[Tyga11]

So the past couple of days I've been trading options. I bought calls on Microsoft, Apple & Meta. Came up with each trade. I invested $500 total for each trade and it was pretty cool to see how much money you can make when the stock goes up like 1%. I made $200 on Meta today after a 1.5% swing.

Seems like it's easy money if you have an algorithm or software of some sort?

[dangerus_car]

you make easy money, but you also lose easy money. with options, you must have total control of every movement.

yes, now stock is in bullish mode for the past week. you make easy money, just wait when you buy calls then the market turn.

tell me if you are not stressing up over 30%-40% loss

[Tyga11]

Originally Posted by dangerus_car

you make easy money, but you also lose easy money. with options, you must have total control of every movement.

yes, now stock is in bullish mode for the past week. you make easy money, just wait when you buy calls then the market turn.

tell me if you are not stressing up over 30%-40% loss

I've been monitoring the market pretty extensively since the Pandemic. Seems like it's pretty easy to time trades especially when the market is in a free fall / going up.

I bought calls on META today when it was down 3.50% mid morning because I saw the market turning. Sold at the close when it was down 1%.

[2000cs]

I don’t trade options but I do use them to manage some of my stocks. Options are a derivative, and derivatives are inherently more volatile, so it is a different game. They also are almost always going to be taxed as short-term gains/losses. And playing options instead of the underlying stock means no dividends if that stock pays them.

Way back in the middle of the last century I read a book called “Options as a Strategic Investment” and learned the Black-Scholes math and several options strategies. I was very active with options in the late 1970s and early 80s, but once I started really working my career I found I didn’t have time to watch them as closely as I needed to (this before instant Internet pricing). I built computer models on my first PC and used that for a while, but those are long gone now.

Since I retired and have time again, I have gotten back into writing covered calls, but that is about it.

[RonronEG]

There are so many ways to use options, I would use them as lotto tickets. I usually buy calls with strike prices way outside the money for between $100-$200 depending on what I see in the news, forums, Reddit (lol), etc. Most the time they see some early gains, which I never sell of course, then expire worthless. I find they require a lot of attention to be successful due to the high volatility and have generally moved away from them, but they can be very useful for those who have a good handle on their mechanics.

[OkieSnuffBox]

Originally Posted by Tyga11

Seems like it's easy money if you have an algorithm or software of some sort?

This is why they built a new and faster internet pipeline between Wall St and NJ a few years ago. NJ is where all the supercomputers are.

The vast majority of trades are done this way these days built on incredibly sophisticated algorithms.

[Tyga11]

So I have a question. I bought calls on Expedia last week with a strike price of $107 which expire on 8/12. It was above $107 early this morning yet I'm still down 30%. How is that possible???

[dangerus_car]

Originally Posted by Tyga11

I've been monitoring the market pretty extensively since the Pandemic. Seems like it's pretty easy to time trades especially when the market is in a free fall / going up.

I bought calls on META today when it was down 3.50% mid morning because I saw the market turning. Sold at the close when it was down 1%.

this is exactly why i warned you earlier. you have no experience, and just because a one time gain, you think you are all good and expert, lol

your expedia call option is down because
1. theta decay, as it approaches the end of contract, theta decay will become faster, then the swing is going to be wilder
theta decay is time. when you bought it last week (10 days), theta decay is not large because there is still time to hit your contract strike price. now you only have 5 days to hit your strike price, so theta decay is getting smaller and your chance to hit the strike price is getting smaller.
think of theta decay as a time bomb, when your time bomb is 1 hour, your chance of defusing it is high because 1 hour of time to think. now lets say the time bomb is 5 minutes, then your chance of defusing it is lower.
2. IV - implied volatility
you maybe bought the expedia when the IV was high, then now IV is low, that along with the theta decay can cause a lower contract price even though the stock price is up

do not assume just because you have been monitoring, that means you are an expert in options.

monitoring and doing actual trading is two different thing. similar to watching someone teaching how to swim on youtube and pool, and doing the actual swimming itself

like i said, it's easy when everyone makes money, then when it's down 30%, that's when you start crying and question why

lol

Originally Posted by dangerus_car

you make easy money, but you also lose easy money. with options, you must have total control of every movement.

yes, now stock is in bullish mode for the past week. you make easy money, just wait when you buy calls then the market turn.

tell me if you are not stressing up over 30%-40% loss

[Tyga11]

Originally Posted by dangerus_car

this is exactly why i warned you earlier. you have no experience, and just because a one time gain, you think you are all good and expert, lol

your expedia call option is down because
1. theta decay, as it approaches the end of contract, theta decay will become faster, then the swing is going to be wilder
theta decay is time. when you bought it last week (10 days), theta decay is not large because there is still time to hit your contract strike price. now you only have 5 days to hit your strike price, so theta decay is getting smaller and your chance to hit the strike price is getting smaller.
think of theta decay as a time bomb, when your time bomb is 1 hour, your chance of defusing it is high because 1 hour of time to think. now lets say the time bomb is 5 minutes, then your chance of defusing it is lower.
2. IV - implied volatility
you maybe bought the expedia when the IV was high, then now IV is low, that along with the theta decay can cause a lower contract price even though the stock price is up

do not assume just because you have been monitoring, that means you are an expert in options.

monitoring and doing actual trading is two different thing. similar to watching someone teaching how to swim on youtube and pool, and doing the actual swimming itself

like i said, it's easy when everyone makes money, then when it's down 30%, that's when you start crying and question why

lol

Thanks for the info - it appears I got in over my head. At least I started out small.

