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Options trading strategies for stacking mining shares and/or yield.

gnome

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I'm familiar with selling buying ITM LEAPS and selling covered calls against it...(poor man's covered call)
But I'm not familiar with selling puts to offset the cost. This is a very bullish assumption, right? I guess you are not worried about getting assigned in may?

I'm long YOLO canabis etf and keep selling calls against it, I'm profitable despite getting in just before march selloff.
 

solarion

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No. In general the risk of being assigned is overblown. Options are rarely exercised and there's a lot of time between now and expiration.
 

Voodoo

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No. In general the risk of being assigned is overblown. Options are rarely exercised and there's a lot of time between now and expiration.
But that was essentially a naked or cash secured put. So you would have to have the margin available.
 

gnome

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No. In general the risk of being assigned is overblown. Options are rarely exercised and there's a lot of time between now and expiration.
Of course you can always buy it back at a loss before expiration if the trade goes against you.
I'm just saying that put is essentially doubling down on your bullish assumption, tho it does lower your cost basis.
 

solarion

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But that was essentially a naked or cash secured put. So you would have to have the margin available.
That's true. As I've deployed very little capital thus far, I'm mostly sitting in cash. The market repeatedly tried to crash, and was prevented from doing so. I suspect because stealth yield curve controls are already implemented. ...which means dollar death. The reason I like the play is because of the time decay element. I'm long high delta, high theta, and low vol(72.29, -.0117, 68.00%) and short low delta, low theta, and high vol(-45.59, -0607, 72.01%). Another way to look at it is that the LEAP will move toward zero value very slowly and the naked put will do so very quickly(-.03265, -.14583) ...essentially the naked put will be returning to its intrinsic value at a rate that is 4.46x faster than will the leap. This actually compares two calls with a differing expirations at a strike of 55, but you get the idea...

ExpiryPremiumDaysTime Val per Day
1/20/2023​
20.80​
637​
0.032653​
1/21/2022​
15.00​
293​
0.051195​
32.61092​
156.78%​
12/17/2021​
14.30​
258​
0.055426​
35.30659​
169.74%​
11/19/2021​
13.40​
230​
0.058261​
37.11217​
178.42%​
8/20/2021​
10.90​
139​
0.078417​
49.9518​
240.15%​
5/21/2021​
7.00​
48​
0.145833​
92.89583​
446.61%​

...yes I'm geeky that way.
Of course you can always buy it back at a loss before expiration if the trade goes against you.
I'm just saying that put is essentially doubling down on your bullish assumption, tho it does lower your cost basis.
Also true, though long before I'd resort to buying it back, I'd likely instead render it "not naked" by simply buying a further out of the money put...resulting in a bull spread paid for out of received credit. This only becomes necessary, of course, if I think there's a non-zero chance of the short put ending up significantly in the money. If the certainty continues to grow that the sold put will wind up in the money, far enough for the put buyer to wish to assign, then I'd either have to buy it back prior to expiration, buy another in the money put to offset it, or buy an offsetting call at the same expiration. This could either convert the position to a synthetic or a risk reversal...depending on the strike of the purchased call at the same expiry.

One thing I'd not do is give up a far more expensive call two years into the future.

This trade has not happened of course and if interest rates and the sheisse dollar index keep moving up into market open it would make every aspect of the proposed BLOK trades more favorable...not less. It should render the short sold MAY put more expensive(higher credit) and make the LEAP slightly cheaper simultaneously.
 

solarion

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Dunno just how geeky you guys get, but I'm a computer scientist/tech by trade and get kind of lost in numbers at times. I've worked out methodology largely to my satisfaction to determine relative bargains whilst staring at options chains. This is what I employed in selecting the 48 strike. Mind you, this is based only upon ask on the last trading day. That ask can be pulled, value could climb(or drop), or I could simply be unwilling to pay ask. That said the same methodology should work equally well finding fair bid/ask/mid offers relative to theoretical value of a particular contract.

