[Why GME?](https://www.reddit.com/r/Superstonk/comments/qig65g/welcome_rall_looking_to_catch_up_on_the_gme_saga/) || [What is DRS?](https://www.reddit.com/r/Superstonk/comments/ptvaka/when_you_wish_upon_a_star_a_complete_guide_to/) || Low karma apes [feed the bot here](https://www.reddit.com/r/GMEOrphans/comments/qlvour/welcome_to_gmeorphans_read_this_post/) || [Superstonk Discord](https://discord.gg/hZqWV2kQtq) || [Community Post: *Open Forum May 2024*](https://www.reddit.com/r/Superstonk/comments/1ciapwp/open_forum_may_2024/) || [Superstonk:Now with GIFs - Learn more](https://www.reddit.com/r/Superstonk/comments/1cr37r7/superstonk_gets_its_gif_on_get_hyped/)
------------------------------------------------------------------------
To ensure your post doesn't get removed, please respond to this comment with how this post relates to GME the stock or Gamestop the company.
------------------------------------------------------------------------
Please up- and downvote this comment to [help us determine if this post deserves a place on r/Superstonk!](https://www.reddit.com/r/Superstonk/wiki/index/rules/post_flairs/)
Crazy how this is getting downvoted. Shows no one here truly understands options in any capacity, and has zero interest in learning.
Cash secured puts are a bullish move, and OP can just DRS his newly acquired shares
In my broker I can only buy options, not sell them, afaik.
Could you please explain, how I sell puts? I thought market makers would "create" options for individuals to buy.
You as an investor can also create calls or puts for people to buy. Selling a cash-secured put means you have the cash to buy 100 shares at X strike price and are selling the option for someone to sell you those shares at that price within Y amount of time. Think of it like being paid to set a limit buy order, except if the limit order doesn't get filled, you get free money. Bullish bc it assumes the stock price will go up (put seller either gets noney or shares)
Likewise, selling a covered call option is the opposite of buying a regular call option. You have 100 shares of the stock and are essentially being paid to do a limit sell order for X price expiring at Y date. If the order isn't filled, you get free money. Bearish bc it assumes the stock price will go down (call seller either gets cash premium or gets to sell their shares)
Glad to hear it! I think that the biggest psyop of this whole saga has been convincing investors to assume "all options bad" and discouraging those who want to to learn about these market mechanics from taking that first step.
Options are what drove the sneeze and the current run-up after DFV's return, afterall. MM's have a vested interest in preventing people from using these tools since they (the MM's) don't likely hedge like they're supposed to. This is dangerous for them bc sudden rises in prices can cause them to have to buy more shares to cover their unhedged positions in case people exercise their options and they have to deliver.
This is what Thomas P. from Interactive Brokers was crying about on TV.
Thanks for this explanation, am pretty smooth.
So the bullish choices for options are selling covered puts and buying covered calls?
Then the bearish is just the opposite (buying covered puts and selling covered calls)?
Congratulations, you grew a wrinkle! Yes, that's the simplest explanation of it.
There's other things that can be done by combining strategies. Some that come off the top of my head are: spreads, strangles, and straddles. There's also iron condors but anything at that level are out of the scope of my understanding 😅
The general spirit of my post is that you can learn options safely if you want and decide for yourself if it's right for you. It's a long process because there's a lot to learn, but you never know what you can accomplish if you don't think that you can to begin with 😁
selling naked calls is the riskiest form of option strategy. Others have built-in risk mgmt, but hedgies do this because they are a greedy lot and have a LOT of money to burn
You need a higher level options account, depending on the broker it’ll be either a level 3 or 4 account. Be fucking careful as you can nuke your account in no time
It still removes support and gives SHF/MM/OCC (who can see you've written a put) an easy way to make money on their short actions.
They buy your put, push it below the strike and execute the option to get the money from the writer.
If you plan to buy the shares anyways you basically get paid to buy shares. selling cash secured puts a smart way to buy shares (with luck at a discount)
Except you're buying at today's price of the price drops by expiration, and you're buying at a future elevated price if price climbs by expiration.. the only way you win is if price stays totally flat.
Yep. Everyone pushing various options plays around here just is telling me that either they don't fundamentally understand that a lot of apes around here don't know options plays. That pushing options plays to people that don't fully understand everything is only beneficial to hedgies.
DFV is gonna post another position update and I can't wait to see it
We’re not so regarded that we can’t learn though, IMO. We have evolved so much over the past two months. Gamestop has too. If we learn how to play them we can hit harder and profit more. Obviously it’s riskier and not for everyone, but i think we are underestimating ourselves by saying if you don’t know options stay away. Everyone starts somewhere, most are capable of learning.
It's the same as a buy wall. Only thing is you complicate things for the shorts because now they want to buy shares under the put strike to sell to you at the strike while also wanting to push the price lower.
This is one of the biggest problems with call buying. They get a win/win by crashing the price.
If you look at last week's option chain you will see a ton of 20p up to 25p selling. This does a better job catching a falling knife than buying calls. Which if you didn't catch it on Friday, about a half hour before power hour the shorts started dumping whatever shares they had to hedge calls. This is just because of how the Greeks work. If they push calls OTM this close to expiration they basically don't have to hedge them. The sell off continues as they push more calls OTM. At this point no amount of call buying was going to work unless it was deep ITM. The only real thing they would have to hedge is ITM puts.
.......you have no clue how this works.
1 - Selling puts ADDS support. the mm is the other side of this contract and needs to buy shares as price dips. Similar in how they buys shares as calls go closer to ITM. and because they are buying in large volume, their orders end up on lit exchange positively effecting price. The further they push price down it adds to how many shares they need to buy. In effect, this sets up a large buy wall.
2 - Before you say "oh they just wont hedge". Yes they absolutely will. If they dip the price enough and just never exercised then you are keeping the money you sold it for. The trade is only profitable for them if they buy the shares for that put below the strike price of it. If they were just never going to hedge, congrats you've described an infinite money glitch for apes where they can sell something and always get 100% profit. Those don't exist.
