Newbie Options Trading

[chiller]

Don't get too tempted. This is how you can get in too deep with options, by having early success. Be *careful*.

Thanks for the warning; we have had a couple of famous cases here in Norway where very rich people have lost everything (more than 100 million USD each) because of their success early on.

For now I'm limiting my self to buying calls with money I'm willing to lose.

 

[Johann Koeber]

When TSLA was at $260 (a few days ago) I sold TSLA Oct16 300 Call Options (making it a covered call). Only for a part of my holdings. I figured it would not go up so quickly (I was wrong) and would expire.

Now these options are close to the money. I do not wish to be called, but to buy them back now would cost me $13.50 (TSLA @ $293).

Now these $13.50 are pure time value. I would not pay so much, but rather wait it out. When the IV has calmed down, time value should be crushed. At that time (hopefully thursday evening or friday) I plan to roll the strike price to wherever TSLA stands, possibly a little higher - and for a later expiration date.

Only downside I see, is if TSLA continues to skyrocket too quickly. That makes it impossible to roll upwards.

Let's see how it goes.

 

[ggr]

I assume you mean Oct 26. As of now (a day later) their intrinsic value is over $14, ignoring any time value, so unless TSLA tanks tomorrow you are faced with either buying back or losing your shares.

 

[Johann Koeber]

Yes, it was Oct26.
On Oct 25 (1 day before expiry) I rolled them to Nov02 305 Call for a credit of $3.05.

Yesterday I rolled these to Nov09 330 Call. For this I had to pay $17.55, just to protect my shares.

We will see how that goes.

 

[CaptainKirk]

I have 2 x $400 Jan 2019 call options that I paid $40.00 way back, now it's worth $10.00 Should I just cut my losses and move on by rolling the options?

 

[jbih]

I have 2 x $400 Jan 2019 call options that I paid $40.00 way back, now it's worth $10.00 Should I just cut my losses and move on by rolling the options?

Maybe you want to read this excellent post by Fact Checking: https://teslamotorsclub.com/tmc/thr...stor-roundtable.105308/page-2977#post-3196876
Based on that I would say yes, but better judge by yourself.

 

[jbih]

I'm in Germany and currently use Captrader for trading options. I pay $3.50 per traded option (not per trade) and IIRC $25 per month for the market data for options.

I'm not totally happy because I can't use the Java client (it crashes on Linux with open source Java and I don't want to contaminate my hopefully otherwise secure installation with Oracle Java, neither do I want to do money related things on Windows), and the web client is somewhat limited.

I believe Captrader both uses the software and the backend from Interactive Brokers.

What do you use and how happy are you with it?

 

[uselesslogin]

It might be time to bump this thread again. Does anyone have questions?

 

[willow_hiller]

It might be time to bump this thread again. Does anyone have questions?

I've got a relatively practical question...

Given that for most brokerages, the first level of options authorization is buying protective puts or selling covered calls, do you typically need to own at least 100 shares of a stock before you can start trading options?

 

[Intl Professor]

Here is a link to a recent post by KarenRei:

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

 

[uselesslogin]

I've got a relatively practical question...

Given that for most brokerages, the first level of options authorization is buying protective puts or selling covered calls, do you typically need to own at least 100 shares of a stock before you can start trading options?

The short answer is yes. Although usually if level 1 options include puts it is actually cash secured puts. This means the brokerage sets aside the cash needed in case the put is exercised. Usually it isn’t hard to get approved for level 2 right off the bat, however.

 

[ReddyLeaf]

It might be time to bump this thread again. Does anyone have questions?

It’s a year later and, yes, we need to bump this thread. I’m planning to eventually skim/read it entirely. However, until that time, I would like to know what tools/websites that folks use to evaluate options prices, trading, an potential profits/losses. Thanks in advance. More questions to follow.

 

[willow_hiller]

It’s a year later and, yes, we need to bump this thread. I’m planning to eventually skim/read it entirely. However, until that time, I would like to know what tools/websites that folks use to evaluate options prices, trading, an potential profits/losses. Thanks in advance. More questions to follow.

ThinkOrSwim desktop application has a great options analysis tool. You can combine options into a single hypothetical order, and it will calculate the payout curve and at what SP you break even. They also have reasonably realistic paper trading on the platform.

 

[ReddyLeaf]

Another newbie question about the prohibition on free riding. For trading stocks, is the 3-day period exactly 72 hr, or at the end of the third trading day? For options, is it 24 hr or the following EOD?

Here’s an example. My accounts were fully maxed out in TSLA or options. Since I wanted to buy more options but didn’t have any cash (and can’t just put more into the IRA), I sold some TSLA shares on Monday around 11am EST. When can I buy options? Thursday is thanksgiving, so can I buy during Friday after 11am, or must I wait until COB Friday (which is unfortunately Monday since my IRA brokerage doesn’t allow me to trade after hours)?

 

[ggr]

Another newbie question about the prohibition on free riding. For trading stocks, is the 3-day period exactly 72 hr, or at the end of the third trading day? For options, is it 24 hr or the following EOD?

Here’s an example. My accounts were fully maxed out in TSLA or options. Since I wanted to buy more options but didn’t have any cash (and can’t just put more into the IRA), I sold some TSLA shares on Monday around 11am EST. When can I buy options? Thursday is thanksgiving, so can I buy during Friday after 11am, or must I wait until COB Friday (which is unfortunately Monday since my IRA brokerage doesn’t allow me to trade after hours)?

My understanding (based entirely on what ETrade warns me) is that you can buy the calls straight away. You will get a warning about using unsettled cash, and if you try to sell whatever you bought within that window, you will be sanctioned harshly. I just have a personal rule that in my IRA accounts I only do anything once a week, such as rolling options to higher strikes or selling stock to buy options.

 

[Knightshade]

Yeah if you buy something with unsettled cash, then sell it pre-settlement, you get a freeriding violation....did it once in an IRA account, basically put me on a 90 day period where I couldn't use unsettled cash at all for anything until the period was up.

 

[ReddyLeaf]

Yeah if you buy something with unsettled cash, then sell it pre-settlement, you get a freeriding violation....did it once in an IRA account, basically put me on a 90 day period where I couldn't use unsettled cash at all for anything until the period was up.

Yes, I think I’m still in that 90d period. I’m definitely a newbie, so a rookie mistake. I’m not sure what account I did it on, though it might not matter and it might apply to the person, not just the account (I have ROTH, regular and rollover IRA). Thanks for the info.

 

[mickificki]

Need some clarification here. I thought a weekly option was something that lasted a week? But came across this:

Can someone explain to me how this weekly works if it expires in december? Appreciate any info.

 

[ReddyLeaf]

Need some clarification here. I thought a weekly option was something that lasted a week? But came across this:

View attachment 611607

Can someone explain to me how this weekly works if it expires in december? Appreciate any info.

No, they don’t just last a week, they are named for the Friday of the week that they expire. Weekly’s expire on Friday of every week, except the 3rd Friday (which is called a monthly). If you pick an option way, way far out, say January 2023, you are only allowed options on the monthly, which expires Friday January 20, 2023. Eventually, as we get closer to 2023 the options market eventually provides the ability to trade on the individual weeks of January 2023. The point being that 2023 is so far away that January only needs one date option to trade currently. Does that help?

 

[ReddyLeaf]

Need some clarification here. ....snip......Appreciate any info.

Spend some time reading this thread and watch the videos referenced. @adiggs is definitely a great teacher.
Applying options strategy 'the wheel' to TSLA