Is there anywhere to see historical prices of options? I accidentally forgot I hey some jam 2017... Which automatically converted as they were in the money...then I had to sell some shares to cover my negative account balance. Just want to do the math to see if I would o sold before if there would be a difference. Tax wise is irrelevant as hey are in an rrsp.
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TSLA Trading Strategies
- Thread starter Robert.Boston
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Thanks!
I was discussing this with my wife. We had set up an options account with Vanguard since they offered cheap options trade, but they are only giving us "sell calls" and "buy put" options only. We have another trading account which we did not apply for options, since it was much more expensive per contract.
She pointed out that the Vanguard Options may be like buying stuff at Costco. You can get a lot for cheap, but you don't have much choice on what it is. Whereas if you're paying full price, you will probably have more "options".... pun intended. Will look into the other account...
Jonathan Hewitt
Active Member
I think Vanguard is the best source for low cost mutual funds and index ETFs. That is their specialty and because of that I own them in my 401K that I don't touch. On the other hand, if you want to do a lot of complicated options you want someone who specializes in that area. It's good to pick a broker that meets your needs, whatever they are. You don't necessarily get what you pay for. For example, a new broker that just started up in January (Tastyworks) this year is wholly designed for people who want to sell options. They have no closing commissions, no ticket charge, and only $1 an options contract to open trades. They don't have some of the advanced aids and tools that IB, TDAmeritrade ThinkorSwim, or OptionsHouse might have (though they might in the future). However, I still only pay $.50 a contract in optionshouse plus a $4.95 ticket charge. On large $ amount trades that $4.95 doesn't matter but if you are selling a put for $100 of premium that $4.95 kills your profits over time so Tastyworks would make the most sense for someone doing trades like that.
Jonathan Hewitt
Active Member
IB has a bunch of different commission rates so I"m not sure which ones you are referring to but notice that they charge on opening AND closing. Tastyworks only charges on opening. I think if you negotiate with IB you can get down to equivalent rates to Tastyworks (aka $.50 opening and $.50 closing on IB is basically the same as $1.0 opening and $0 closing on tastyworks). The default rate on IB is $1 opening AND $1 closing if I am reading their site right.
As far as margin I don't really care because when you sell options you maintain a positive credit balance in your account because you take in a credit selling options and you get paid interest for that balance (not much but hey, better than paying them). You only pay for margin when your balance is a debit. I don't remember the last time I had a negative balance in my account for more than a day.
A cool thing about tastyworks is they design it for people wanting to sell options. A lot of their tools are geared towards helping you succeed in this area. If you don't listen to any of their educational shows on the Tastytrade network then these tools probably won't help you much and IB is probably better.
ah sorry, i misread your initial post about the $4.95 ticket charge and thought that was happening with tastyworks. with that in mind, tastyworks rates aren't that different from IB.
i personally do like using margin to sell naked puts (so i'm also not worrying about closing trades either), but that's not for everyone so yeah, margin rates might not matter to many.
i personally do like using margin to sell naked puts (so i'm also not worrying about closing trades either), but that's not for everyone so yeah, margin rates might not matter to many.
Eh, I've been lazy about brokerage picking. I *have* discovered that, if you keep fairly large accounts, many brokers will offer to match the competition's published commission rate. So if you prefer one broker but their rates aren't competitive, call them up and say you're considering going to (other broker with cheaper rates) and see if they make you a counteroffer...
Because we are near highs I have a little more than 80% of my TSLA designated money is cash. The rest is all March 2017 calls @$270. This is my way of playing volatility. A traditional strategy would be to buy puts as well and that is still tempting but I think I'll only do that if the stock is hanging out around $280 right before earnings. Without puts I have the cash to buy in again at a lower price if we don't push through these highs. If we do push through the highs I can still take most the benefit of the upwards movement. I've been burned too many times at these highs to not have a strategy for a decline.
