So, Ramjade got a new home I hope. You can "promote" you DIY-"premium" strategies here. All Q&As, discussions and "debates" regarding options and their strategies are welcomed.

WARNING to beginners and the inexperienced: Options are highly risky and are strictly NOT for the faint-hearted. Basic understanding of the underlying securities of the derivative products (here, options) is definitely needed. Further study of the Black-Scholes Option Pricing formula is highly recommended.

https://www.investopedia.com/terms/b/blackscholes.asp

https://en.wikipedia.org/wiki/Black%E2%80%93Scholes_model

(Black-Scholes model is also used to price the stocks options granted to the executives of listed companies under the employee's stock plan in major MNCs)

People have ended up committing SUICIDE because of misunderstanding of options. https://www.forbes.com/sites/sergeiklebniko...sh=308843516384

Caveat lector!

This post has been edited by TOS: Oct 12 2021, 08:53 AM

Ok. Let's get started. First and foremost this is not financial advise. I am not a financial planner, licensed accountant or my job have anything to do with a finance industry. I am just a dude on the internet who puts his money where his mouth his. I am writing this from my own experience.

Background
Here's my story on how I get into options. I was a pure dividend investor since 2015 I believed. Nothing beats have cold hard cash rolling into your bank account every now and then. Cold hard cash which you don't need to work for. Even till today, nothing beats pure cold hard cash rolling into bank account without working for it.

By being a pure dividend investor, I was limited by few stuff namely:
1. Dividend with holding tax
- 30% dividend tax hurts. After the govt makan your 30% tax, you are basically left with breadcrumbs. There's no way you can get those dividend back especially US companies.
Now with options, I am not limited by dividend tax which means any company which have options is basically fair game. The premium I get from selling options I get to keep instead of say giving to US govt.

2. Can't invest in quality companies that don't pay a dividend
- many quality companies in the United States don't pay a dividend or they pay peanut dividend. Now is it better to invest in wonderful companies that's don't pay dividends or lousy companies that pay a dividend? Keep in mind both a losuy company and quality company can both don't pay a dividend or they can both pay dividends.

How do you know a company is if good quality. One of the criteria is growing revenue, gross profit in double digit. If company revenue is stagnanting or declining, I will avoid. Yes there are other metrics as well.

For me I want to buy quality companies but I was force to choose semi quality companies that pay a dividend.
Before this with options, I won't invest in non paying/peanut paying dividend quality companies. Now as mentioned if they have options, it's fair game. Premium I earned from selling options is basically my own DIY dividends

3. Peanuts dividends
See above.

4. Need to keep looking for new opportunities
As share price increase, every new addition of money into dividend account will decrease dividends received as share price is inversely proportional to yield. Hence your risk reward overtime decreases as you are getting paid lesser to hold your stocks. Hence you need to keep looking. I am a concentrated guy which means I only hold 10-12 stocks and I don't like to hold like 20-30 stocks.
With options, I can average up. No more looking for new companies eveye now and then.

5. Unable to receive your money fast.
Someone once told me they like to received their money fast and now I see the point of it. The faster you received the money, the faster you can reinvest and earned more money. Unlike normal dividends investing where money comes in every few months, now my money comes in every week. I can reinvest or keep the money until better opportunity comes (when market is red). Yes you can do a dividend portfolio that pays weeks but you will be holding like 100 stocks. I know of one guy who is doing that.
Now with options, you choose when you want to get paid.

6. Huge capital needed to generate so-so dividend returns.
Let's be honest here. To generate say RM50k of dividend per year at 5%p.a you need RM1,000,000. Remember not everyone have RM1,000,000 to start with. Even someone working for 30 years does not guarantee they have RM1,000,000. I am one of them without a RM1,000,000 in my bank account. Unless one is born with a gold/platinum spoon, working in private sector, have successful business, unlikely you can have RM1,000,000 in bank account.
However with options, I don't need RM1,000,000 to generate RM50k/year. I just need say RM378,000 to generate RM50k. RM378,000 is easier to get Vs RM1,000,000.

So how to generate say RM50k from RM378k?
Buy 100 shares of square, docusign and crowdstrike. Sell covered calls on them for the price of say USD100/week.
USD100 x 3 X 52 weeks = USD15600 x4.2 = RM65520/year.

There's less capital required than dividend investing.

Now I need less capital Vs dividend investing.

