Excellent.
Definitely, someone looking to trade options should spend time understanding all the elements and how to use them. What that means is understanding terminologies, the greeks, the way an option gains or loses value, etc. Once one has an understanding of those elements, applying logic to various strategies (like conversions, synthetics, etc) is the easy part.
So playing off the analogy, this conversation about conversions is actually equivalent to contemplating the best way to prepare the buffalo's ribs, whether to dry rub or sauce them, whether to sear them or go straight to low heat, etc.
To play another analogy, I appreciate that an eager and optimistic healer might want to get their residency started ASAP...but its probably a good idea if they took a few pre-med classes first...
Shorting shares is exactly the opposite of buying shares. When you buy a share you buy at current price to open the position and (obviously) you want the price to go up so you can sell the share at that higher price to close the position. When you short a sale you sell a share at the current price to open the position with the expectation that price will go down, then you buy back the share to close the position at the lower price.
In both cases the goal is "buy low sell high", its just that shorting is doing it in reverse. In the case of the shorts you do the sale on margin, and so you need to manage that margin relative to underlying price.
I don't have time to day trade these days, but when I do I always trade futures, usually ES or GC (or if I'm feeling wimpy, MES/MGC), and very occasionally FV or US.. I never day trade securities and definitely not TSLA, because it doesn't really adhere to common technical analysis and so it really just relies on gambling/gut feel.
Oh, I’ve never been so unfortunate to read a reply to my message after the trading day! Case and point, day trading Tesla stock SUCKS!
I made 10k just day trading on Monday only to lose 16k today. Yuck! I have no business day trading any stock let alone TSLA. My day is too busy and it’s far too easy to be wrong but it was valuable lesson nevertheless. Swing trading perhaps is something I could do with time and education but even that is problematic and too dangerous before I really understand position sizing and separating trading and investing stashes etc.
Even so, I’ve learned some things…
1) don’t buy premarket, and if you do, don’t get lackadaisical with stop loss just because it’s premarket
2) it’s best to enter stock at MMD if it “looks right” which means NDX s&P mini are climbing steadily upward as well, no FUD, good treasury rates.
3) if daytrading, pay attention to slope of 20 day moving average, buy at bottom of bollinger and if TSLA is oscillating between the upper and lower bands similar to NDX.
4) move stop loss up as soon as there is a profit , exiting the trade automatically when the price reverses.
5) beware of low volumes,
7) and finally don’t do it…. Don’t day trade TSLA … you will lose…. And if you are going to do it anyway, really be sure prices are trending upward and be prepared to be wrong more than 1/3rd of the time.
On a separate note, I really do like the reverse conversion. It certainly has a time and place if you can do execute it gracefully at the right time. I LOVE selling puts, it feels like something I could become decent at. I HATE the buying calls aspect of the reverse conversion and there has to be a better way than what I’ve done. Still, I did some things well this week.
For example, I entered synthetic this week only because I had rolled my put position from previous week, AND 2) stock dropped a lot on Monday allowing me to purchase 25x 602.5 calls for relatively low premium. I was looking for a better way to hedge the upside this week with my rolled puts.
As a result of this position, I discovered (on accident) the fantastic margin requirements of the reverse conversion (10% margin in reserve for each 100 shares) which allows more leverage to do a few not so smart things like daytrade TSLA on a down day. No need to point out that this isn’t wise.
So bxr. I appreciate your analogy about medicine. All I can say is some people learn best by learning the terminology after they have intuitive understanding of the concept. Not ideal in any sense, but I’ve learned a lot in my life, but options is much more like fly fishing than medicine. There is real science beneath fly fishing but it’s still too complex and messy to do good double blind studies on what strategy catches more fish. Still, with time, you develop an understanding of water temp, tides, wind, various types of synthetic fishing line for the right situation (no pun intended). For me…. I need to experience first hand each aspect to understand it fully. Terminology is just a way of explaining the concept after I’ve experienced it. I’m getting there…. Just takes time.
So when I say using all parts of the Buffalo…. I’m talking about finding a practical way to make the most of a decent rolled put position expiring this week and I seized an opportunity to purchase weekly calls. An opportunistic synthetic. Do I like it? Maybe. I am hoping you might tell me if there would be ANY adaptation to what I’ve mentioned with a decent rolled put position expiring Friday. All things being equal, the only thing I might do differently is buy longer dated calls. The duration of the long calls is what doesn’t sit right with me… and I’m wondering is there a better way to play this situation?
Thanks again for your help!