Edit: If we are sitting at $270 when the calls expire I'll be buying LEAPs and/or stock to replace it. I won't mind losing the money at that point because I will be a lot more comfortable having more money in the game at that point because I don't think we've gone past 2-3 weeks above $270 ever.
Edit: If we are sitting at $270 when the calls expire I'll be buying LEAPs and/or stock to replace it. I won't mind losing the money at that point because I will be a lot more comfortable having more money in the game at that point because I don't think we've gone past 2-3 weeks above $270 ever.
Jonathan Hewitt
Active Member
To continue the discussion of Gamma and weekly calls...I had a complicated options trade that included some 270 weeklies ( I wouldn't have just bought plain $270 weeklies on their own, that would be like burning cash but without the side benefit of heat). It was also not a ton of money, mostly for fun and a hunch something would happen this week.
Remember, Gamma is the rate of change of delta and weeklies have huge Gamma. So when today happened my Total TSLA Deltas were ~75% higher today than yesterday even though I didn't have that many 270s dollar amount wise compared to the rest of my account. For those who need a refresher Delta is basically how much your account would move if it were all stock, i.e. a Delta of 100 means for every +$1 of share price movement your account will gain $100. That means my account basically gained the equivalent of 75% more shares overnight as far as gains per $1 of stock movement. For someone shorting weeklies they are going to see the opposite effect. My account didn't go up a crazy ton because we only went to ~$270. To see the effect of that huge delta the $270s gained we would have had to continue moving up past $270.
Remember, Gamma is the rate of change of delta and weeklies have huge Gamma. So when today happened my Total TSLA Deltas were ~75% higher today than yesterday even though I didn't have that many 270s dollar amount wise compared to the rest of my account. For those who need a refresher Delta is basically how much your account would move if it were all stock, i.e. a Delta of 100 means for every +$1 of share price movement your account will gain $100. That means my account basically gained the equivalent of 75% more shares overnight as far as gains per $1 of stock movement. For someone shorting weeklies they are going to see the opposite effect. My account didn't go up a crazy ton because we only went to ~$270. To see the effect of that huge delta the $270s gained we would have had to continue moving up past $270.
Well you are right about that one. Out of the blue my other broker just emailed me saying we are now going to be invited to be "premium" members (whatever that means). Guess my wife has been doing a decent amount of trades... Will have to see what is being offered. I'll let her sort it out
.
MitchJi
Trying to learn kindness, patience & forgiveness
Delta goes up on itm calls with the same strike price as they get closer to expiration.
OTOH on otm calls the delta goes down as the option gets closer to expiration.
How do the option fill rates compare with these smaller brokerages like tastyworks vs IB and other majors? Are you getting access to the same fill speed and liquidity?
MitchJi
Trying to learn kindness, patience & forgiveness
Check the level II queue. I think that every broker has access to the same buyers and sellers.
Off topic here, but here's a pointer on how NOT to invest:
Feds: Man plotted to blow up Target stores to buy cheap stock
Feds: Man plotted to blow up Target stores to buy cheap stock
CBS News - 5h ago
OCALA, Fla. -- A Florida man is accused in a plot to blow up several Target stores along the East Coast in an attempt to acquire cheap stock in the company if the stock value plunged after the explosions.
My first question to my wife when she pointed this to me was "is he at least shorting the stock?".
Feds: Man plotted to blow up Target stores to buy cheap stock
Feds: Man plotted to blow up Target stores to buy cheap stock
CBS News - 5h ago
OCALA, Fla. -- A Florida man is accused in a plot to blow up several Target stores along the East Coast in an attempt to acquire cheap stock in the company if the stock value plunged after the explosions.
My first question to my wife when she pointed this to me was "is he at least shorting the stock?".
MitchJi
Trying to learn kindness, patience & forgiveness
Copied article about using options:
When it comes to investing, pretty much everyone has an opinion. While those opinions are great, sometimes investors will spread myths about subjects they don’t have a firm understanding of. One of the most confusing subjects is options trading. Due to the many moving parts involved, investors find themselves befuddled and not knowing where to start. Here I’m going to debunk five major myths of options trading.