StrikeMoneynessLastBidMidpointAskTheoreticalTheory_V_AskTheory_V_Ask%Ask Per DeltaAskDelta_TheoryAskIVDeltaGammaRhoThetaVega
68-19.89%16.2014.9015.8516.8016.200.603.704%0.2870.32468.21%58.630.007380.27071-0.01420.29042
62-9.31%16.3816.6017.5018.4017.500.905.143%0.2960.34867.14%62.120.007310.27885-0.01350.28285
70-23.41%16.2314.4015.7517.1016.230.875.360%0.2940.34870.00%58.110.007210.26637-0.01460.29133
60-5.78%18.1017.3018.1519.0018.100.904.972%0.2990.34967.20%63.490.007210.28108-0.01330.27921
63-11.07%16.0016.3017.2518.2017.250.955.507%0.2960.35167.26%61.480.007330.27855-0.01360.28440
67-18.12%22.8715.1016.1017.1016.101.006.211%0.2910.35366.99%58.800.007510.27355-0.01390.29011
5011.85%22.4420.8021.6022.4021.600.803.704%0.3170.35467.83%70.770.00650.28491-0.01210.25327
4815.37%18.7021.6022.4023.2022.400.803.571%0.3210.35768.00%72.290.006310.28419-0.01170.24640
553.03%18.2018.8019.8020.8019.801.005.051%0.3100.36167.66%67.090.006880.28487-0.01280.26777

Once the "cheap" OTM strikes are removed from the equation, the first option that makes any sense is the 50 strike...which is frankly very comparable to the 48 strike. The reason I believe the additional .80 spent on the 48 strike is justified, is due to its higher delta. A long term options play such as this begs for the implementation of a "dividend replacement strategy", as you'll not be getting any income from this derivative...even if the underlying pays dividends(it does). Therefore selling covered calls(or puts) against the contract is kind of a no-brainer...and a higher delta provides a more stable foundation for doing such. Over time, one can even make their LEAP option essentially "free" by employing these techniques. On paper this is an investment of 17.20(with the sale of the naked put), so it'll be some while before cost basis could be reduced to zero. Even still it's a worthwhile strategy.

One can even use such a strategy to enhance performance by scalping premium in alignment with the long position or hedging against declines in the opposite direction. For instance if I check resistance lines in the relative near term, BLOK comes in with upper band resistance around the 58.85 area...say 59 to be safe. If I add percentages to that based on distance to expiry for shorted calls then I can have a pretty safe way to lever this position into an income stream. For instance in my example here if selling an APR 61 call that expires worthless in 12 days is considered relatively safe, then how far out from there must one move to sell a call short on the MAY expiry table? Perhaps 3.5 of standard deviations? This is after all 35 additional days tacked on...and selling calls short is the riskiest thing one can do with options.

A covered call sold into the APR expiry @ a 61 strike would have a roughly 24% chance of winding up ITM based on purely mathematics. The reality is that as long as there's overhead resistance separating the two, the odds are lower than that, but we'll call that a safety margin. 100-24 = a roughly 76% chance of this being a winning trade. Then to move up to the MAY expiry, adding 3.5 standard deviations would mean setting your sold call at 66.

More time = more risk of course, but now our trade remains profitable roughly 77% of the time, while scalping twice the premiums. If things begin moving against you, then there's plenty of time to convert the covered call position to a bear or bull call spread by initiating additional positions around the sold call.

All this said, I rather be on the other side of the order book and selling naked puts as losses are clearly defined, but both have merit.
 

solarion

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These guys report earnings on 4/16 @ 8am Shanghai(NOT 4/6 as indicated). As such, I believe I will take on a couple bull/put spreads for APR 16 expiry. Likely 30/20, as that seems relatively safe from really poor earnings. Ehang is a maker of drones, and their formerly high flying stock was crushed in February after some disappointing earnings. The newsfeed is stuffed full of class action ambulance chaser stuff. I'm not picturing a huge upside here, but this thing is very battered already, in an industry seeing significant growth and an economic environment of fiat inflation.

1617624514903.png

1617624816841.png


I may take on a MAY 21 position as well with the proceeds, I haven't decided, but these credit spreads should be a relatively safe way to stack a few bucks.


Note: I'm assuming here that 4/16 8am event = Shanghai time...which is 4/15 in the US. As a result these options should react to the report. I suppose I should look at a bull call spread as well, depending on how the earnings report sluices out.

Edit: Another option for a MAY 21 position without limiting upside could look something like this...

1617625703868.png


This is a 40/35 risk reversal with a protecting put at a strike of 20. Not exactly a surefire winner, but nearly neutral. Certainly the sold APR credit spread should more than cover the shortfall in MAY. Another alternative could be an offsetting call at a higher strike rather than a protective put. I guess it all depends on your outlook for the company. Certainly they're in a growth industry and the lockdowns should bring in the investor appeal...which is why their shares ran up so much on vapors last year...only to be crushed by reality this year.