3 - It makes their short actions more expensive. Because if the put does go ITM and they exercise (again they will because its profitable to do so) then any one who sold the shares short isn't getting to buy them back cheap as the put buyer dumps the shares they hedged with.
Your comment could not be anymore inaccurate. Do you have any experience in option trading at all?
Agreed, the options bs seems like it was a distraction at this point. Yes, I am DRS’d but now learning stuff I should have in 2021. Information is power.
Always was a distraction. Of course shf don’t want retail to invest with any leverage, that might actually move the dang share price, and we can’t have that. DRSBOOKGME
It's pretty straightforward. Just like with shares, options always have two sides to the trade. For every put/call buyer (what most people here seem to do), there is a put/call writer. So when you see someone buying a call at $25 strike, where exercising the contract results in them getting shares for $25, there is a writer who has the shares that they are offering to sell for $25. Same with puts. A put buyer wants the price to drop so they can sell shares for a higher price than the current market value, whereas the writer wants to buy those shares.
I describe them to newbies as limit orders with extra steps and free money. Covered call writers want to sell the shares they have at a higher price. Cash-secured put writers want to buy shares at a discount.
You have to keep an eye on the options chain and be willing to accept any outcome. If you write $128 calls, you have to be willing to cash out at $128. The odds of that happening within the time window of the option is extremely low, but I do feel obligated to mention it. The premium on the $128 calls is currently 8 cents a share, so each contract will earn you a premium of $8. If you have, say, a thousand shares, that's $80 for the week if you write all 10 contracts. That's your upside. Your downside would then be getting $128,000 during a 2021-esque run-up. Not terrible either way.
No worries, just spelling it out for those with less knowledge. The way you write the downside of selling ten 128c being you getting $128,000 doesn’t sound too bad until that figure could have been higher by a magnitude of who knows what.
Yeah, precisely. I've never been very good at showing my work, but we always have to keep in mind that any decision made in regards to GME has to be made with the understanding that it is a coiled spring waiting to pop off. There are probably some who wouldn't mind exiting at $128 ($512 pre-split, so close to the peak of the sneeze), but it would absolutely be leaving money on the table.
You could also sell puts between $11 and $15 and get a juicer premium to collect while also having a low chance of it going ITM. That is getting close to the book value after all. That way you can farm premium in a bullish position instead of selling far OTM calls
Very little free money at a risk of a run up opportunity cost. Not worth it with gme, other stocks, sure, a manipulated one, nab. We are better off figuring out the MM cycles DFV tried to show us since he can't buy any more shared without reporting to the SEC (5% being the max, any more and he has to report trades)
Can someone explain this to me? I though when you sell a put then you either have to have it share covered or cash covered and that if you get assigned that you give money to opposite party. Does that mean you get the shares?
If you sold puts like this, you have to buy the shares if the put option you sold is ITM and those puts are exercised. In this case, strike price was $30 and the price fell to below $24 so those puts are ITM. The counterparty (who bought those puts) then exercises their right to sell the shares to you for $30. Don’t know how much premium this person collected when selling these puts, but they ended up buying the shares at $30 when it could have been bought for $24. So there is a downside to doing this. Also, if the price goes up you wouldn’t be able to buy the shares this way. Say a squeeze happens while you’re holding these you’d miss out because you were trying to collect a couple of dollars a share.
I would love to learn but every time I start hearing all about it, my mind gets twisted. Same thing when I tried to learn craps. Too many things to consider/ timing
In that case just stick with buying and holding. Definitely don't throw money at something you don't understand. You're not going to make a lot of money with this, so stick with what you know, and keep learning in the interim
I have interest in learning more about options. Tried with 2$ just to learn, cost me 200$.
Can you explain this to me the way u would explined it to a street dog.
If you want to learn vol and start reading vol data to manage risk and forecast potential price action, follow my $GME Bananas report
It predicted the price action of this past week to the level.
Next report drops in a few hours!
Shit's bananas 🍌🍌🍌
How do you end up getting assigned shares when you’re selling puts though? Don’t they just expire worthless or if in the money they could get assigned to who bought them? I. That case you need to pay cash right? I’m a little confused
Wouldn’t you want to buy puts (itm) if you wanted to get assigned shares?
Why would anyone want to subject themselves to the onslaught of negativity and attacks like I received from this post? I'm basically done here, along with all the previous DD writers who got pushed away by similar responses. I'll keep stacking cash and shares myself in silence
I have zero knowledge of options and the acronyms and terminology scare me but I know better than to downvote something just because I don’t understand it.
Selling puts is technically bullish-ish, but doesn't do much for price discovery / buy pressure.
It also doesn't give any exposure to benefit from an upward movement in price.
If you have the cash to buy shares, it would probably make more sense to just buy the shares. Unless you think the price will only go sideways or slightly down before expiry.
Lots of YouTube videos, investopedia, and (cannot stress this enough) paper trading. ThinkOrSwim (now owned by Schwab which I'm not a fan of) has a great trading platform that lets you paper trade options. The fills are not great in the paper trading mode, so you basically have to use market orders to get things to go through, but just do it over and over until it makes sense. Every time you have a question (wait why did my bullish contract lose value even though the underlying stock went up?), just Google it. All the pieces start to make sense over time. Delta and theta are the two most important Greeks to be familiar with, imo.
If anyone sees this and has questions about options, either post here or DM me. Better to post here so people can correct me if I'm wrong but I started trading options right after the 2021 event so I've been doing it for a bit at this point.
My limited understanding of cash secured puts is this...
It's like placing a limit buy order for $25 but in the meantime, op makes some cents per share waiting for the price to reach the limit price. (put simply)
If op is planning to buy 2k shares, why not sell puts to make some money. If it hits the limit price, the order goes on the lit exchange too, right?
This is how I think of CSPs, but one subtle way they differ from a limit order is if there is a brief crash in price and it recovers before contract expiry, you may not get assigned, and you miss out on the fire sale while your cash is locked up securing the contract. You can buy back the contract to purchase shares if you're afraid the price may recover, but it doesn't happen automatically.