7. Limited dividends.
With selling options, I am getting paid 1 year worth of dividend in a month. That's 12 years worth of dividend in a single year just by selling options. What this means is if I stuck with dividend investing, I would need 12years of dividend to equal 1 month of cash flow from options. #True story. Talk about boosting your dividends

Rules
1. Always do options on stocks you want to own long term. Never do options on stocks you don't even think of holding say 5 years.

That's basically my only rule. I don't do options on stocks that I don't want to hold no matter how good is the premium paid. Eg stuff I won't even think of buying. GME, AMC, penny stocks.

2. I only do selling options be it selling covered calls or cash secured put or naked put.
When you are buying options, you have time decay working against you. When you are selling options you have time decay working for you. Selling options is basically you become the insurance company, Genting/Macau. You want to become insurance seller or insurance buyer? You want to become gambler or the house?

3. I never ever sell naked call.
It's not worth it.

Basics of options.
Call options
Put options

So how I do it?
1. I do covered calls
Buy100 shares of the company you want to hol long term. You can o e shot buy 100 shares or slowly build up position.
Once you have reach 100 shares, you can now covered call provided the stock have options.

You can choose weekly, 2 weekly, one monthly, two monthly, yearly etc. Up to you. For me I choose weekly as I want time decay to work in my favour. Keep in mind all options have expiry date. Time decay of options works faster when the options is near expiry.

Some people might choose monthly or two monthly options to get some meat off the extrinsic value as they said weekly options have no meat left as the option is due to expired in 5 days. The choice is ultimately yours.

2. I do covered puts
Covered puts is basically fancy term for getting paid to wait/queue. What do I mean?
Eg a stock is worth USD100. You can buy at USD100 or you can queue at say USD95.
Normally when you queue, you don't get paid.
But when you sell a covered put, that means you are agreeing to buy 100 shares of the company at that strike price or below the strike price with cash as collateral (you need cash to buy 100 shares. The cash will be lockup as collateral and you cannot use the cash).

Now back to the eg.
Share A is trading at USD100. I feel USD100 is too expensive and I don't wamt to buy at USD100.
I can sell a covered put at stirke price of say USD95 and get paid say USD50 just for waiting for the share at USD95.
Now I get to buy the shares at cheaper price and get paid to do it if the price do drop to USD95 or below.
Now this is not an issue as I want to own the share at USD95. That's why it is important to do options on shares you want to hold long term. Now if you don't want to hold it long term, you basically become a bag holder.

3. I do naked puts as well.
What does this mean? This is basically cash secured put but this time your put is secured with margin/loan from brokerage.

Why margin?
Isn't it dangerous? Yes and no. Depending on how you use it. Keep in mind you buy a house with loan unless you are loaded and pay around 3.5-4.5%p.a in interest.

Same concept as buying a house. I am willing to buy good quality companies using loan. Not to mentioned interactive broker interest is only 1.5%p.a. Yes you read that right. Only 1.5%p.a. Hence if you are buying any one of the above stock on margin (say USD 27k = 100 shares) you are only paying USD405/year = USD33.05/month in interest.
One month of covered call basically pay off the whole year interest rate already. You can then do covered call to slowly pay off the margin.
Good thing about interactive broker is as long as your put options is not assigned (never hit the strike price or went below the stirke price of the put), no interest will be charged. Tried and tested.

Say you have USD100k, by taking a loan of 20% only, it's not even 50%. For me I usually keep it around 20-30% of my portfolio worth.

The goal is do not overleverage. Practice self discipline. It's only dangerous if you don't have restrain. It's like a knife and fire. Use it wrongly and get burn or get slashed.

4. Don't be greedy.
Pick far away strike price. Like Visa for example. A safe premium would be in the range of USD50-60.
For stuff like docusign, square, the range would be in the USD100/week range
For stuff like palantir, I love selling premium for USD10. Yes it's peanuts but it's safe. I am getting around 20%p.a from palantir. So think USD10/week is still peanuts?

You are supposed to look at Delta, theta etc but I don't. There is no formula from me.

There are many ways you can do options, iron condor, butterfly, strangle, saddle. Pick one which you like and you know. I only know covered call and coverd put hence I do that only.

LEAPS
- buying a call which is atm or very deep in the money with very far expiry date. This one only do when market is very red.

Now what are risk associated with options?
It can't be bed of roses right? Yes that's right.
By selling a covered call, you are capping your upside. How much you are willing to sell your stock.
By selling a put, the stock can drop lower but because you are the seller, you have the obligation to buy the stock at the strike price even if current market price upon expiry is way at the below the strike price.