VALE is looking very strong pre-market, so nice to see it catching a bid.

Also with silver's dramatic(if not unexpected) reversal overnight, I'll look to close out my EXK(Endeavor silver) position at a favorable price tag. It's not likely to make it to 7.5+ in the next week and change, so better to take profits here.

Long term on the SILJ is beginning to look appealing as well. Perhaps a risk reversal there, to lower cost/break even point with or without an additional put or call to further unbalance the equation. More numbers must be run.

1617627745069.png


Edit: Closed out one VALE risk reversal for .75, holding the other for now. Average cost basis for the two of them was -.58 apiece. Meaning that I pocketed .75 + .58(credit) = 1.33. This was a limit ask order that I didn't really expect to get hit, but nobody goes broke taking profits and this is why I prefer to take two combos. From a margin impact standpoint this was 588 "invested" and 133 returned...for a 22.6% return in 4 days.

Also closed out the short APR 16 EXK put strike 7.5 for 2.31 with a cost basis of -2.69. This means I kept a premium of .38 while clearing up some more margin space/eliminating risk. I now have a net short EXK position with 2xAPR 16 5 strike puts that I'll be looking to close out in the near term.

PLAY is appropriately melty...once again, so I'll be looking to close out my remaining puts(APR 16/APR23) there on strength. As the call side of the order book is weak, today, I may look to take on a bear call with a longer term as I still believe this company is overvalued. ...actually I believe I'm going to instead short a 40 strike PLAY put for .64 to offset the long put. I do not believe it falls that far in 11 days and I may as well stack some premium.
 
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solarion

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Took on a small position in AAGFF(Aftermath silver), that I will look to add to on weakness. This is another one of the Sprott staked microcap silver plays that I've been tracking.

1617634819023.png


Took on an SILJ JAN '22 call(11), the cost of which was partially offset by the short sale of an AUG '21 put(15)...net cost of 3.25.

1617636194911.png


I took on a similar calendar spread/risk reversal trade with BLOK. Long a JAN '23 LEAP(42 strike) and short a MAY '21(57 strike) put.

1617637459441.png


So adding some big bet, long term positions today.
 
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Voodoo

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Fun tip. Options expiration can be a great way to stack a bit of extra funny munny by riding the wild volatility ebbs and flows. I used to often take a floater on a call(or put) on an index I perceived as particularly strong(or weak) going into expiration. With the current near constant options schedule on the indexes this is near constant. The triple Qs for instance has options expiring on both Wednesday and Thursday.

What I find is that those options become increasingly volatile on these occasions and I want to take a flyer on a contract or 2, so I want to stack them the evening before. So roll with the direction of the market, as usual, and stack(in the opposite direction) for the following day. Since these are guaranteed to be completely worthless within 24hrs, clearly we do not wish to invest a bunch into them, but they can prove quite valuable if there's a large gap up or down on options expiry morning.

So as an example, the QQQ's are IMO quite weak here, and I may or may not find an opportunity to roll the dice on this perceived weakness on Wednesday and/or Thursday. To capitalize on this potential I will go shopping for cheap OTM puts the evening before. So for March 31 options expiration, I'll shop on Tuesday shortly before market close.

Right at the moment the 295 put looks tasty, and it's only .23bid/.28ask Since I don't really want to risk my own funny munny on such a short term venture(cuz...duh), I would likely fund this little escapade by building a spread in the opposite direction to fund the outing. So in this example I'd build a vertical spread on the call side of the order book expiring at the same time and look to raise the funds necessary to grab the put I like for captured premium. Right this second that looks like a 324/328 bear call could work...to fund the lions share of the put.

Now while this is not without risk, the risks are clearly defined beforehand and if done properly has very little chance of blowing up in your face. These spreads should be appropriately far OTM and high probability of expiring worthless. The afore mentioned bear call spread has a 15% chance of ending profitable even now...three days ahead of expiry. More importantly for us this means it has an 85% chance of expiring worthless...which is groovy for me, but the reality is that the odds are likely much worse even than that as there's significant overhead resistance on the QQQs above 320ish and again at 325ish. By Tuesday afternoon these odds could be even more significantly in my favor allowing me to fund a longshot with proceeds picked up for nothing.

