RigsTx said:
McInnis 03 said:
RigsTx said:
McInnis 03 said:
NNDM May $20 sweeping. Stock at $9
How often do you take a position after seeing these large sweeps?
Is there a volume trigger for you? Or does that just raise the antenna of maybe you should look at the stock?
I've seen Cheddar Flow as one of the better Options trackers out there. I'm assuming that is what you use also?
FWIW,
If I was following here I'd likely buy something like May 12.5's and sell May 20c's. $1 to make $7.50 in 2 months seems like nice risk/return for me.
That makes sense. I really need to learn more about Spreads.
In your example, the risk is that it never gets above $12.5 and the calls expire worthless correct?
But if the stock is $19.99 at expiration, you close out the position for max profit.
I know you will always close out beforehand, but wanted to make sure I understood the logic.
This actually brought up another question:
Let's say at expiration the stock is at $25. Do the brokerage houses close out your spread for you or do you still have to do it manually.
In this case I would purchase xxx amount of shares at $12.5 and immediately sell them at $20?
Sounds like you have it, but for the class, here are a few scenarios:
A) Stock never sees 12.5, you hold to expiration, you go to $0. Risk is premium paid. If you sense it coming though you could sell for a loss and salvage whatever is left. You can also set stops on spreads like you would for a single option.
B) Stock sees somewhere between 12.5 and 20.....depending on WHEN this happens is what determines if you're profitable or not. Your breakeven at expiration on $1 spent would be $13.50. The 20 would go to zero and you could buy the $20 back early if you want or sell the spread to close it, etc. Many different ways to play thsi hand.
C) Stock goes moonshot, let's say $25. You hold to expiration. You could close it early for profit, you could take max profit close to expiration of $7.50 per spread, or you let your brokerage handle the transaction and you'd still see $7.50 cash because you'd exercise your $12.50's and your buyer would exercise their $20's, so you'd receive $20 for your shares, and you'd pay $12.50 for those shares.....hence $7.50 in your pocket.
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