p, 2/28/21
AG
If you sell a put at a lower price, and the share price increases, are you obligated to buy them, or would you? Or just let the contract expire.

My struggle with this is I've watched who knows how many videos explaining this stuff, but I learn by doing. I paper traded for a while to get experience, still do, but can't paper trade options that I am aware of.

ETA: Just looked further into it, and you can paper trade options with TD Ameritrade through Think or Swim in case anyone else wanted to experiment
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LarryL
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In reply to Mostly Foggy Recollection • 3:32p, 2/28/21
Mostly Foggy Recollection said:
I interpret that tweet to say "should we have a rally into Fed news and the stimulus bill being passed, trim your positions and engage hedges"

I got a youth basketball game this afternoon and will get the boys down for bed then I'll post SPY levels and QQQ levels and how I will play weeklies.
I would like at least a 2-day rally please
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Prophet00
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In reply to FJ43 • 3:34p, 2/28/21
AG
So in my example with SPY, if we see a downtrend and I want to trade the dip, I'd buy a put OTM on a lower strike, pay the premium, and then sell the contract once it hopefully hits my target ITM?

I'd sell a put if I wanted to try and either capture premium when I don't think the stock will drop to the strike, or look to lower my entry on shares by reducing the strike with premium but wanting to be assigned. Is that right?

I'm that second example, even if I wanted to try and capture premium and don't feel the put will get assigned, I still have to have the cash in my account in case it does, correct?
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Fairfield_Ag
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In reply to Ukraine Gas Expert • 3:34p, 2/28/21
AG
Just let it expire.
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Ukraine Gas Expert
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In reply to Fairfield_Ag • 3:36p, 2/28/21
AG
Thanks
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McInnis 03
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4:03p, 2/28/21
AG
I'm getting so positioned into leaps that my "trimming" is becoming unimportant lol
***If this post is on Business and Investing, take it with a grain of salt. I am wrong way more than I am right (but I am less wrong than I used to be) and if you follow me you will be too.***

B&I Key:
ETH - Extended Trading Hours --- RTH - Regular Trading Hours
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jimmo
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4:34p, 2/28/21

maybe goalpost pattern?
just messing w/ scanner in TOS...
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gig em 02
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In reply to McInnis 03 • 5:06p, 2/28/21
McInnis 03 said:
I'm getting so positioned into leaps that my "trimming" is becoming unimportant lol


Do You mean because you've got hedges with shorts and calls or something else?
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AggieIce
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5:17p, 2/28/21
AG
Any reason why JNJ would not take off after getting vaccine approval?
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Madmarttigan
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In reply to AggieIce • 5:25p, 2/28/21
AG
Because it's already built in or way too massive of a company for it to matter like pfizer
Formerly tv1113
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Brewmaster
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In reply to Mostly Foggy Recollection • 5:25p, 2/28/21
AG
Mostly Foggy Recollection said:
Engaging hedges at key levels is very important.

To make it simple, I'll use one of the SPY zones from last week. 381.50 - 385.50

On a weekly basis (this week being Mar 5), I would watch this zone and if we were rejected at 385.50 I'd engage 380 puts (some might do 377s as well as this is the next support down).

Then if we defended 381.50, I'd enter a weekly 385 and/or 388 call (next resistance up)

This is on a weekly basis. As for Monthly hedges (on anything), I'd look at ATR... if we got between + 2 and 3 ATR I'd be taking out hedges on the +1 to -3

That makes perfect sense... when you bought calls at 381.50, what do you eye as the exit? 385 or do you trim some on the way up?
I got greedy before the close on some calls and need to fix that, annoys me!
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Esteban du Plantier
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In reply to jimmo • 5:32p, 2/28/21
AG
jimmo said:

maybe goalpost pattern?
just messing w/ scanner in TOS...


I mentioned that one yesterday.

They're at risk of bankruptcy due to expenses incurred during the Texas ice storm.

That said, somebody bought a lot of shares Friday.
.
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jeremy
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In reply to $30,000 Millionaire • 5:33p, 2/28/21
AG
$30,000 Millionaire said:
I think the negative side of the trade has to be explained as well:

You short for sound technical reasons and the fed announces they're not raising rates until 2030, introducing YCC, and they're gonna buy SPY and QQQ. That would drive like a 10% uplift in stocks. At that point, you either have to pay out of pocket to cover your short in order to keep the option, or you have to liquidate both, but depending on what you shorted, you came out ahead
Oooohhh.








I still have no clue.
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jeremy
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5:41p, 2/28/21
AG
I'm still catching up on this last page so some of this might have been discussed. I'm trying to learn how you go net free without your underlying stock doubling.