View attachment 205895

**************Not trading advice...entertainment only. If you don't know what you're doing, consult someone who does.****************

I'm also considering a net short position on CCL(carnival) ahead of their earnings report on Friday. The thing got beaten to crap with the lockdowns and plandemic last year, but then once the damage was baked in, it charged right back ahead and is now up 100% from the lows in October. I personally disagree with the assessment of those that believe the damage has been done and the situation is going to be peachy swell going forward. It's not. Moar lockdowns, forced vaccinations, and economic destruction caused by the response to the plandemic will, IMO hand CCL another crap year of earnings. I will be watching it very closely heading into Friday and building an appropriate position based on technicals over the week as I believe YoY earnings will be un-pretty and forward guidance will be coming down from already low levels. This position will likely be some kind of relatively safe volatility ratio spread...likely with a credit so that it's neutral-premium capture on the upside and offers unlimited upside if the underlying falls all the way to zero. I find this is often the best way to play these expected volatility expansions, though I know some prefer strangles here.

View attachment 205898
View attachment 205897

...and here's a relatively simple strategy I whipped up to attempt to take advantage of the situation...though it's far from certain this is going to be my final position. Specifically, I do not love the level of upside risk if somehow, some way, CCL manages to have a great quarter and declares 2021 the greatest earnings year in the history of earnings. ...I know right?

View attachment 205899

Edit: I may just go ahead and float some low ball bids for some OTM APR 09 puts on CCL over the next few days. They're already cheap only 12 days from expiry and generally bullish bias of the underlying. Bid on the 23 strike is appropriately enough .23 just now. Then if I snap up a couple, I can build a credit positive position around them by selling puts near them or even at a forward expiry as they'd be tanking as well if I turn out to be correct. This kind of calendar spread thought process can add a lot to your overall options gains. A bear call spread, for instance forward of APR 09 expiry, say APR 23 expiry for instance, built prior to Friday could fund the entire endeavor and would be nearly guaranteed to expire worthless if the underlying tanks in here.

CCL jumping today and announcing on Wed. I can't seem to find a play that I like though. The stock jumped today but it looks weak. A straddle around $29 strike or selling like a $27.5 call / buying the $29 call seem like the better plays but the straddle is expensive.
 

solarion

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Covered the pair of MAY '21 INTC 65 strike puts I'd sold short...for a realized profit of 3.10 combined. I left two each puts in place at 57.5 & 60 as I still don't like their market positioning going into their earnings.
I can't seem to find a play that I like though.
The bear call isn't bad. Not much upside, but not much downside either, and credit spreads are groovy. Still, I like my ratio spreads for volatility. If you straddle the moneyness line with a bear put...uh currently 28.5/28 and then go long another put at a lower strike then you'll end up with very little invested and near unlimited gains if CCL tanks on earnings. Say you lined up puts on the APR 16 expiry like this +28.5/-28/+26 then your downside is capped and your upside is limited only by expiry. A relatively low probability strategy, but one with a massively outsized reward/risk potential. Call it a ratio spread or a bear put with an extra long put whatever you wish, but it's a good strategy when one has a directional bias and expected spike in volatility.

1617645304148.png


Again...do not blame me if you do this and get clipped please. It's merely a suggestion. I've long puts scattered all over that APR 16 chain paid for with bear calls and a net credit overall, so I'm not going to be following my own advice here. I think CCL is garbage and the run up is completely unjustified, but that doesn't mean it's going to tank...just that I like my odds here.

Remember, you want to be a net buyer on whichever side of the order book is being whacked. The put side ratio spread makes sense here because the puts are on sale today.
 

solarion

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Silver futures touched on daily support and is now bouncing a bit. I may stack another SILJ LEAP if there's much of a rebound.

1617645957022.png


The dollar is weak...rates are lower...there's no excuse for this besides pure manipulation.

Edit. Stacked another SILJ LEAP call/short sold put. Also stacked a few shares of a mirco cap royalty called Ely gold & minerals(ELYGF).

PLAY is bouncing off support. I may look to take some new positions if there's a further breakdown. I still have bear calls that are almost certain to expire worthless on the 16th and then a pair of APR 23 puts...which I will be selling into PLAY weakness.

Thank the crooked buffoons at the CDC for the unjustifiable jump in cruise line shares. Somehow I doubt this is going to do much to CCLs bottom line anytime soon.