I will give some real life examples of risk with options
1. Sold lemonade puts at 120. Took assignment and stock price drop to USD60+ I didn't panic. But continue selling options at USD20/week. I average down my lemonade holdings as I believed in it long term. I am still holding it. As mentioned above, only do on stocks you want to keep long term.
2. Sold crowdstrike covered call at USD257.5. Took assignment and stock ran up to 280+. I missed the run up to USD280+ but it's ok. Now I am doing covered puts on it at USD257.50

This post has been edited by Ramjade: Oct 28 2021, 12:47 AM

Here are some video that I used to learn about options.

https://www.youtube.com/watch?v=DFGmGsqufos
https://www.youtube.com/watch?v=7o5DkqbWNIc
https://www.youtube.com/watch?v=HDlHNqqN2V4
https://www.youtube.com/watch?v=9BVc_yf6Ut0
https://www.youtube.com/watch?v=dlOziB8Y3-g
https://www.youtube.com/watch?v=BL-tStGdynU

This post has been edited by Ramjade: Nov 1 2021, 12:56 AM

Good thread 👏

To enhance your understanding of options in a proper manner, here is an extract of "options" reading materials from my Finance textbook. (Exercises included )

It's 90-page long and include 2 chapters. The Black-Scholes model is discussed in the second chapter, options valuation.

This post has been edited by TOS: Oct 12 2021, 09:01 AM


Attached File(s)
 Options___Investments_by_Zvi_Bodie_Alex_Kane_Alan_J._Marcus.pdf ( 4.85mb ) Number of downloads: 304

Reporting in.. first page yo

This is gold. Options can be a double edged sword. Know your risks and try as you learn.

Go for “safer” strategies first. The time factor in options can be intimidating especially for those who are more comfortable with buy and hold strategies.

I’m also still getting used to that.

Got wrecked selling puts on meme stocks. Guess I'll be selling covered calls for years

First time getting a profit from IBKR's rebates.



I initially sold naked puts on MVST and rolled it few weeks ago. I forgotten to close my Buy to Close order for 9 contracts at $0.05 and it was filled at market open (i.e. ended up longing the option).

Realising my mistake (it will expire OTM since it's 0 DTE), I quickly sold it back at $0.05. Initially I thought I made a loss because of commissions as I bought and sold at the same price. Turns out IBKR gave me rebates for providing liquidity and I made a profit

I've seen you around a lot and I have much respect for your extensive knowledge - do you mind going a little bit more on Covered Call/Poor Man's Covered Call/Synthetic Covered Call and how to utilize it as a side income, or recommended reading? (I've seen you stating that this is your staple income in the $100 a day thread.) I plan to do it as I start buying and holding individual US stocks that I really like and okay with holding for life.

The post with all the videos you linked isn't loading for me for now, I'll revisit those when they are available again. Any input or advice is appreciated!

Hi there, thanks for the input! Appreciate it!

Do you have any extensive knowledge on QYLD? which is a kind of covered call ETF.

Thanks for the info!
Would like to know if its mandatory to have minimum 40K USD income or 100k USD liquid asset to start trading options in IBKR?

Unlike brokers, investors don’t necessarily benefit from frequent options trading. Research has shown that people who trade options typically have worse returns than those who stick to stocks.

https://www.wsj.com/

What platforms do you guys use to trade Options? IBKR?

Options have very high bid-ask spread. Bad for traders, good for platforms/market makers.

Robinhood reported last week that it made $164 million from selling options order flow in the third quarter, more than triple what it made from such payments tied to stock trades. The firm has said around 13% of its customers trade options, meaning the higher options revenues come from a smaller slice of Robinhood’s user base.
....
For example, the average spread in Apple shares was about 1 cent in September, while the average spread for Apple options was about 14 cents, according to data provider MayStreet.

From the same article.

This post has been edited by icemanfx: Oct 31 2021, 10:08 PM

Agreed.

But there are still ways to make income/hedge/speculate/cover risks using options. Options can also be applied to cryptocurrencies. But like TS has said, beware newbies

Thanks for updating the video list post Ramjade!

Here you go. Happy reading and watching all the video I posted above.

TQ

Good to see Options Trading group in the community.

I've just started my Options Trading journey recently with a small account with mostly selling spreads but made a mistake with trying out synthetic (but selected short DTE due to unfamiliarity to IBKR interface) on SQ! Got burnt due to that.