Myth #1: Options are Riskier than Stocks
This is one of those broad-based, blanket statements that does not tell the whole truth. People think options are riskier because you can lose 100% of your investment in an option. However, you can use options to limit your risk on trades.
Here’s an example, let’s say you wanted to buy 100 shares of Tesla (TSLA) ahead of their earnings report next week because you think they are going to have a good report and the stock will go up. Today it would cost you around $270 per share or $27,000 to own 100 shares. If TSLA goes down 10% on its earnings report, you are going to lose $2,700 dollars. If it goes up 10%, you’ll make $2,700.
On the flipside, you could buy the March 17th $270 Call option for $1,350. If TSLA goes down 10% and stays there through expiration, you’ll lose your $1,350. If it goes up 10%, you’re call option will be worth at least $2,700, maybe more. If you wanted to define your risk as $2,700, you could buy two of these contracts, controlling 200 shares of Tesla rather than only 100. Same amount of nominal risk, but now your upside potential is doubled.
Myth #2: You Need to be a Sophisticated Trader for Options
There certainly are options strategies that involve a great deal of complexity. With so many choices available to trade it can be very complicated. Each options expiration date has call options and put options of varying strikes available. At first glance the selection process can be daunting. Many stocks now have weekly options expiration, making these even more overwhelming for investors.
You don’t need a PhD in Applied Mathematics to use simple options strategies to make money and create income. For example, buying a call in the hopes that a stock goes up. If you know there is an event coming up that you think the stock will profit from, you can buy a call near the money on the stock and if it goes up you can profit. If you want to make a trade that benefits when the stock goes down, you can buy a put option in the hopes the stock goes down. Start with the basics and add more complex strategies as you become more comfortable.
Myth #3: It Takes a Lot of Money to Trade Options
This couldn’t be further from the truth. It’s a lot less capital intensive to trade options than it is to buy 100 shares of your favorite stock. Most brokerage firms allow you to sell options premium, a more advanced strategy, in accounts that contain as little as $2,000. Compare that to Pattern Day Trader accounts which require at least $25,000.
Trading options allows smaller accounts to gain exposure to more stocks for less money. You can diversify your options trades across many industries and many stocks simultaneously. There are even options on ETFs like the Volatility Index (VXX) so you can gain exposure to exotic financial instruments while managing your risk.
Myth #4: Time is Always Working Against You
If you are long or buy options then yes, there is a time value element that’s working against you. However, there are simple ways to flip the script so this time works in your favor. One way is by using long call and long put spreads rather than buying a call or put outright. The other is to use credit spreads.
A long call spread, or a bull call spread, is a two-legged options trade where a closer to the money option is purchased to open and a further out of the money call option is sold to open or shorted. This helps to drop the overall net debit or price of the call spread. It also limits the total profit potential of the trade.
For example, if I bought a March 17th $67.50 Call on Gilead (GILD) today it would cost me about $2.95. My upside potential would be unlimited but my breakeven would be the strike price plus the net debit which in this case is $2.95, making my breakeven $70.45.
However, if I believe Gilead’s upside is limited to $72.50, I could sell that $72.50 Call at the same expiration and take back some money, dropping my overall cost on the spread, therefore bringing down my breakeven. I could sell the $72.50 Call for 55c. Now my cost on the $67.50/72.50 Call spread is only $2.40, my breakeven now $69.90, and I’ll make more money up to $72.50 than I would have with the long call by itself.
Another example is the credit spread. Rather than buying the aforementioned spread, if I’m bearish on GILD I can sell the spread. So instead of spending $2.40 for the spread I would pocket $2.40. My risk would be the $5 difference in the strike prices, minus the $2.40 I took in premium. So I risk $2.60 to make $2.40. This credit spread would max out or give me the largest possible winning outcome of $2.40 if shares of GILD closed at or below $62.50 at expiration on March 17th.