The execution I got on the BLOK combo and the fantastic bounce in SILJ handed me quite a day at the casino. Very satisfying. ;)
 
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Voodoo

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Covered the pair of MAY '21 INTC 65 strike puts I'd sold short...for a realized profit of 3.10 combined. I left two each puts in place at 57.5 & 60 as I still don't like their market positioning going into their earnings.

The bear call isn't bad. Not much upside, but not much downside either, and credit spreads are groovy. Still, I like my ratio spreads for volatility. If you straddle the moneyness line with a bear put...uh currently 28.5/28 and then go long another put at a lower strike then you'll end up with very little invested and near unlimited gains if CCL tanks on earnings. Say you lined up puts on the APR 16 expiry like this +28.5/-28/+26 then your downside is capped and your upside is limited only by expiry. A relatively low probability strategy, but one with a massively outsized reward/risk potential. Call it a ratio spread or a bear put with an extra long put whatever you wish, but it's a good strategy when one has a directional bias and expected spike in volatility.

View attachment 206769

Again...do not blame me if you do this and get clipped please. It's merely a suggestion. I've long puts scattered all over that APR 16 chain paid for with bear calls and a net credit overall, so I'm not going to be following my own advice here. I think CCL is garbage and the run up is completely unjustified, but that doesn't mean it's going to tank...just that I like my odds here.

Remember, you want to be a net buyer on whichever side of the order book is being whacked. The put side ratio spread makes sense here because the puts are on sale today.

Don't worry about me complaining. I like to take the baseball analogy and launch for home runs all the time. Bunting is a long lost art.

I hadn't thought about using the puts instead of calls although I had built a strategy with the extra put but it was further out with a similar P&L profile. A $100 loss is nothing for my typical outlook, plus I have a giant ST gain that is just itching to be whittled away (not really of course). I ended up placing an order for 2 of the 28.50/28/25.50 ratio spread. Just to see how it goes.

Edit, well it would seem to have been good timing but I did not get filled at a $0.55 midpoint bid.
 
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solarion

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Sounds like a nice choice. Good luck!

Stocks I do not prefer ahead of earnings...despite the "strong buy" recommendation crap.

1617714009881.png

1617714071876.png


Share dilution, declining revenue, declining earnings, shrinking margins. ...damn you covid! They report on Thursday.

Also slapped some fresh bear calls on PLAY on strength. These are APR16 expiry and raised 1.10...which will probably be used to stack a longer term put on the same underlying. Note this is just outside max resistance of the stock.

1617718983658.png
 
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Voodoo

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You mean you don't go with analyst reco's. :dduck:

The one guy left in our investment club just loves reading through Valueline and their price targets. I can't take much more of it. Just roll my eyes and move on.

I did sell a cash secured put on HGEN today. I own quite a few shares and think they are being shorted. Yes, they have NO income, yet. But they've already received good P3 results and just waiting on a EUO from the g-men. I have been adding from $18 level. So instead today I sold the August $15 Put and pocketed almost $450 to potentially tie up $1500 for a few months.

And I couldn't resist and bought a call on GME. Lol.
 

solarion

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Ugh GME. lol The man is a gambler.

I just slapped this risk reversal on PLAY. I'll look to add a far OTM call to limit risk if the underlying takes off on me to the up, otherwise stacking a bunch of credit while this thing melts works for me...

1617725467540.png


Still haven't gotten any bear calls to go through re: LEVI and not real anxious to lower my limits. I did slap multiple bull puts on EH as mentioned above and that thing has taken off...so, seems likely I keep a couple bucks of premium there. Guess it depends on their earnings & revenue. Not confident enough to grab a call, but I sure don't mind stacking credit.

...and PLAY goes negative INSTANTLY. ROFLMAO

Slapped this reversal trade on LEVI. Still waiting for some bear calls to go through to pay for it and give me an extra call to protect against a potential upside spike.

1617726364503.png


...and no, absolutely not. Most analysts are professional liars pimping for their sugar daddies. Promoting the overpriced crap their banks have stacked a bunch of.

Stuff is pure hopium. lol "Yes we're losing over $.5b a month...and yes we're diluting the crap out of our shares to avoid bankruptcy...but on the other hand things could be worse...somehow..." So buy buy buy CCL shares!