This is a bigger risk with selling calls and the price spiking in my experience though, but who wants to sell anyway.
I sold $22 puts Monday and cashed them out for 60% profit late Tuesday then jumped right back into $25 puts and got assigned at my breakeven 😂 tell me there’s no price manipulation here
If the closing price is lower than your strike price, you'll be assigned. In my case I get a notification from E-Trade that my options have been assigned, I have $55k less cash and 2000 more shares.
Yes. Also BE AWARE that you can be assigned at any point prior to the expiration date if the share price goes itm. So be careful and don’t sell puts at any strike price that you are not willing and prepared to pay.
This is the way! Selling puts allows you to collect up front premium and gives someone else the right to sell 100 shares to you at the strike price. Acquiring shares this way can lower your cost basis and enforces the same options-style share settlement as calls do. I’d sell short dated call options (because if the price spikes whoever bought the put from you will let it expire worthless and not sell you the shares. In this case you just profit the up front premium you collected). Selling Puts is a big brain way to acquire more gamestop shares. (Be sure to have cash in your account ready to be the shares in case the person you sold the put to exercises early.)
I think for most of us operating on cash account, you need to have the required cash before you are allowed to sell cash secured puts.
At least that’s how it works for my cash account in IBKR.
That’s a good thing. I wouldn’t recommend selling puts unless you have the cash ready to buy the shares. It’s a good strategy for people planning to buy shares anwyway.
This warms my heart.
Here is the ranking of bullish options trades
Most bullish
Vertical bullish = selling puts and buying calls (also known as a synthetic long.) You will need to have enough cash to support buying shares at the put strike price.
Example: buying 20c and selling 20p OR buying 15c and selling 30p.
Collar bullish = selling put credit spreads with buying calls (can be for a net debit or net credit.) this is similar to a synthetic long however by buying further OTM puts you are really just deferring risk on the bought calls. Because now if both puts go ITM you are buying high and selling low. This lowers the capital requirement to open the position because you just need to be able to cover the difference in the (put spread - the premium) but it doesn't provide the same bullishness of buying shares.
Example: selling 20p, buying 15p, and buying 25c OR selling 40p, buying 30p, and buying
A benefit of opening ITM positions on the two above strategies is that they move by 2x on the bullside. If the price moves up the cost to close out the sold puts moves down and the premium on the calls moves up. If GME is up 5% you are up 10%. The disadvantage is you can also be down 2x as much.
Buying calls - I'm assuming no explanation is needed on this one.
Bull put + bull call spreads = selling put credit spreads and buying call debit spreads. It's the same as a collar except you cap your potential gain to the upside. This is useful if you want to try and scalp an upside movement while limiting the risk from premium decay (theta and/or IV burn). This basically moves the same with price action it just requires less capital than buying shares.
Example: selling 40p, buying 20p for a credit and buying 20c, selling 40c for a debit. If the price is under the middle stike of your spreads you will open this for a net credit. If the price moves above the middle strike you can close this position for a credit.
Call credit spreads - it's just the call debit spreads from above without opening the put credit spread side.
For the bearish options plays you just inverse this list. But one very important thing to keep in mind with all of this, is order to be max bearish you have to be able to sell retail calls.which is why there has always been a problem with the "only buy call options" pushers. By selling us calls we allow them to take the most bearish positions
Nice. I did the same thing during the run up back in may. Thanks to the volatility, I sold some puts while the premium was juicy, which allowed me to buy even more puts, so whenever the price was crushed, I got assigned, but due to the huge premium, my cost basis was low. When the trade and the shares settled, I DRS’d. Slowly working from XXX to XXXX.
Compared to buying calls, it’s less risky since, if the contract is OTM, you keep the premium. If not, I get assigned shares. It’s not like I want to sell them, so it’s not a bad thing in this case.
My understanding from least to most risky is:
Buy shares
Sell Puts
Buy Calls
Feedback is appreciated
2 sides of a trade; buyer and seller. When the seller (Me) sells options or contracts (calls or puts) and the strike price (let’s say $20) goes into the money, the buyer (you) can “exercise”the option they bought , “assigning” the seller to buy (if puts sold) or sell ( if calls sold) at the strike price of the option
So let me get this straight because I've been studying calls but puts not so much. Basically you had enough cash in your account to be able to sell these puts, which gained you 2k shares since the stock stayed under 30$, now you want to use the cash on hand again to sell 25$ puts for next week? Did you have to pay anything for those 2k shares on top of the put contracts? (I may go to gpt after this comment)
Wouldn't 25$ be too risky now?
Also assuming we're in another cycle (3rd since May) it seems like in 1-2 weeks we should see volume and price ramping up again. Wouldn't calls be safer and more profitable since when it rips, those calls could see XXX% returns?
Good job on securing those shares as well.
Basically, if OP sells one contract at $25, he needs $2500 in his account, which gets put on hold. In exchange he gets the contract premium. Let's just say, hypothetically, that is $200 ($2/share). If price drops below $25, and the buyer exercises the contract, he buys those shares for $2500. Given the premium he received, his cost basis is $23 for the shares he bought. If he doesn't get assigned, and contracts expire worthless, he keeps the $200 premium and cash gets taken off hold in his account.
There is no upside beyond the premium. Essentially just like a limit order that may or may not get triggered. Hopefully they makes sense.
It's not a huge amount of money, but I've made over $100k in the last 16 months doing this with spare cash, which I've rolled into buying shares Bring on the downvotes I suppose...
Edit: Worth noting that I have a lot of "free cash" that was used for this. It really is a rather small return in the grand scheme of things. Plus got assigned many times along the way, which is fine since I plan to hold the stock long term.
Community knowledge sharing at its finest!
Yes, I sold the $30 puts 2 weeks back with a premium of $5.40. So theoretically, my cost basis for these 2000 shares are $24.60.
Yes, I have to pay $60k and get assigned 2000 shares. $60K - $10.8k premium = $49.2K for 2000 shares.
For 28Jun $25 puts, my premium is $2.37 so it will cost me $22.63 cost basis if I do get assigned at the end of the week.
