How you like dem AAPLs?
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So another flat day huh!!!
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Robinhood has a pretty low limit on how much is “instantly available” and then how much will be available after 4 trading days. Hit that limit so have to wait until Jan for my money to clear.
Have a TD account too but don’t really use it. Really loving the no fees on robinhood although the platform isn’t as great
Hey OP (aka, The Godfather), its D. Great Intel on buying OTM vs. ITM. I always did OTM and with the exception of the 40% return on those BAC puts, I've always lost. Wish I'd learned this lesson sooner. Ha!
If you buy OTM, say $165C and the stock has that same $157 to $150 move, you’re likely looking at a 60-80% unrealized loss, and yes, you can dollar cost average, but you still need a 10% increase in the stock price by expiration to breakeven, and yes, I acknowledge that if you get 10% earlier than that you’ll likely be making money, but it’s more about managing risk because the market moves are so significant, and with OTM calls, you’re more likely to lose 100% of your investment on a significant stock drop than to maintain some of your capital with ITM options. Returns will be smaller, but it can be safer.
Give yourself more time if you don’t have a lot to put into the market. Also, buy in the money contracts slowly. You likely won’t get a 40x payout, but it’ll still help grow your account so you can then take those bigger risks.
Holdings end of day in main account:
66 AAPL $160C Feb 15 Exp @ $8.6
10 AAPL $155C Jan 4 Exp @ $2.75
15 AAPL $165C Jan 4 Exp @ $0.65
Was transferring more money into my robinhood account and it didn’t clear in time for me to buy the calls I had planned on....pretty salty
Same
Held $150 on retrace - heading higher. I’m back into $155 and $160 calls for Jan 4
My trades today:
Depending on brokerage, if you transfer in amounts $2500 or under by 4pm close, it’ll be available for options trading the next morning. If you go above, it can take significantly longer to clear. (This goes for TD ameritrade). So multiple 2500 deposits will clear but 5k won’t.
Yep. Took it off the table after the historic day today. If it retreats a bit, I’ll go back into them as I expect this week and next to be good.
When you have stock moves this significant, if you’re on the wrong side of an OTM trade, and it doesn’t recover because you didn’t have enough time before expiration, you can take a huge loss. I did so in AMD back in Aug/Sept because the reversal I called for didn’t happen until Oct. and my options expired at the end of Sept.
By using ITM contracts let’s say $150C for AAPL right now, you’re paying a significant amount of premium, but that premium is part “basis” and part “implied volatility. The stock is $157, so I’d say if the premium was $15 per contract, you have $7 of basis and $8 of implied volatility by expiration. If the stock declines to $150, you may be down 20-30%, but can dollar cost average, and you only need a small bounce by expiration to breakeven.
I never exercise - would need too much cash to do so. For instance - 50 contracts of $150Cs would cost me $750,000 to exercise. I sell my contracts for the change in option premium which generates a short term gain/loss. The dollar cost average I refer to is done by buying more contracts at a lower premium to reduce the average premium on the option contracts I’ve purchased.
Exactly
Watch options action on CNBC on Fridays or record it to learn some basics. Google call options and put options and read about how they work. Fast money @ 5PM eastern on weekdays also has small segments on options occasionally. Strategies vary by investor. I’m more aggressive in a stable market by buying OTM options for significant returns, and I’m more conservative by buying ITM options for good returns in a volatile market.
For AAPL, I had $150Cs which were just out of the money when I bought them for Jan 4 and then I’ve been dollar cost averaging my Feb 160Cs over the past several trading days. I have about $57k invested in the Feb 160Cs right now and am looking for a 100-200% return ideally. Had I not dollar cost averaged, I’d be down 25% or so on my original investment of about $4-5k, and my expected return would likely have been 25-50% on that amount.
So OTM options are a better in stable markets? Is that because they get hit harder when markets are volatile? I’ve only been buying OTM options and selling calls, but looking for a better strategy. Thanks OP
Also, how many companies do you usually follow at a time?
Chart of the option premium on AAPL $160C contracts over the past 10 trading days. These contracts were worth $17.75 when the stock was trading at $172.57 and as low as $4.60 this morning
Locked in 75% of my 75% profit on those Jan 4s today and took $1.5k flier bet for $165Cs for Jan 4 given the significance of the turnaround in 2 hrs today.
It’s almost insane to not think they are undervalued with their balance sheet, cash on hand, and cash flow each quarter. Their current multiple is cheap and the forward P/E is even lower, indicating to me that expectations are WAY overdone to the downside. Lot of analysts think they should be priced like a services company as they transition from hardware growth to services growth since the hardware market is oversaturated. Service cos. typically have a much higher P/E than Coke or P&G. Q1 and Q2 reports may drive this to the moon — not to be overly optimistic, it’ll take time, and hitting all the right notes to do this. I was a bear at $233, but it’s near impossible to remain a bear at these levels.
Dem AAPLs are dropping! Buying more?
Ahh, so you were pretty active today then
How’d you do today?
+28.5k (Main acct) +10k (Roth)