Myth #5: You Need a Special Account to Trade Options
Well, sort of. While you do need to sign an options risk acknowledgement form and get your account approved specifically for options trading, it’s not exactly a “special account.” Pretty much any non-qualified, or non-retirement, account is eligible for options trading. I specify non-qualified because accounts like IRAs are restricted as to the type of options trading you can do since you can’t short stocks in retirement accounts.
There are several levels of options approvals out there, designed to save investors from themselves. Each level or tier is restricted, only allowing certain types of trading. Each broker has their own guidelines for what these levels look like. All you really need for approval is experience trading and capital. It’s not like you have to be a millionaire or anything.
Bottom Line
Those are the five biggest myths about options trading that scare off potential traders. If you take the time to learn more about trading options, you’ll find that they are a great way to manage your risk and gain exposure to the stock market.
When it comes to investing, pretty much everyone has an opinion. While those opinions are great, sometimes investors will spread myths about subjects they don’t have a firm understanding of. One of the most confusing subjects is options trading. Due to the many moving parts involved, investors find themselves befuddled and not knowing where to start. Here I’m going to debunk five major myths of options trading.
Myth #1: Options are Riskier than Stocks
This is one of those broad-based, blanket statements that does not tell the whole truth. People think options are riskier because you can lose 100% of your investment in an option. However, you can use options to limit your risk on trades.
Here’s an example, let’s say you wanted to buy 100 shares of Tesla (TSLA) ahead of their earnings report next week because you think they are going to have a good report and the stock will go up. Today it would cost you around $270 per share or $27,000 to own 100 shares. If TSLA goes down 10% on its earnings report, you are going to lose $2,700 dollars. If it goes up 10%, you’ll make $2,700.
On the flipside, you could buy the March 17th $270 Call option for $1,350. If TSLA goes down 10% and stays there through expiration, you’ll lose your $1,350. If it goes up 10%, you’re call option will be worth at least $2,700, maybe more. If you wanted to define your risk as $2,700, you could buy two of these contracts, controlling 200 shares of Tesla rather than only 100. Same amount of nominal risk, but now your upside potential is doubled.
Myth #2: You Need to be a Sophisticated Trader for Options
There certainly are options strategies that involve a great deal of complexity. With so many choices available to trade it can be very complicated. Each options expiration date has call options and put options of varying strikes available. At first glance the selection process can be daunting. Many stocks now have weekly options expiration, making these even more overwhelming for investors.
You don’t need a PhD in Applied Mathematics to use simple options strategies to make money and create income. For example, buying a call in the hopes that a stock goes up. If you know there is an event coming up that you think the stock will profit from, you can buy a call near the money on the stock and if it goes up you can profit. If you want to make a trade that benefits when the stock goes down, you can buy a put option in the hopes the stock goes down. Start with the basics and add more complex strategies as you become more comfortable.
Myth #3: It Takes a Lot of Money to Trade Options
This couldn’t be further from the truth. It’s a lot less capital intensive to trade options than it is to buy 100 shares of your favorite stock. Most brokerage firms allow you to sell options premium, a more advanced strategy, in accounts that contain as little as $2,000. Compare that to Pattern Day Trader accounts which require at least $25,000.
Trading options allows smaller accounts to gain exposure to more stocks for less money. You can diversify your options trades across many industries and many stocks simultaneously. There are even options on ETFs like the Volatility Index (VXX) so you can gain exposure to exotic financial instruments while managing your risk.
Myth #4: Time is Always Working Against You
If you are long or buy options then yes, there is a time value element that’s working against you. However, there are simple ways to flip the script so this time works in your favor. One way is by using long call and long put spreads rather than buying a call or put outright. The other is to use credit spreads.
A long call spread, or a bull call spread, is a two-legged options trade where a closer to the money option is purchased to open and a further out of the money call option is sold to open or shorted. This helps to drop the overall net debit or price of the call spread. It also limits the total profit potential of the trade.