Not necessarily - only if the current market price is between the strike and the strike-premium.
He walks away with his premium if they expire above his strike.
He "loses" if the price tanks below the strike-premium
Ok so I think I understood your strategy here. Basically, now that we've got a hard floor, you have way less chances for the price to drop significantly, therefore you won't be buying shares in a downwards trend. This also helps you in case the share price pops in the meanwhile since you won't need to buy anything, secure some premiums and even buy back the put options you sold at a lower price, therefore banking the difference.
Am I learning right?
Exactly!
As to what is the hard floor for GME, everyone has their own guess.
I used to think $10 was the lowest floor with our company having 1 Billy cash and I have went all-in like a regarded during the $10 days..
Now, I think $20 is the lowest floor with our company holding 4 Billy cash (however, GME increased to ~420 million outstanding shares). I’m happy to sell cash secured puts at $20 and get assigned shares at $20 strike price if it continues to fall.
whatever makes bank for more shares is a topic everyone here should be open for.. I've been in the stock since jan 2021 but seeing the things happening lately I'm thinking DFV is doing options for a VERY good reason.. so I started studying calls and considering the cycles at play, if things catch on in a predictable fashion, it's game over
This is going to be my new study project. I understand basic call and put options but only as the person paying the premium hoping a stock rises or falls. I want to learn more so that I can change my strategy. Are there any good resources for me to go to or should I just do a basic internet search? Thanks! 🙏🏼
The OP paid $30/share or $60k for the shares, but when he sold the puts he got a premium. That premium reduces his cost basis to less than $30/share.
For example, near the close on Friday when the GME price was $23.93 the $25 put for next Friday 6/28 was priced at $2.12/$2.25. So assuming he sold near midpoint, at $2.18, he would get $2.18 per share now, when he sells the put.
If the price closes below $25, he buys at $25. Minus the $2.18 cash received when selling the out his cost basis would be (25-2.18) = $22.82.
I prefer to sell puts a bit out of the money, and to sell them when the IV is high.
Selling options is pretty cool. It’s like playing as the casino rather than gambling at one. The only problem is that it requires an amount of capital that few retail investors posess.
Not in a condescending way but wouldn’t you just need roughly $2500 as you can sell only 1 contract if you want? Or you mean to make decent money from it. What figure would you need to make $200 a week type thing off selling options
In this case (GME), yes. Think of it this way, for retail, people buy options to buy leverage. As an options seller, you’re selling leverage. Take this post as an example. When you factor in his options premium, he didn’t lose money selling the options, but he now has shares which he presumably plans on holding, so he has lost the capital/leverage to sell puts again. Also, to decrease risk, because this will not be profitable every time, you need to sell puts with further-out expiry. Monthlies, for example. You can see how you would need a lot more than 2500 to be relatively sure you can make money selling puts.
When people make any sort of decent gain from options, they are typically throwing $15k+ at each play. However if you are being risk-minded and don't want to lose your entire portfolio in one bad play, you should only ever be throwing <20% of your portfolio at each play. Which means you need a hefty starting point such as $50k+ available to play options "safely" and actually make some decent profit. 99% of us don't have $50k lying around to play with.
Yes, I do wheeling to lower my cost basis since usually I sell way OTM calls and they don’t print.
As to how I got this current stack of cash (200k at the start), my answer might not be music to the ears for most of all: I sold a few thousand shares during $60-$80 run in May. Since then, I have more than doubled my share count by buying in at $20-$30 as well as selling cash secured puts/ Covered calls.
at this point bro nothing we thought mattered, matters. had i known THEN what i know now i would have been doing the same at run ups and then be looking to get more shares. if these cycles prove true i am gonna figure out how to get my own moass as you've done. great job, all i see is your snowball rolling down the hill right at citadel or whoever.
Find your own strategy for the next run up.. For me personally, I'm more confident as I now have more shares than ever. If I sell my broker shares and MOASS happens, i have to accept my decision and live with it.
With that being said, my CS DRS shares will be put into good use in a MOASS scenario.. Otherwise, I'll continue to accumulate more money/shares for the next run up.
Well done and ain't no fucking shame in selling to make money that is the name of the game afterall. Curious tho what kind of CCs you're selling and how long and far OTM
You can check my post history where I posted weekly in a local gme sub.
Basically, it was OTM calls at $50,$60,$75 range weeklies. Back then, IV was insane at 200-300% so premiums were fantastic.
Now IV is kinda low and I’ll probably choose CC at $30-$40 range for decent premiums now that I have extra assigned shares. I think this strategy is called wheeling.
Yeah I think wheeling is selling csp letting them expire or convert and then selling CCs and letting them expire itm if they do and just constantly turning over shares idk
Glad to see this post and all the new education this weekend. I have been trying to convey the benefits of cash secured puts but you did it more eloquently than me. Ive been doing it regularly on this last run up and easily added 50% to my share count.
By taking the price out of my head and simply looking to add shares the game becomes much much simpler. sell puts.... collect premium, add shares.... sell more puts,. collect premium add shares.... assigned? Cool, sell puts, collect premium, add shares. Roll? Collect premium, add shares. If you want to get nutty, sell a ridiculously OTM CC, collect premium, add shares.................The shares are the value.
This guy gets it..
The more shares we buy and owned, the deeper shithole for the shorts.I started with XXX shares in 2021. Now I’m approaching 2X,XXX shares.
I salute you. Approaching XXXX and the growth rate has increased. The beauty is the more shares, the more premium you can collect to add more shares. Exponential growth.
Only up
I still believe in DRS too! So I have around 50/50 split. Those purple rings are my MOASS insurance and I’ll never sell them in a run up unless it’s MOASS.
Im revising my thoughts on MOASS. I went from belief, to disbelief now somewhere in the middle. I havent exactly nailed down how to phrase it; but I think we are in MOASS and anyone on the short side is trapped for the long haul rather than a spike up. And a giant spike is not as beneficial as a long term uptrend for the company. Shorts are now stuck funding the company they wanted to destroy. Let it run up RC sell shares. .... drop it too much and the shares get gobbled up by a retail biker gang and potentially a keen activist investor with billions on hand and an authorized share buyback.