In the seminar yesterday, Old Army said, "I want to go net free without selling more than 50% of my underlying stock."

How do you use options to do that? If anyone is ballsy enough to answer my question, please speak to me like I'm five. In other-words, so many of ya'll say things like "use a call" do you mean buy a call? Sell a call? Set up a covered call situation? I just miss so many of the little nuances of the conversations that I am totally lost on how to leverage options.

Also, I've never understood why the word hedging always brings up SPY and QQQ. Do those to follow most of the market or do the opposite? I feel like I'm learning, but if I could shore up a few of these concepts, I could be tracking with this thread much better.

Thanks for anyone who decides to explain these things.

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fastgreens
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In reply to jeremy • 5:44p, 2/28/21
AG
When your cost basis doubles, sell half of your shares or options.
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Esteban du Plantier
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In reply to jeremy • 5:46p, 2/28/21
AG
jeremy said:
I'm still catching up on this last page so some of this might have been discussed. I'm trying to learn how you go net free without your underlying stock doubling.

In the seminar yesterday, Old Army said, "I want to go net free without selling more than 50% of my underlying stock."

How do you use options to do that? If anyone is ballsy enough to answer my question, please speak to me like I'm five. In other-words, so many of ya'll say things like "use a call" do you mean buy a call? Sell a call? Set up a covered call situation? I just miss so many of the little nuances of the conversations that I am totally lost on how to leverage options.

Also, I've never understood why the word hedging always brings up SPY and QQQ. Do those to follow most of the market or do the opposite? I feel like I'm learning, but if I could shore up a few of these concepts, I could be tracking with this thread much better.

Thanks for anyone who decides to explain these things.

I'll use REI as an example.

I bought at about $1.50, so need $3 to double.

But the premium on $2.5 calls was pretty elevated, $0.50.

So I sold $2.50 calls on half my shares for $.50. If I get called out at $2.50, my real price is $3 with the premium recieved.

If it doesn't hit $2.50 by expiry, I'll sell that call again a couple months out, making another ~$0.50. Keep doing that 3 or 4 times and my stock is free and it doesn't have to move a penny.
.
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Fairfield_Ag
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In reply to jeremy • 5:46p, 2/28/21
AG
Sell covered calls, collecting premium over time.
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Ukraine Gas Expert
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In reply to Fairfield_Ag • 5:49p, 2/28/21
AG
Can you sell puts in the same manner or is different? Why a call versus a put?

Sorry I'm also five
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McInnis 03
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In reply to gig em 02 • 5:50p, 2/28/21
AG
gig em 02 said:
McInnis 03 said:
I'm getting so positioned into leaps that my "trimming" is becoming unimportant lol


Do You mean because you've got hedges with shorts and calls or something else?


I'm in for the long haul. Pltr jan23 25c's are my thang
***If this post is on Business and Investing, take it with a grain of salt. I am wrong way more than I am right (but I am less wrong than I used to be) and if you follow me you will be too.***

B&I Key:
ETH - Extended Trading Hours --- RTH - Regular Trading Hours
ORH - Opening Range (1st 30min) High --- ORL - Opening Range Low
R1, R2, R3 - Resistance 1, 2, or 3 --- S1, S2, S3 - Support 1, 2 or 3
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ClutchCityAg
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5:53p, 2/28/21
If we gap up tomorrow, gonna need bikini pics to become a Saturday tradition on this thread. If we gap down... gonna need it to be an everyday tradition.
Let it ride
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FJ43
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In reply to Ukraine Gas Expert • 5:54p, 2/28/21
Ukraine Gas Expert said:
If you sell a put at a lower price, and the share price increases, are you obligated to buy them, or would you? Or just let the contract expire.

My struggle with this is I've watched who knows how many videos explaining this stuff, but I learn by doing. I paper traded for a while to get experience, still do, but can't paper trade options that I am aware of.

ETA: Just looked further into it, and you can paper trade options with TD Ameritrade through Think or Swim in case anyone else wanted to experiment
If you sell puts for let's say a strike of $20 and the share price is $25 at expiration or stays above $20 before expiration, it is highly unlikely you'll be assigned the shares. You still have the obligation to buy the shares up to expiration should the buyer of the put assign them to you.

In this scenario that the share price rises you'll most likely 'buy to close' this and keep the premium gap as profit. The premium you were paid will be less since the share price rose. If the hare price goes down that's when 5e put increases in value.

I seldom ever let sold puts expire. I almost always buy to close.

Edit: unless I want the shares and don't care to be assigned.

Wealth gained hastily will dwindle. but whoever gathers little by little will increase it.
Proverbs 13:11

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