For example, if I bought a March 17th $67.50 Call on Gilead (GILD) today it would cost me about $2.95. My upside potential would be unlimited but my breakeven would be the strike price plus the net debit which in this case is $2.95, making my breakeven $70.45.
However, if I believe Gilead’s upside is limited to $72.50, I could sell that $72.50 Call at the same expiration and take back some money, dropping my overall cost on the spread, therefore bringing down my breakeven. I could sell the $72.50 Call for 55c. Now my cost on the $67.50/72.50 Call spread is only $2.40, my breakeven now $69.90, and I’ll make more money up to $72.50 than I would have with the long call by itself.
Another example is the credit spread. Rather than buying the aforementioned spread, if I’m bearish on GILD I can sell the spread. So instead of spending $2.40 for the spread I would pocket $2.40. My risk would be the $5 difference in the strike prices, minus the $2.40 I took in premium. So I risk $2.60 to make $2.40. This credit spread would max out or give me the largest possible winning outcome of $2.40 if shares of GILD closed at or below $62.50 at expiration on March 17th.
Myth #5: You Need a Special Account to Trade Options
Well, sort of. While you do need to sign an options risk acknowledgement form and get your account approved specifically for options trading, it’s not exactly a “special account.” Pretty much any non-qualified, or non-retirement, account is eligible for options trading. I specify non-qualified because accounts like IRAs are restricted as to the type of options trading you can do since you can’t short stocks in retirement accounts.
There are several levels of options approvals out there, designed to save investors from themselves. Each level or tier is restricted, only allowing certain types of trading. Each broker has their own guidelines for what these levels look like. All you really need for approval is experience trading and capital. It’s not like you have to be a millionaire or anything.
Bottom Line
Those are the five biggest myths about options trading that scare off potential traders. If you take the time to learn more about trading options, you’ll find that they are a great way to manage your risk and gain exposure to the stock market.
MitchJi
Trying to learn kindness, patience & forgiveness
Wrong. Your maximum risk with options is $1,350.
How much is your maximum risk with shares?
smorgasbord
Active Member
Options are often riskier than stocks, due to 2 factors: 1) the limited time element, and 2) the leverage.
If you buy TSLA stock, you want simply wait out down periods, like the one we just had from Sept 2014 to just recently. That's almost 2.5 years of lower/sideways stock prices, which is longer than any LEAP option. So, you'd have to roll or perform other things that are harder than simply buying and holding the stock.
Second, you have to keep the investment size in mind. Arguing that only $1350 for a 100 share contract is lost compared to $20,000 for 100 shares of TSLA ignores that the person buying/selling 1 single option contract almost certainly isn't taking the other $18,650 and putting it in a money market account instead. What we hear about are people who buy $20,000 worth of calls that then expire worthless and so they've lost it all. That's leverage, and one has to smart to be careful about how much to use.
There are real dangers to mis-using options. For instance, you can perform a "synthetic long." That's where you sell a Put and buy a Call. The money you get from the Put pays for the Call so it costs nothing to initiate: It's like free money! Typically, this ends up acting just like owning the stock, but with two major exemptions: the first being the afore-mentioned time window in which the options expire, and the second being that if the stock goes down, you need to come up with the money to buy the stock from the Put at the strike price. If you had bought the stock instead, you would have already come up with the money needed so no additional money required, but having the Put exercised means you have to come up with the money later. If you haven't cash-secured the Put (that money market thing I was talking about) that means you're borrowing money to buy a stock at a price that's below the current price of the stock. So, you're paying interest to buy something that's worth less than it is today on the open market. BTW, that's called margin.
So, unfortunately, the myths are at least partially true. Options can be riskier than stocks. Truly making money from options requires more sophistication than just buying stock in good companies and holding. If you have a very small portfolio, buying options is more difficult, and then you're back at the risk concerns when things expire worthless. Buying options does have very real time limitation risk. And finally, you DO need a special account to trade options.