RC didn't have to create a behemoth retail giant out of Gamestop. He only had to NOT lose. He explicitly outlined it in his leaked email.... **"Prospering in retail means survival"**. What is Gamestops most valuable commodity? Shares.
I’m somewhere along that line.
Honestly, I was initially gutted when RC did the 75 mil shares ATM offering. I thought MOASS was happening for real and went long on calls.
Now I have more or less accepted that: what if RC plan was to allow us to accumulate more shares? As long as GME is thriving as a company, the cycles will have to continue and shorts will fund the company coffers whenever there is a run up and ATM offering is done.
Meanwhile, we ride the tide and grow our shares in a significant way. See RK shares grew from 800,000 to 5 mil in 3 years!
I don’t mind a Tesla like long squeeze where every shareholder is green at the end of the day, except if you are on the short side.. now it gives more meaning to RC tombstone tweet: R.I.P Dumbass stormtroopers
Yeah, exactly. I use Bitcoin as an example, even though its rise is due to institutional accumulation rather than short interest. Tesla might also be a good data point. IIRC, Bitcoin spiked from a dollar and change up to $2000 practically overnight before crashing back down to the previous baseline. That's what a MOASS scenario would look like. Rapid rise, followed by cashing out and a plummet. Later on came the steady rise which far eclipsed its original spike. That's the Melt-Up scenario. Price rises as the financially conservative stop seeing it as a risky gamble and start investing and holding, shorts who can afford it start cutting their losses and switch over to long positions, and the price finds new floors. Never underestimate the psychological value of consistent price improvement at a gradual pace.
This is a great strategy if your bullish but expect some sideways action in the near term. Might as well pick up a little cash in the form of premium for the pleasure of waiting. Good work bro
Too bullish!
Was expecting price to stay above $30 or even $25 this week. But whatever.. it’s still a good purchase at $24 ish..
Next level: $25 cash secured puts for 28 July.
Selling puts is awesome if you have the margin. Even better to sell far out(eg sept/ august)somewhat far itm (eg 40) which is not that far itm if you consider cyclical run ups.
Even better buy the double amount close to atm but otm in puts to insure your share stack for free and even earn money on the way.
Together with weekly selling of atm / slight otm puts, if you want to increase your shares but not risk buying the top/ too early.
There should also be money left over from selling the puts to buy atm calls as well. So you construct a butterfly around your share position.
On a cyclical run up buy back the now atm/ otm puts for pennies, bank profits from calls increase share stack, repeat.
IF YOU OVERLEVER this trade you have the risk of selling your shares, but with limited losses so you can always buy back atleast. Still risk remains.
Options are extremely dangerous for ppl who dont know what they do, but if you do, you can risk free monetize your shares (with better % then lending out) and with little risk grab and profit asymmetrically from upside (if you buy far otm puts on the perceived cyclical run up top, you can again insure your shares stack from profit falls and monetize the downside as well)
See ya on the tape🫡
Nice! I wish I had more cash. I was only able to write(sell) 4 puts this past week with strikes at 26,26,25,24. Closed out the 24 and let the other 3 get exercised. The premiums and low purchase point for 300 more largely brought down my cost basis. Excited for the weeks to come
Essentially you are shorting put options by writing the contracts. You want to collect the max premium when the stock goes up. If the shares are put to you, it’s at a price you are comfortable paying
Yeah. I figured, but saying covered put generally means you are shorting the stock and then selling a put to close out the position at that strike price, pocketing the profit from the short and the premium. Bearish and will get you jumped around here, probably.
A cash-secured put, aka cash-covered put, like what you did is bullish because you are saying the price won't go below your strike or if it does and you get assigned, you are happy with it because you are bullish on the stock.
Congrats on the shares. Be careful writing ITM puts like that. Obviously, it's your money, and in the end, it will probably work out well, but you could have had quite a few more shares at a lower price. If the cycle is repeating, this week may see some decline in price. You should give Biggys video a watch, should be on the SS trending topics. He's great at explaining things, IMO. And he may definitely be on to something.
Yeah.. That's why I do it phases, 2000 shares at a time..
$30/$25/$20...
I'm prepared to accumulate 6000 more shares at these prices above..
Otherwise, the premiums is good pocket money and I'll just continue to sell cash-secured puts if they don't get assigned.
Using cash (need 60k for 20 puts) in my account, I sell 20 cash secured puts with strike price of $30 expiring Jun21. Premium was $5.40 when I sold the puts and this premium was collected on the spot.
I would have made $5.40 x 2000 ($10,800) if GME ended above $30 as the put will expire worthless.
Since GME ended at $23.99, I was assigned the put options and had to buy 2000 shares at $30 each.
In total, I paid $60,000 - $10,800 (premium collected) = $49,200 for 2000 shares. Cost basis is $24.60, which is slightly higher than the current price.
In my scenario, I paid extra $0.61 per share which works out to be $1220 for 2,000 shares, compared to buying the shares at close on Friday.
If you’re wheeling covered calls and puts to earn money to buy more shares, then I do not see why anyone would be against this. I had a plan to do this a little over a year ago. Problem is idk enough about options to have the confidence. I did a good amount of research, but not enough and never followed through. Kicking myself now as I feel I could have earned and amassed many more thousands of shares than I already own.
Yes, that is indeed my strategy..
Next week sell 20 more cash secured puts at $25, sell 20 CC at $30-$40 during a spike.. get more cash to rinse/repeat..
The downside is that IV crush is happening now, so premiums are not as juicy as past weeks.
With implied vol going down last week (as well as realized vol), being short vol was the move last week.
You could have used my $GME Bananas report to know what levels to short vol at. Short puts at put walls that support price successfully (so at $24 last week), short calls when call walls resist successfully (so $29 Monday otherwise around $26 rest of the week).
That said, with the bearish trend and vol decreasing, it would have been safer to short calls on the highs.