Can any sifus share on how to monitor your position especially on spreads or other strategies/combo in IBKR?

I learn Options Trading from a course using TOS but due to hefty fund transfer from Malaysia (I got CIMB SG account but TOS only favors DBS/POSB for electronic transfer, others have to go through normal wired transfer). It will be good if you could share your experience and your view on this.

Have been using both ib n tos for 5 years. Tos UI n features No doubt is one of best industry. But recent years only use ib due to low fee n worldwide markets support n cheaper easy for funding.

If you believe SQ will rebound eventually n have sufficient margin cushion downside, it’s completely ok close existing position when dte exipires n open new synthetic bull position with longer dte (as long as u wish

In IB app there is “options” tab which seems helpful monitoring options expiry date.

Depends on risk appetite n profit target I also use “unrealized profit %” helping decide exit timing. Usually for spread I m happy exit when reaching 50-80% profit.

Guess I'm using the right column of "unrealized profit %" my main reference when monitoring my positions.

Can you share how do you fund TOS?

I stop fund tos. Mainly use ib.

Use telegraphic transfer. Pay higher exchange rate + TT fees + intermediate fees.

If you have access to sg bank account, you can try FAST transfer even though on paper it mentioned that they accept only DBS/POSB.

Keep in mind TD conversion fees is not as cheap as IB.

I have access to SG Bank (only CIMB SG) to fund for my IBKR but never try what you mentioned to TOS. I wrote to TOS and got feedback that I can only wired transfer to their bank account in US. Below is their reply for those who are interested:




Have anyone tried to fund TOS using WISE? Can you share the experience and total cost?
One reference I found in Youtube (but not from Malaysia)


This post has been edited by kimhoong: Dec 4 2021, 05:31 PM

From chatting with people who used TOS, they do accept FAST transfer form other sg banks.

That is one way you can do. But I am not sure if money send via ACH is it under your name or TransferWise name. If it's under TransferWise name, it will be rejected (third party transfer not allowed)

https://www.cnbc.com/2021/12/22/options-tra...-investors.html

I recently borrowed this book from my uni's library, a great read for those with finance background and retail investors alike.

Very new book written in late 2021, so it covers cryptos and SPACs as well as topics like ESG investing (oh and also GameStop...).

https://www.wiley.com/en-us/Modern+Portfoli...p-9781119818502

(You can find free PDF versions online, but due to copyrights issues I won't post any links here)

Here's the chapter on options and derivatives in general.

Since our friend Ramjade likes to promote options investing, especially "weekly options", here's something to be cautious of (from page 18 of the PDF attached, or page 607 of the actual book):



The last line is striking: Bulls can make money. Bears can make money. Pigs get slaughtered.

Don't be a pig...

P.S. If anyone wants the whole book PM me for further details.

This post has been edited by TOS: Jan 28 2022, 09:55 PM


Attached File(s)
 Modern_Portfolio_Management_Moving_Beyond_Modern_Portfolio_Theory_by_Petzel__Todd_E.__Chapter_10_Derivatives_.pdf ( 420.88k ) Number of downloads: 60

3rd week will always have the higher premium as that day have the most contract expiring. Up to you do weekly or monthly. I do weekly or sometimes 2 weekly.

Thanks, good read! your explanation on options really much better than those i see on Youtube (Or probably those channels i clicked in are craps to begin with). The Margin thing, i really need to take a look. Does it means when you're on Margin account if you purchased the options at $1k (PLTR $10 x 100 shares), only portion of your cash got locked in by the options and not the entire $1k? so you have cash to buy other stocks?

Then the Margin 1.83% interest only kicked in when your portfolio cash becomes Negative due to the stock you hold in portfolio is making losses? Please don't bash me

even though the money is not fully locked in, you must have the discipline to treat it as "locked". that way you'll not trigger margin (and the interest if margin is more than cash in acct). unless of cos you decide to jump from investing to speculating/trading

This post has been edited by Medufsaid: Apr 25 2022, 06:23 PM

Thanks for this thread on options trading. Already found another in Spore forum. While it look easy monies it is not really and like all investment instruments there are pro and con.

https://www.experian.com/blogs/ask-experian...w%20they%20work.