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Of course, options can also help reduce risk. You can buy protective puts, which essentially act like insurance against a declining stock price. So, if you're sitting on a some TSLA at $260 today and worried it'll drop below $200 before June, you could buy some $200 puts at $3.50/share (in lots of 100 shares). If TSLA drops below $200, your option increases by about a buck for every buck under $200 it goes. If TSLA stays above $200, your Puts are worthless, but that's the way insurance works. I don't make money on car or house insurance.
I trade options pretty regularly. I did a bunch of Synthetic Longs before Model S when people were convinced Tesla was going to fail, because it was actually cheaper than buying stock. I've been selling Puts when prices drop for years now. To trade options you really have to have a goal and a plan. When I sell a Put, what I'm saying is that I want to buy TSLA today, but I'm willing to wait a bit to see if I can get a better price, and if I don't, I keep the money from selling the Put.
But, I don't kid myself that options are for everyone.
If you buy TSLA stock, you want simply wait out down periods, like the one we just had from Sept 2014 to just recently. That's almost 2.5 years of lower/sideways stock prices, which is longer than any LEAP option. So, you'd have to roll or perform other things that are harder than simply buying and holding the stock.
Second, you have to keep the investment size in mind. Arguing that only $1350 for a 100 share contract is lost compared to $20,000 for 100 shares of TSLA ignores that the person buying/selling 1 single option contract almost certainly isn't taking the other $18,650 and putting it in a money market account instead. What we hear about are people who buy $20,000 worth of calls that then expire worthless and so they've lost it all. That's leverage, and one has to smart to be careful about how much to use.
There are real dangers to mis-using options. For instance, you can perform a "synthetic long." That's where you sell a Put and buy a Call. The money you get from the Put pays for the Call so it costs nothing to initiate: It's like free money! Typically, this ends up acting just like owning the stock, but with two major exemptions: the first being the afore-mentioned time window in which the options expire, and the second being that if the stock goes down, you need to come up with the money to buy the stock from the Put at the strike price. If you had bought the stock instead, you would have already come up with the money needed so no additional money required, but having the Put exercised means you have to come up with the money later. If you haven't cash-secured the Put (that money market thing I was talking about) that means you're borrowing money to buy a stock at a price that's below the current price of the stock. So, you're paying interest to buy something that's worth less than it is today on the open market. BTW, that's called margin.
So, unfortunately, the myths are at least partially true. Options can be riskier than stocks. Truly making money from options requires more sophistication than just buying stock in good companies and holding. If you have a very small portfolio, buying options is more difficult, and then you're back at the risk concerns when things expire worthless. Buying options does have very real time limitation risk. And finally, you DO need a special account to trade options.
------------------------
Of course, options can also help reduce risk. You can buy protective puts, which essentially act like insurance against a declining stock price. So, if you're sitting on a some TSLA at $260 today and worried it'll drop below $200 before June, you could buy some $200 puts at $3.50/share (in lots of 100 shares). If TSLA drops below $200, your option increases by about a buck for every buck under $200 it goes. If TSLA stays above $200, your Puts are worthless, but that's the way insurance works. I don't make money on car or house insurance.
I trade options pretty regularly. I did a bunch of Synthetic Longs before Model S when people were convinced Tesla was going to fail, because it was actually cheaper than buying stock. I've been selling Puts when prices drop for years now. To trade options you really have to have a goal and a plan. When I sell a Put, what I'm saying is that I want to buy TSLA today, but I'm willing to wait a bit to see if I can get a better price, and if I don't, I keep the money from selling the Put.
But, I don't kid myself that options are for everyone.
MitchJi
Trying to learn kindness, patience & forgiveness
Obviously!
My point in posting the copy of the article was to point out that options are not necessarily (depending on what your goal is and how you use them) a higher risk method of investing.
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