Do you have your eye on anything?

[dangerus_car]

learn the options greek first, then watch how it works
two most important options greek are theta and delta
theta as explained
delta is the amount of contract price increase or decrease as the stock price increase or decrease by $1.
so that means delta will get bigger when the stock price increases more and more, but delta will get smaller when the stock price decreases more and more

my other advise to you is treat the market as like your girlfriend. your girlfriend is moody, right? market is the same, moody.

figuring out what's the market mood is the same as figuring out your girlfriend mood

right now i think the market mood is consolidating. after 2 weeks of bull run, market is consolidating before getting a new high, consolidation can takes days or weeks.

consolidation means the channel range is tight, probably in 1% or less, that means sell when the stock price hits 1% higher than the lower range of the channel.

how do you determine the market mood? watch nasdaq QQQ and S&P500 SPY. watch their price action.

also watch VIX - market volatility index - investor fear gauge. the lower the value, the more confident, the higher the value, the more scared the investors are, that means you want VIX to be as low as possible. VIX below 20 is good, VIX over 30 is bad, just see last month, VIX almost over 30

[Dim333]

i trade options everyday be very careful nowadays with the market being so down and , for steady safe money weekly buy only companies you dont mind owning stock on, sells puts collect end of the week low risk low reward but steady

[LivingInSalt]

Originally Posted by Tyga11

Seems like it's pretty easy to time trades especially when the market is in a free fall / going up.

lol

[dangerus_car]

Originally Posted by LivingInSalt

lol

that's what a newb always said when they first make their money,

if it's that easy, everyone is working on wall street

remember, observation is different than action. you watch F1 race religiously, does it mean you can race F1 car?

[Tyga11]

Originally Posted by dangerus_car

that's what a newb always said when they first make their money,

if it's that easy, everyone is working on wall street

remember, observation is different than action. you watch F1 race religiously, does it mean you can race F1 car?

I just assumed I'd be in the money once I hit the strike price...to me this sounds like a system rigged against investors. Hit the strike price and still don't make money.

I'm long quite a bit of funds so not exactly a newbie...

[2000cs]

Originally Posted by Tyga11

I just assumed I'd be in the money once I hit the strike price...to me this sounds like a system rigged against investors. Hit the strike price and still don't make money.

I'm long quite a bit of funds so not exactly a newbie...

Not a rigged system at all. Options are derivative instruments that carry more price volatility and no dividend than their underlying stock. They also have a specific time to expiration. There is a premium that erodes over time; roughly this equates to the probability the option strike price (for a call) will be lower than the stock price at any time during the life of the option. As the life gets shorter (closer to expiration), that premium dissipates. On the expiration day, the option is worth the stock price less the strike price (not below zero), because there is no remaining time value. Nothing rigged about that, just math and statistics.

You should really get some options education, whether good books or online, and do some of the math by hand/calculator (Black-Scholes for example) to get a feel for it all.

[2000cs]

Another thing to get smart about with respect to options (and really, all securities) is liquidity. Thinly traded options can carry a lot more risk since there is a limited market for them. Pricing models generally assume good market liquidity (enough outstanding contracts and buyers/sellers).

[dangerus_car]

Originally Posted by Tyga11

I just assumed I'd be in the money once I hit the strike price...to me this sounds like a system rigged against investors. Hit the strike price and still don't make money.

I'm long quite a bit of funds so not exactly a newbie...

it's rigged because it doesn't go in your favor.

did you say it's rigged when you first made money on META calls in the first post? you were playing in the same system, same software, same money, so why is it rigged this time, but not that time?

first, learn the system
second, understand the system

then come back and say again if it's rigged once you understand it and make money both ways.

2000cs is right, options is a derivative, there is a math behind it. the premium he is talking about is what i mentioned earlier, the IV. The higher the IV, the more premium you pay. that's why when you look at the stable stocks like apple, google, their IV is in high 20s to low 30s, then watch IV for GME, AMC, it's in 100+%, tesla is in 60+%

just stick with buying stocks if you don't understand it, plain and simple

or if you want to make money in stock market, be like Elon Musk, invent something, work it, and sell your share and let these 'rigged' investors drive up the share value.
elon is rich because of these rigged investors, right?

[Tyga11]

Originally Posted by dangerus_car

it's rigged because it doesn't go in your favor.

did you say it's rigged when you first made money on META calls in the first post? you were playing in the same system, same software, same money, so why is it rigged this time, but not that time?

first, learn the system
second, understand the system

then come back and say again if it's rigged once you understand it and make money both ways.

2000cs is right, options is a derivative, there is a math behind it. the premium he is talking about is what i mentioned earlier, the IV. The higher the IV, the more premium you pay. that's why when you look at the stable stocks like apple, google, their IV is in high 20s to low 30s, then watch IV for GME, AMC, it's in 100+%, tesla is in 60+%

just stick with buying stocks if you don't understand it, plain and simple

or if you want to make money in stock market, be like Elon Musk, invent something, work it, and sell your share and let these 'rigged' investors drive up the share value.
elon is rich because of these rigged investors, right?

I think it’s stupid you can hit the strike price and not be in the money. That doesn’t make sense to me and never will.

I appreciate the articles you’ve shared. By the way, this is the first one I’ve lost money on and I’m only dabbling.

So is it rigged? That’s not the right word but there should be a transparent way to see all of the technicals you’ve laid out so one can make an informed decision. I called Merrill edge earlier and their traders are worthless