Will take a look at this soon to see if it is really fit my risk appetite. Btw why forum very few share much about play options lose monies experience? Ppl can learn from their mistake and avoid actually

If you are on margin, it won't lock up your entire cash.
It will just use your buying power.
I have done a covered put on stock worth USD20k and the amount of used was only around usd5k.(again minus from my buying power).
My cash is untouched and can do what I like with it.
Best part is the used USD5k did not incur any interest rate as my cash balance remains positive and the options expired worthless.
Hence the USD5k used for buying power is essentially free.

Yes. It's 1.83% p.a not 1.83% per month.

but that's bcos the put was OTM and the stock didn't suffer a severe drawdown so the margin calculated was minimal right?

in the event your put became deeply ITM, the margin will exceed the initial 5K, which might not be ideal if you didn't intend to get charged interest

This post has been edited by Medufsaid: Apr 25 2022, 08:18 PM

Actually it's based offmhow Voltaire the stock is. If it's very volatile you need a lot of buying power if you are using margin.

Not sure about deep itm. If deep Item, I just buy back at a loss and sell options the next week.

Just curious, will anyone Sell Put ATM? I noticed the premium for ATM had more to cover the strike price (very small margin maybe +0.1/share). In what scenario will a person Sell Puts ATM?

ppl may be doing credit/debit option spreads.. or short straddles. or they are just selling and hoping to buy back cheaper in minutes/hours time

This post has been edited by Medufsaid: Apr 26 2022, 04:44 PM

Edited: I actually answered my own question, so i decided to ask another question.

Does rolling an options charge additional commission every time you roll?

This post has been edited by Lon3Rang3r00: Apr 27 2022, 11:40 PM

Yes. There's always commission when you buy/close with interactive broker.

Mind to ask? Are you using IBKR for options. If yes, is it normal to see Rolling Options feature shows "NA" when you click calculate? Try play around this last night, no matter which i click, when Buy/Sell orders i can preview the calculate, but it shows NA when i use Rolling option.

2) Is it a bad habit to monitor the option everyday? I found myself keep looking at the stock price every now and then to see whether I'm closed to ITM and re-think should i roll down/out. (Or because this is just psychology problem as this is the first time i'm trying out options).

being glued to the screen is normal when you are gambling. I use options to reduce my stock risk and sleep better at night.

don't know about IBKR but it costs me $0 for my options to expire worthless so I only open positions after the old one expire

Fire and forget

This post has been edited by Medufsaid: Apr 28 2022, 09:29 AM

I don't roll. I just let it expired worthless or in the money and take assignment.

If you are glued, you are doing something wrong. I just checked it once day. That's it. Don't need to be glued. Like I said remember rule of 1 doing options.

If you are selling put, you are ok with buying 100 shares at that strike price. If you are not ok, don't bother.
If you are selling call, you are ok with selling 100 shares at that stole price. If you are not ok. Don't bother.

I give you an example. I bought Starbucks 10 shares ar 86.6. Did I regret? No. I am buying again at 75.

This post has been edited by Ramjade: Apr 28 2022, 10:02 AM

Q: Eventually you'll get assigned for the stocks you want while doing options.

Assuming the assigned stock got plummet for 30% below your Put price after assigned, would you sell Covered call on the price you got for the stock or you'll adjust accordingly (nearer to ITM and get more premium and find the balance that you'll still get profit without losing $$)

Another question is. If you know that the stock is currently in a bearish situation but you're bullish on the stock. How do you see selling a Put Options with a Limit Order *and* set to *Good till Cancel*.

Example: Selling a put options on PLTR with a strike price $10 when the stock price is at $12 (just example) and the options premium by end of the week is only at 0.04. So, is it good that if I were to set a Sell Put Options with a limit price of 0.10 (This is the premium) and i set *Good till Cancel*.

For the example above, can i assumed that if the Order got executed, i will get a higher premium // If the order did not reach the limit price i set, the order will not be processed then nothing happen

This post has been edited by Lon3Rang3r00: May 3 2022, 01:26 PM

please rephrase your questions clearly. you need to state the strike price and what options (call/put) it is

Done update, should be readable now? Sorry, cause the option thing still very new to me so i not sure how to phrase it

Lon3Rang3r00

Of course I still sell covered calls on it. Come I give you an eg. I have TSMC at 115. Now its 93.xx I am still selling weekly covered calls on it and pocketing USD2x-3x/week from it. No I don't adjust nearer to ITM as I want to hold on to it long term. Why should I get a higher premium for the stock to be sold away at a loss if there is nothing fundamentally wrong with the stock I am holding?
As long as I am holding the stock, it is generating cashflow for me on a weekly basis and I am holding on to strong companies which will rebound over time. By not selling, I am guaranteeing myself cashflow every week. Don't go chase small short term gain for long term profit.