Look at ALL this great news! No making money this summer either...too bad, so sad. Now let's get that stock to new all time highs!
1617732788770.png



Idjits can't find a better long play than a company that's expected to lose nearly $5 PER SHARE this year? hahaha The ship is sinking boiz.

1617734330849.png


1617734693189.png


Then after losing -7.29 EPS 12 months trailing, they're going to "recover" with hopefully a whopping .11 EPS in 2022. Come on with this free money crap...if interest rates weren't zero then this company would already be filing for bankruptcy. Anyone recommending this crap needs to be slapped silly. ;)

From a strictly technical standpoint CCL is rising on nothing but vapors. No confirmation from RSI or increased volume.

1617735567073.png


EDIT: Corrupt CDC for the win! CCL way up large in after hours due to mommy and daddy gubmint giving them permission to maybe conduct business this summer.

 
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solarion

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Wrote a couple bear calls on EH 45/55 APR16. Now I have bear calls above and bull puts below...snatching up premium in both directions. These people chasing momentum all day are SO much fun. Sure, I'll take your premiums for your low percentage bets.

1617737625317.png


Also stacked a few shares of a microcap uranium concern I track on weakness.

1617737831606.png


Analysts. This is literally a dead company walking and there are several analysts out there still telling clients to buy this grotesquely overpriced crap.

1617743123324.png
 
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Voodoo

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Gamestop is a gut feel just from watching it so closely for a year now and putting it together with everything going on in the world. It's not the gamble the "numbers" say it might be because of the share numbers. It has 2-3x shares owned than really exist. IV has come down a ton, though it came down more during the day, while prices are stabilizing 10x higher than Dec. This screams loading the spring again to me.
 

solarion

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Well good luck with that. ;) I function almost entirely on probabilities with regard to trading, though I certainly attempt to speculate as to overall market direction out of necessity.

Just noticed that one can buy a SAND(Sandstorm gold) 2023 LEAP for roughly the same pricetag and strike as a SEP21 call. The LEAP has a slightly lower delta...but still over 80 deltas and obviously a much lower rate of decay...so almost 500 days more life on it. I likely target one or two of these bad boys on a meaningful pullback. Pity no LEAPS are available for OR(Osisko royalties), as I like it a bit better and it's also cheap relative to the big daddy royalties(WPM & FNV).

1617801083509.png


Amused today when I realized I'd built a couple iron condors around EH during the day yesterday. A bull put vertical + a bear call vertical. Due to rapidly shifting momentum players I was able to stack 1.70 in credit for each pair of verticals and they all expire worthless nine days from now. Just need the shares to stay between 30 and 45 to collect max credit. Surely that's not asking too much? ;)

1617801946730.png


Had to pull the plug on the CCL APR 16 30 strike calls I sold short when it became clear stupid people would continue to bid up garbage. That resulted in a roughly 2.06 loss...though I still have the 40 strike calls that expire in 9 days. Woohoo! They're worth all of .03 each. lol
 
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Voodoo

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Probabilities are all fine and good but they often are NOT calculated correctly. Sure mathematically they are fine but the markets are so far from "Highly Efficient" they are just not correct far more often than the math says. Hence, the LTCM blow up in the 90's and it's much worse now.

Speaking of things not working, CCL is up after not Burning as much cash as people expected and the usual hooplah on reopening. Never mind the fact that they may not ever be able to sail out of the US again. I mean that won't matter will it? Lol. Eventually the market stupidity / sentiment will turn and this will make a good sell.
 

solarion

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Yeah, their losses per share are less BECAUSE THEY'VE DOUBLED THE NUMBER OF SHARES. Christ people are stupid. lol

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Shares outstanding are up 440M(61.9%) since March of 2020. Dummies can't do maths of course, or even be bothered to look this stuff up. This means the value of each share is reasonably assessed at a minimum of 60% lower than their pre-covid scamdemic numbers. I would argue it's worse than that because they've also taken on massive debt and their fleet has been mothballed...but most investors don't deal in fact/realities, they deal in fairy tale stories.
 

Voodoo

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Yes, never underestimate stupidity. Trust me, I've fought them far more often than I should. These things trade on fear and greed. Math only plays a part in the long run.

Carnival is fading fast today during trading. Check out this response in the ever so high quality Yahoo Forum. Maybe these people will realize that the woke crowd hates cruises because they are high energy use things for estimably a big party.

This is my favorite. And they are saving a ton of $$$$$$ on fuel !!!!!
 