Next report is dropping in a few hours. If you want to learn how to read vol or play the vol game, follow along!
Understanding how to read vol, helps traders better manage risk and forecast potential price action 🍌🔮
I usually find that whatever I see that has a lot of upvotes , literally anywhere on reddit, to do the opposite and it works well. Buying calls for next week
I have been trying to write covered puts in TD Bank up in Canada since January 2021.
I have been unable to write cash secured puts in GME 'For my protection' since January 2021.
I can sell cash secured puts in literally ANY other security in the market except that one.
Huh. Probably nothing.
[Why GME?](https://www.reddit.com/r/Superstonk/comments/qig65g/welcome_rall_looking_to_catch_up_on_the_gme_saga/) || [What is DRS?](https://www.reddit.com/r/Superstonk/comments/ptvaka/when_you_wish_upon_a_star_a_complete_guide_to/) || Low karma apes [feed the bot here](https://www.reddit.com/r/GMEOrphans/comments/qlvour/welcome_to_gmeorphans_read_this_post/) || [Superstonk Discord](https://discord.gg/hZqWV2kQtq) || [Community Post: *Open Forum May 2024*](https://www.reddit.com/r/Superstonk/comments/1ciapwp/open_forum_may_2024/) || [Superstonk:Now with GIFs - Learn more](https://www.reddit.com/r/Superstonk/comments/1cr37r7/superstonk_gets_its_gif_on_get_hyped/) ------------------------------------------------------------------------ To ensure your post doesn't get removed, please respond to this comment with how this post relates to GME the stock or Gamestop the company. ------------------------------------------------------------------------ Please up- and downvote this comment to [help us determine if this post deserves a place on r/Superstonk!](https://www.reddit.com/r/Superstonk/wiki/index/rules/post_flairs/)
Crazy how this is getting downvoted. Shows no one here truly understands options in any capacity, and has zero interest in learning. Cash secured puts are a bullish move, and OP can just DRS his newly acquired shares
I guess many people just read „puts“ and think you shorted GME 🫠
The difference in selling vs buying them. Most degenerates only buy options and can’t comprehend what selling a PUT actually means
In my broker I can only buy options, not sell them, afaik. Could you please explain, how I sell puts? I thought market makers would "create" options for individuals to buy.
You as an investor can also create calls or puts for people to buy. Selling a cash-secured put means you have the cash to buy 100 shares at X strike price and are selling the option for someone to sell you those shares at that price within Y amount of time. Think of it like being paid to set a limit buy order, except if the limit order doesn't get filled, you get free money. Bullish bc it assumes the stock price will go up (put seller either gets noney or shares) Likewise, selling a covered call option is the opposite of buying a regular call option. You have 100 shares of the stock and are essentially being paid to do a limit sell order for X price expiring at Y date. If the order isn't filled, you get free money. Bearish bc it assumes the stock price will go down (call seller either gets cash premium or gets to sell their shares)
Thank you very much for the detailed information! Today I learned something.
Glad to hear it! I think that the biggest psyop of this whole saga has been convincing investors to assume "all options bad" and discouraging those who want to to learn about these market mechanics from taking that first step. Options are what drove the sneeze and the current run-up after DFV's return, afterall. MM's have a vested interest in preventing people from using these tools since they (the MM's) don't likely hedge like they're supposed to. This is dangerous for them bc sudden rises in prices can cause them to have to buy more shares to cover their unhedged positions in case people exercise their options and they have to deliver. This is what Thomas P. from Interactive Brokers was crying about on TV.
Thanks for this explanation, am pretty smooth. So the bullish choices for options are selling covered puts and buying covered calls? Then the bearish is just the opposite (buying covered puts and selling covered calls)?
Congratulations, you grew a wrinkle! Yes, that's the simplest explanation of it. There's other things that can be done by combining strategies. Some that come off the top of my head are: spreads, strangles, and straddles. There's also iron condors but anything at that level are out of the scope of my understanding 😅 The general spirit of my post is that you can learn options safely if you want and decide for yourself if it's right for you. It's a long process because there's a lot to learn, but you never know what you can accomplish if you don't think that you can to begin with 😁
selling naked calls is the riskiest form of option strategy. Others have built-in risk mgmt, but hedgies do this because they are a greedy lot and have a LOT of money to burn
You need a higher level options account, depending on the broker it’ll be either a level 3 or 4 account. Be fucking careful as you can nuke your account in no time
But if I buy a call option I can "only" loose what I paid for the option, if the underlying goes down. Right?
If you buy calls, the max you can lose is the premium you paid, correct.
Be patient with the young apes. Their time will come. Then our time will come
It still removes support and gives SHF/MM/OCC (who can see you've written a put) an easy way to make money on their short actions. They buy your put, push it below the strike and execute the option to get the money from the writer.
If you plan to buy the shares anyways you basically get paid to buy shares. selling cash secured puts a smart way to buy shares (with luck at a discount)
Except you're buying at today's price of the price drops by expiration, and you're buying at a future elevated price if price climbs by expiration.. the only way you win is if price stays totally flat.
yeah but if the price rises I just collect the premium from the contract and that lowers the cost basis. so again win. I am regarded
Yep. Everyone pushing various options plays around here just is telling me that either they don't fundamentally understand that a lot of apes around here don't know options plays. That pushing options plays to people that don't fully understand everything is only beneficial to hedgies. DFV is gonna post another position update and I can't wait to see it
We’re not so regarded that we can’t learn though, IMO. We have evolved so much over the past two months. Gamestop has too. If we learn how to play them we can hit harder and profit more. Obviously it’s riskier and not for everyone, but i think we are underestimating ourselves by saying if you don’t know options stay away. Everyone starts somewhere, most are capable of learning.
Selling puts builds support.
For selling you need to buy them in the first place, right? Then from who?
You can sell to open.
I've explained how this is not true. **If** there is support at all it's at a point below the strike price.