Yes you can sell put on it. In a down market, it's more profitable to sell puts then sell calls.
There is another way you can do. Let me intro you to poor man covered call. Buy a call options either ATM or Deep ITM with expiry date of 1-2 years out. Once you have bought that call, now you can start selling covered calls on it.
So if price increase, your call value should increase in value. it needs to outrun theta decay and you get to continue doing covered call on it until your covered call get assigned. Then you just exercise the call you bought to pay it off.

So, you paid the premium to hold the 100 shares instead of paying the actual 100 shares price, and then selling a covered call on it.... it sounds like a glitch to me since you don't actually owned the shares and yet still can sell it off it sounds macam trading the paper contract instead of shares.

For the long call options that expiry after 2 years, assuming if the shares price went up then you will get capital gains if exercised the calls options. If the shares price went down, you can abandon it and forfeit the premium you paid. why it sounds like it doesn't have much of a flaws.



I always got mix up with buying an options, so write it down here in case anyone may need it

Selling a Put Options = You get the options premium in exchange for buying shares at a strike price on or before the expiration date.
Selling a Call Options = You get the options premium in exchange for selling shares at a strike price on or before the expiration date.

Buying a Put Options = You pay the options premium in exchange for the right to SELL shares at a strike price on or before the expiration date.
Buying a Call Options = You pay the options premium in exchange for the right to BUY shares at a strike price on or before the expiration date.




This post has been edited by Lon3Rang3r00: May 4 2022, 08:16 AM

Just remember selling put and selling call. Then remember it's the inverse of it when it comes to buying. If you are trying to remember both, you going to get yourself confuse.

That's why I only remember selling puts and calls and never bother with buying options. Buying options for me only reserve in severe cases like in 2008.

This post has been edited by Ramjade: May 4 2022, 08:08 AM

True, lower strike price and also lesser premium to pay for ITM compare to all time high. Hmm , Poor Man's Covered Call look to me like setting a time target for yourself to earn enough premium to cover the amount you paid for buying the long call. Anything after the breakeven is profit. The name Poor Man, just so poor people can buy stock that they can't afford just so they can do covered calls

Noticed this on Google stocks, could that means these people just wanna sell Covered call and don't bother about capitalization gain?

can be anything. the simplest explanation is, a naked sell-to-open for the call option weeks ago at $70, and then buy-to-close for a good profit (this is a "good ending", or maybe he sold a covered call and closed position at loss)


to find out more, you need to know if the transaction you saw resulted in a reduction in open interest.
reduction = he buy-to-close
increase in open interest numbers = he buy-to-open



and even then, it doesn't tell u about the shares activityyeah that is what futures and options are all about. You don't have to have it* before expiry date
_{*ignore the ITM and kena exercised options}

This post has been edited by Medufsaid: May 4 2022, 01:00 PM

Still don't get it for Poor Man's Covered call (Please bear with me)

After you buy the LEAPs that expired in two years time, then you move on to selling a covered calls.

So my question
1) What happens if your covered calls got exercise? Did the initial "LEAPs options that you purchased" also got exercised?
&
2) What happens if your covered calls expired? Continue to sell covered calls?

3) Assume that everything went well, is the LEAPs automatic exercised or you need to manual intervene to exercise

Yes and no.
By buying a deep in the money call. Your options still have value upon expiry. If it's in the money upon expiry it's automatically exercised.
That means you are buying 100 shares at xyz price at 123 date.

Eg. Apple. Current price is 162. You buy a call options of apple at 145 expiry 2 years from now and pay a premium for it.
Now 2 years later, apple is say 250.
You can now buy Apple at usd145. There's a net profit of USD250-145 = USD105 x100 shares
Then add in your covered call profits minus the premium you paid for the call.

Alternatively you can just sell your call say at 6 months prior to expiry and pocket the premium from selling and start doing a new poor man cover call. So no. You don't exactly
"earn enough premium to cover the amount you paid for buying the long call. Anything after the breakeven is profit. "

Hope that's clear.

@Ramjade, can share why u prefer weekly options over monthly? weekly u are paying more brokerage fees, no?