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solarion

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...well I covered the short calls, I did not sell puts or cover the bearish MAY expiry risk reversal I took out against CCL...the puts are near worthless now anyway and the reversal has time to suck less. If it tanks as it should I'll get some money back.

Also began stacking JAN23 5 strike LEAPS on SAND...cuz they're crazy cheap for that kind of time and a company that stands to rapidly accelerate earnings this year.

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This is also unencumbered, so I can sell short OTM near term calls against on strength to get the bucks spent back. Really do not understand why more people don't leverage LEAPS, but most people look at them as expensive(they're not) and risky(they're not). Limited losses(in this case 3.32) and unlimited gains. Absolutely outsized gains as a percentage compared to buying 100 shares of stock. I guess people don't do this because most don't understand how great the deal is and can't be bothered to do maths. LEAPS like this one make short term options and stock look silly expensive by comparison.
 

Voodoo

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I'm noticing some VERY similar trading in the GME options. The last time this happened was when I bought my Bull Call spread because the $800 calls are trading ABOVE the other strikes all the way down to $670. IV is down a bunch and now the whales are gonna pick their spot and pounce on a bunch of calls IMO. This is the April 16, 2021 expiration.
 

solarion

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You seem to enjoy the wild rides. Me? I'll stick to the high probability stuff and keep plugging away. ;)

Stacked a NOV21 call on LAC(Lithium Americas Corp) 10 strike with a short sale of the AUG21 15 strike put. So that brought total cost down to 3.2 and break even down to 13.83. Lithium has been on a tear since Q3 2020 and is up 93.55% YTD. The corrupt spend happy federal regime will need mass quantities of the stuff for nearly any green crap projects as they don't work well without some kind of power storage. These guys report earnings on May 14.

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Voodoo

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I'm a longer term trader because that's where the market inefficiencies provide opportunity. And it's why I'm fine with losing money, in the near term. If I'm right and have convictions then it doesn't matter and may just allow me to stack more. But you can't be wrong very often, and it's VERY difficult to be right and use options because of the theta decay. Which is where I could get better and be a little more strategic.
 

solarion

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Theta decay is easily minimized via long term options...even LEAPS. The difference in decay between a contract 2-3 years out and deep in the money vs a OTM or NTM near term contract is quite striking. That's why I like shorting near term NTM puts against LEAPS I stack long term. It instantly cuts break even dramatically, and makes the LEAP significantly cheaper by allowing me to split the cost between cash balance and margin.

Then when the shorted put gets cheaper...either through lower volatility, price action, or theta decay, I can buy it back cheaper and keep the LEAP unencumbered. This then allows me to start stacking near term OTM covered calls on a monthly basis against the LEAP whenever I believe there'll be a decline or sideways action in the underlying. The odds are so thoroughly stacked in your favor in this regard, it's frankly a bit hard to not make money...particularly as deep ITM LEAPS are very reasonably priced relative to the value they provide.

Take the sandstorm LEAP I stacked today. Theta is -.00128, and I'm going to be staring at that lovely 80.34 delta exposure for up to 653 days. Even then, with it 2.19(43.8%) in the money, if I don't ever sell or roll it...it'll auto exercise @ 5. Now while simple mathemagicks says theta decay is .49005/day($320/653days), that's misleading and the reason why it's actually only losing a fifth of that a day(-.00128). The reason is because it's deep in the money so its value is nearly all intrinsic...and that intrinsic value does not decay. Only the extrinsic(the time premium) decays. The mistake most people make with options is they select deep OTM options with short durations to expiry and then wonder why they're so melty. Well, they're based on 100% extrinsic value and they're at or near the rapidly accelerating part of the decay curve(30+/- days). That's what I like to sell...not buy for this very reason. Those options are garbage lottery tickets and should be sold short for premium 95% of the time. This is how one turns a malevolent greek(theta) into an ally. Buy low theta decay and sell short high theta decay. Combining this with long high deltas and short low deltas it's far easier to make money with options.

Stacked a few shares of a micro cap lithium miner called Cypress Development on weakness today. Lithium is the best performing commodity YTD, of all the commodities I track, so exposure is kind of a no-brainer to me. Also doubled up on shares of my favorite micro cap silver play(Aftermath).

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solarion

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CCL finally getting melty down 3%. Perhaps I salvage a little something from my APR16 puts after all and the MAY risk reversal is well into profit territory. Seems eventually it matters when your company is bleeding out. Then too the option volatility tends to crater after earnings announcement.