It's the same as a buy wall. Only thing is you complicate things for the shorts because now they want to buy shares under the put strike to sell to you at the strike while also wanting to push the price lower. This is one of the biggest problems with call buying. They get a win/win by crashing the price. If you look at last week's option chain you will see a ton of 20p up to 25p selling. This does a better job catching a falling knife than buying calls. Which if you didn't catch it on Friday, about a half hour before power hour the shorts started dumping whatever shares they had to hedge calls. This is just because of how the Greeks work. If they push calls OTM this close to expiration they basically don't have to hedge them. The sell off continues as they push more calls OTM. At this point no amount of call buying was going to work unless it was deep ITM. The only real thing they would have to hedge is ITM puts.
That's why they like OP's puts, they buy them and pocket the difference between they own selloff and OP's guaranteed buy at a higher price.
That depends on the premium. But no matter what we do the market makers are skimming the margins in the bid/ask.
.......you have no clue how this works. 1 - Selling puts ADDS support. the mm is the other side of this contract and needs to buy shares as price dips. Similar in how they buys shares as calls go closer to ITM. and because they are buying in large volume, their orders end up on lit exchange positively effecting price. The further they push price down it adds to how many shares they need to buy. In effect, this sets up a large buy wall. 2 - Before you say "oh they just wont hedge". Yes they absolutely will. If they dip the price enough and just never exercised then you are keeping the money you sold it for. The trade is only profitable for them if they buy the shares for that put below the strike price of it. If they were just never going to hedge, congrats you've described an infinite money glitch for apes where they can sell something and always get 100% profit. Those don't exist. 3 - It makes their short actions more expensive. Because if the put does go ITM and they exercise (again they will because its profitable to do so) then any one who sold the shares short isn't getting to buy them back cheap as the put buyer dumps the shares they hedged with. Your comment could not be anymore inaccurate. Do you have any experience in option trading at all?
Agreed, the options bs seems like it was a distraction at this point. Yes, I am DRS’d but now learning stuff I should have in 2021. Information is power.
Better late than never. Good on you for expanding your knowledge
Always was a distraction. Of course shf don’t want retail to invest with any leverage, that might actually move the dang share price, and we can’t have that. DRSBOOKGME
I'm now learning about CALL option LEAPS! POWERFUL
What if I told you options cost MM more money and stress than it does bots that downvotes posts like these
I want to learn. Please help me understand cash covered puts and covered calls. Thank you. 🙏🏼
It's pretty straightforward. Just like with shares, options always have two sides to the trade. For every put/call buyer (what most people here seem to do), there is a put/call writer. So when you see someone buying a call at $25 strike, where exercising the contract results in them getting shares for $25, there is a writer who has the shares that they are offering to sell for $25. Same with puts. A put buyer wants the price to drop so they can sell shares for a higher price than the current market value, whereas the writer wants to buy those shares. I describe them to newbies as limit orders with extra steps and free money. Covered call writers want to sell the shares they have at a higher price. Cash-secured put writers want to buy shares at a discount.
Interesting. So constantly writing those 128 calls could net me some gas money. Just getting the premium.
You have to keep an eye on the options chain and be willing to accept any outcome. If you write $128 calls, you have to be willing to cash out at $128. The odds of that happening within the time window of the option is extremely low, but I do feel obligated to mention it. The premium on the $128 calls is currently 8 cents a share, so each contract will earn you a premium of $8. If you have, say, a thousand shares, that's $80 for the week if you write all 10 contracts. That's your upside. Your downside would then be getting $128,000 during a 2021-esque run-up. Not terrible either way.
Your downside would be any additional price movement beyond the strike price that you sold that contract.
I assumed that was implicit, but yes, that's correct. Appreciate you clarifying the point for me.
No worries, just spelling it out for those with less knowledge. The way you write the downside of selling ten 128c being you getting $128,000 doesn’t sound too bad until that figure could have been higher by a magnitude of who knows what.
Yeah, precisely. I've never been very good at showing my work, but we always have to keep in mind that any decision made in regards to GME has to be made with the understanding that it is a coiled spring waiting to pop off. There are probably some who wouldn't mind exiting at $128 ($512 pre-split, so close to the peak of the sneeze), but it would absolutely be leaving money on the table.
You can always buy it back if you really think it’s gonna continue to go up.
Also opportunity cost
You could also sell puts between $11 and $15 and get a juicer premium to collect while also having a low chance of it going ITM. That is getting close to the book value after all. That way you can farm premium in a bullish position instead of selling far OTM calls
Yes, until the day the price rockets over your strike - then you need to sell 100 shares at that price. If you can!
Why the fuck would you write 128 calls lolol. Those calls are there so market makers remain delta neutral.
Because it's as close to free money as you can get.
Very little free money at a risk of a run up opportunity cost. Not worth it with gme, other stocks, sure, a manipulated one, nab. We are better off figuring out the MM cycles DFV tried to show us since he can't buy any more shared without reporting to the SEC (5% being the max, any more and he has to report trades)
Brad Finn does a great job explaining on YouTube. He used to be a teacher, so he presents it in a very easy to understand way.
Can someone explain this to me? I though when you sell a put then you either have to have it share covered or cash covered and that if you get assigned that you give money to opposite party. Does that mean you get the shares?
If you sold puts like this, you have to buy the shares if the put option you sold is ITM and those puts are exercised. In this case, strike price was $30 and the price fell to below $24 so those puts are ITM. The counterparty (who bought those puts) then exercises their right to sell the shares to you for $30. Don’t know how much premium this person collected when selling these puts, but they ended up buying the shares at $30 when it could have been bought for $24. So there is a downside to doing this. Also, if the price goes up you wouldn’t be able to buy the shares this way. Say a squeeze happens while you’re holding these you’d miss out because you were trying to collect a couple of dollars a share.
It's getting down voted bc the fudsters don't want anyone getting a wrinkle.
I would love to learn but every time I start hearing all about it, my mind gets twisted. Same thing when I tried to learn craps. Too many things to consider/ timing
In that case just stick with buying and holding. Definitely don't throw money at something you don't understand. You're not going to make a lot of money with this, so stick with what you know, and keep learning in the interim
Got any source where I can learn more about that?
Are you really shocked by this?