1. You want the options to decay at a faster rate so that it expired worthless.
I never buy to close. Most of my options expired worthless. Hence I only pay one time brokerage (when I sell options only).
But if paying more per week Vs monthly yes. But if you are earning like USD400-700/week, just treat the commission as business cost to generate revenue.
2. Anything can happen in a month.
Yes there's more meat on the options for 1 month expiry. But what happen if market spike like crazy in a month?
Remember for options you want it to expired worthless most of the time.

End goal is to make money from your options and not lose money. So up to you want to go with one week or one month options.
If you feel you can make money with one month options, by all means. Go with one month options. As they said black cat and white cat as long as can kill the mouse, doesn't matter what colour the cat is.
Yes some people will tell you to do monthly options (I know some expert people online doing monthly in my telegram group and some YouTuber recommend monthly over weekly).

For me, I feel safer and I have been getting consistent results with my weekly options. So I am sticking with my weekly options. I feel less safe with monthly options. It all boils down to personal preference.

idk if i'm asking a dumb question, because I'm still a newbie dipping my feet into options and stumble upon selling covered calls. I saw that selling covered calls and letting it expire worthless will receive the full premium.

So what if I just sell a call of AAPL 13/5 180 at a price of 0.10. (foreseeing that apple won't hit 180 by the expiration date), I could just sell 10 contracts of it, that would make 100 bucks and let it expire. So that I could earn that sweet 100 bucks out of it.

Please correct me if I'm wrong.

Each contract = 100 shares = 0.10 x 100 = $10.
10 contracts = you have to hold 1000 shares of AAPL before you can sell a covered calls. I'll be surprised if you willing to risk so much for so little premium.

Yeap, I did noticed that, but what if the price of the stock does not hit the strike price upon expiry? I will still keep the premium right?

Yes you can do that. But usd120 (12 months x USD10)/18000 = 0.6%p.a if you ok with it, by all means go ahead.

0.6%p.a is even worse than any FD you can find in Malaysia.

Now if it's USD10/week = USD10x52 weeks/18000 = 2.89%p a.
Ask yourself is it worth it?
Unless you are holding apple stock.
If you are not and just trying to get the premium, our EPF is giving us 5-6%p.a

Another thing. How sure are you apple won't reach usd180/share by next month? Who knows if fed suddenly said we will ease back on interest rate, or bear market ends and market goes on a run?
What happen if it breach usd180? What are you going to do?

This post has been edited by Ramjade: May 5 2022, 04:34 PM

*douple posted

This post has been edited by Sherman Kong: May 5 2022, 05:47 PM

Thanks for the information. I will research more about options before putting real money into it. Currently still using demo account to trade.

Dang, I'm using my own money to learn (cause I believe no pain no gain), I'm currently practicing wheel strategy on PLTR. I also plan to buy LEAPs on SoFi, if two years later the company doing well, I'll exercise the option, seems a good buy now.

Please don't waste money on SoFi. Better for you to buy upstart or palantir.

When will the sell put/call options exercised upon expired? Mine expired yesterday and I thought it will exercised after market closed. But this morning it still shows as Options.

Maybe it takes awhile? Once expired it wouldn't even be listed in your open positions

Are you sure it 3xourrd worthless? You need to consider after hours trading.. If during normal hours, it is in the money, it will get assigned automatically.
If after trading hours., The buyer have to manually assign.

Anyway if you are using interactive broker, you can only see it tonight around 10pm. Saturday is maintenance day for them.

Yeah, I avoid SOFI and LEAP. Use Option for trading only, no long term hold

for IB, usually reflect on Sunday. Most Saturdays, maintenance time

PLTR put 10.50, I thought it will exercised immediately after market closed haha. Thanks, I'll be checking after tomorrow. Then start sell Covered Calls next week, looking at selling CC on $10.50 strike price. I don't think the earning will have much impact during this down trend. It may even go lower if they didnt hit the target.

I usually checked in Saturday.

I Sell CC PLTR with Strike price of $8.5 with the expiry date 13-May-2022.
Just now i checked and realize PLTR already up to $8.19
Now check if I able to close the position for $2 premium.

Rather to lose the Premium than to sell my PLTR at $2 loses/share

This post has been edited by Lon3Rang3r00: May 13 2022, 11:17 PM

at least if you still kept your shares, can continue to sell covered calls for another day

How much you sold your call for?
Looks like your call strike price is below your average price which means your will be making a loss if the stock gets called away.

I wonder in this current Bearish market, will it be good selling CC ATM/weekly then IF got assigned, Sell CCP AT or below the CC's Strike Price on the following week.