Closed out my second of two VALE risk reversals for JUN expiry. This one yielded a healthy 1.58 + the initial credit of .6 when I took on the trade for a tasty final outcome of +2.18.

Added a short term bullish risk reversal on overstock.com ahead of earnings on the 29th. I'm long a JUN65 call and short a MAY63.5 put for a net debit of 3.07. A bit risky, but OSTK seems undervalued here and near long term support.

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Also picked up the 2nd leg of the CCL risk reversal I had on covering the short call @ 1.51 debit after collecting a credit of 2.02. Just a risk reduction measure, I left the MAY put strike 27.5 in place as I think CCL has more room to crater.

lol Immediately OSTK spiked up 3.87%. Sometimes it's better to be lucky than good. ;) The MAY put I sold short for that reversal has already cratered over 1.50. I may be picking that thing back up today.
 
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solarion

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Here's another way to skin a cat. Essentially eliminating extrinsic value of an ITM option position and therefore eliminating theta decay 100%. It can be seen as a short term stock replacement, as it still expires of course, but it costs much less and dramatically outperforms stocks. Check it out.

By subtracting intrinsic value of an ITM option, one can then conclude that all remaining cost is extrinsic. This is also the only part of an ITM option that decays...so why not create negative value in that exact amount to offset it? While it's possible to do this within the same expiry, I generally find it better to do so as a calendar ratio spread. Two in the money longer term calls and one short sold OTM nearer term call that offsets perfectly(or near perfectly) the extrinsic value of the two combined longer term long calls.

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In the above example a pair of NOV11 strike SLIJ calls were purchased and to offset the intrinsic value of those calls one simply subtracts the strike(11) from the underlying(15.71) to get intrinsic(4.71). All else spent on the calls is then extrinsic value and needs to be negated. In this example the calls were 5.45 each so 5.45 - 4.71 = .74 * 2 = 1.48. Then you need to also ensure that you offset the theta of the two combined calls(.008). With this data one can then go looking for the appropriate call to sell short to negate 100% of intrinsic. In this example that was an AUG 17 strike call.

The result is a single synthetic unit that has zero theta decay, zero margin requirements, and an unencumbered 1.277 deltas. ....which means it moves significantly more than the underlying and doesn't melt when not moving.

WPM 1.522 deltas of exposure, 13.47 pricetag, zero theta decay, zero margin requirements. As you can see, it massively outperforms 100 shares of stock in both nominal terms and as a percentage of gains/losses. On the downside max losses are capped and are far lower than 100 shares of the underlying(32.16%). You'll never lose more than invested in either scenario...the zebra just costs much less.

A 30% rise in the underlying = 12.57. 100 shares gains 1257.
A 30% rise in the underlying with this zebra = 1629(due to the deltas). That's a 121% return and unlike most options this thing doesn't melt, it must simply be rolled forward every couple years in the case of LEAPS.

One note is that if the long calls slip out of the money then they give up deltas in lieu of value. The best way to fix this is to roll the trade forward in time. This provides some amount of crash protection, not shown in this model, but does require one to monitor/maintain the asset during times of significant volatility. Obviously the deeper in the money the long calls, the more protection there is against this and the higher the deltas over 100 shares of the underlying...though at higher initial cost.

Edit: Man did I get that call right...Overstock beast mode activated roughly 5 mins after I pulled the trigger on that trade yesterday and I can't find any news. Their earnings are coming up and it's undervalued in a crazy expensive market though.

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Edit: Closed down my OSTK position for 8.65. Cost was 3.07 so a tidy 181% profit in a day.
 
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solarion

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Closed down my BLOK position after a nice run up. Mostly I just wanted to reboot into a ZEBRA(Zero Extrinsic Back Ratio).

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Significantly lower cost and higher delta. Since I moved this one forward from a standard LEAP it was difficult to keep the theta at zero, but it's low and that > 1 delta is like leverage on leverage. This thing was already a violent mover...even in plain Jane ETF form...stacked contracts are crazy volatile.

Stacked VALE, WPM, HL, PLG, BTG, SAND, & HBM. ...all ZEBRAs. Oh and I converted my SILJ JAN22 11 strike contracts to a ZEBRA by shorting an AUG21 17 call.

^^^Practically a must read for anyone into options^^^
 
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