For the maximum loss, I'll assume the lost is just your Stocks got called away and you can't get it back + the difference between the average price and the CC Strike price (If the Average Price is higher than the strike price)

This post has been edited by Lon3Rang3r00: May 26 2022, 08:36 AM

why do you choose to sell covered call in such a way that if it gets called away, you actually incur a nett loss? should be setup in such a way that you still earn some limited profit as stock price rose no?

This post has been edited by Medufsaid: May 26 2022, 09:32 AM

Wrong. In a down market, it's more profitable to sell covers put. Selling covered calls give you less premium. Cause simple supply and demand. More people buying put to hedge. Hence increase in price.

By selling calls during down market is market rebounded a lot. Hence you get called away.

I do both. Sell puts and calls on stocks I already own.
You need to make sure it's far otm so it won't get assigned even if market rebound.
Only like 4x I have been called away. Otherwise expired worthless.
I just start doing covered puts on it at the price it was called away.

There are other strategies where you say buy a call and sell a call. I think it's call debut spread.

Higher Premium? It's a bear market now...

Given the scenario as below.
Assumed my average acquisition price for Company ABC is $100 for 100 shares. Currently the stock is trading at $80.
Instead of earning Premium out of the money, I choose to sell Covered Call at $80 strike price and the stock got called away at the end of the week.
The following week, I start to sell Cash Covered Puts with the strike price of $80 or below and wait the stock to get assigned back to me.

By doing the above (Selling Covered Calls and Cash Covered Puts using the same Strike price) and IF everything went smoothly, It nett off since the stock got called away and reassign back to me at the same strike price, and i keep the high Premiums that from both sales options.

And IF i did not get assigned back after the Covered Calls, then the maximum loss will be ($2000 - the premium i got for both sell options), but i still can continue to sell Cash Covered Puts in hope to get assign back.

Unless you really hurting for liquidity, else no need to sell at a loss.

If I were you and liquidity is not an issue, to reduce the avg cost of ABC:
I will sell put at say $60 at $0.5 premium and sell call at say $85 at say $0.3 premium.

If both goes thru and expired worthless, I cut down my avg cost of ABC to $99.2

This is provided you have fund to cover for the sell Put. Slowly grind till you recover your loss.
It is painful and slow to do this. I am also doing this to recover. That's why we need to be mindful on our entry price.

This post has been edited by Toku: May 26 2022, 02:10 PM

if i encounter a drastic bear market, I'll incur losses (due to the dropped value of my stocks in CC), then I need to cough up the money to honour the puts i sold. so lose $$$ by 2x?

This post has been edited by Medufsaid: May 26 2022, 02:21 PM

Either roll or buy back the puts at a loss.

Keep in mind when you sell a put if in the money it will be assigned.
Yes you need to cough out cash to buy 100 shares.

That's why I don't do naked calls. All my stuff are covered.
I only do naked puts. Cause I don't mind getting assign and it's just like buying house on loan. Sell covered call on it and slowly pay down the principal and interest.

But with interest rate increasing, my amount of naked puts have reduced to basically usd30k/year (basically enough for my options premium to cover + my salary at rm5k/month)

Like mentioned, if assigned I am ok with it cause the amount of premium I can generate is about half of that usd30k and I want to get assigned.

This post has been edited by Ramjade: May 26 2022, 04:24 PM

yea i know. just hinting what Toku's setup actually is

This post has been edited by Medufsaid: May 26 2022, 04:25 PM

You can do options on etf like spy, and qqq.You don't need to do options on stocks only. I just like stocks cause I don't like the rubbish that comes with etf. Like Boeing, intel, IBM.

Make your life simple. Buy etc and do options on them. Can sleep well at night too.

This post has been edited by Ramjade: May 26 2022, 04:27 PM

Sorry, I was under the impression that the stock is what he wants to invest and he just want to lower his cost? May be I have mistaken.
That is just one way that I know to lower the cost of stock I want to keep, without having to take risk to sell it and hope to be able to buyback at a lower price.

I admired your fortitude. You basically all-in with options. Your tactics seems to be flawless. And I think in a sideway market, it is something I can do with a part of my portfolio.

May be you could re-evaluate again on your pricing ladder? Like someone posted before, an entry price mistake will take lots of % in returns to recover the loss. The stock price at current level is still overvalue....why waste your part time income...
While building your wealth, live your life as well... Money is not everything, spend it and enjoy life...