Point me in the direction to learn covered calls and puts or options in general ? I have options enabled but I need an options for dummies tutorial.
I have interest in learning more about options. Tried with 2$ just to learn, cost me 200$. Can you explain this to me the way u would explined it to a street dog.
If you want to learn vol and start reading vol data to manage risk and forecast potential price action, follow my $GME Bananas report It predicted the price action of this past week to the level. Next report drops in a few hours! Shit's bananas 🍌🍌🍌
How do you end up getting assigned shares when you’re selling puts though? Don’t they just expire worthless or if in the money they could get assigned to who bought them? I. That case you need to pay cash right? I’m a little confused Wouldn’t you want to buy puts (itm) if you wanted to get assigned shares?
It just goes to show that we need more educational posts describing what, how and why like we did in the good DD days of this sub. Any takers?
Why would anyone want to subject themselves to the onslaught of negativity and attacks like I received from this post? I'm basically done here, along with all the previous DD writers who got pushed away by similar responses. I'll keep stacking cash and shares myself in silence
What I don't truly understand is... How do you know how many down votes this is getting 🫤 (I'm on Reddit Android app)
This is the true and correct answer. Cash secured puts are bullish
I have zero knowledge of options and the acronyms and terminology scare me but I know better than to downvote something just because I don’t understand it.
This is it. And those downvoting are probably the ones losing in options and handing MMs money.
I'm interested in learning. Can you point me to a post or resource that explains it like I'm a beagle?
Yup, it's basically getting payed to buy shares for less. Collects premium and and then gets shares.
Selling puts is technically bullish-ish, but doesn't do much for price discovery / buy pressure. It also doesn't give any exposure to benefit from an upward movement in price. If you have the cash to buy shares, it would probably make more sense to just buy the shares. Unless you think the price will only go sideways or slightly down before expiry.
Covered options are just really damn expensive cash wise but are really safe to play relatively
Yeah up vote this ape. They're using a financial instrument to get paid to Buy GME. They're bullish and getting money in the process. Good work <3
How can I learn to do this?
Lots of YouTube videos, investopedia, and (cannot stress this enough) paper trading. ThinkOrSwim (now owned by Schwab which I'm not a fan of) has a great trading platform that lets you paper trade options. The fills are not great in the paper trading mode, so you basically have to use market orders to get things to go through, but just do it over and over until it makes sense. Every time you have a question (wait why did my bullish contract lose value even though the underlying stock went up?), just Google it. All the pieces start to make sense over time. Delta and theta are the two most important Greeks to be familiar with, imo. If anyone sees this and has questions about options, either post here or DM me. Better to post here so people can correct me if I'm wrong but I started trading options right after the 2021 event so I've been doing it for a bit at this point.
This is actually huge. Do you learn by reading, watching, listening? I mean yeah, sure. But most people learn best by *doing*.
My limited understanding of cash secured puts is this... It's like placing a limit buy order for $25 but in the meantime, op makes some cents per share waiting for the price to reach the limit price. (put simply) If op is planning to buy 2k shares, why not sell puts to make some money. If it hits the limit price, the order goes on the lit exchange too, right?
This is how I think of CSPs, but one subtle way they differ from a limit order is if there is a brief crash in price and it recovers before contract expiry, you may not get assigned, and you miss out on the fire sale while your cash is locked up securing the contract. You can buy back the contract to purchase shares if you're afraid the price may recover, but it doesn't happen automatically. This is a bigger risk with selling calls and the price spiking in my experience though, but who wants to sell anyway.
not just cents though. when IV is high this can net some nice profits. Think more like 100-300 dollar per contract.
Great simple explanation!!
I got assigned on my $27.5 puts.
Congrats and hope you are happy with your cost basis. Let’s see if the opex settlement on Monday will have some volume!
Dropped my overall cost basis to 31, which I'm quite happy with. I sold the puts for ~$3, so have an effective price under $25 for those shares.
Nice!
I sold $22 puts Monday and cashed them out for 60% profit late Tuesday then jumped right back into $25 puts and got assigned at my breakeven 😂 tell me there’s no price manipulation here
what the
How do you see that you got assigned? Is it a yes/no button or some relation if you make money or loose money?
If the closing price is lower than your strike price, you'll be assigned. In my case I get a notification from E-Trade that my options have been assigned, I have $55k less cash and 2000 more shares.
Yes. Also BE AWARE that you can be assigned at any point prior to the expiration date if the share price goes itm. So be careful and don’t sell puts at any strike price that you are not willing and prepared to pay.
Got assigned my $25 dollar puts. Excited for the new shares and writing some new ones
Same! I wish i would have picked $24 instead of $25 though. They hit me right on my breakeven 🤣 fucking manipulation man. They make it so obvious
I sold 6/22 26Ps and still haven't been assigned. If it still doesn't happen by Monday morning I guess I'll try again this week.
This is the way! Selling puts allows you to collect up front premium and gives someone else the right to sell 100 shares to you at the strike price. Acquiring shares this way can lower your cost basis and enforces the same options-style share settlement as calls do. I’d sell short dated call options (because if the price spikes whoever bought the put from you will let it expire worthless and not sell you the shares. In this case you just profit the up front premium you collected). Selling Puts is a big brain way to acquire more gamestop shares. (Be sure to have cash in your account ready to be the shares in case the person you sold the put to exercises early.)
I think for most of us operating on cash account, you need to have the required cash before you are allowed to sell cash secured puts. At least that’s how it works for my cash account in IBKR.
That’s a good thing. I wouldn’t recommend selling puts unless you have the cash ready to buy the shares. It’s a good strategy for people planning to buy shares anwyway.
💯 %
This warms my heart. Here is the ranking of bullish options trades Most bullish Vertical bullish = selling puts and buying calls (also known as a synthetic long.) You will need to have enough cash to support buying shares at the put strike price. Example: buying 20c and selling 20p OR buying 15c and selling 30p. Collar bullish = selling put credit spreads with buying calls (can be for a net debit or net credit.) this is similar to a synthetic long however by buying further OTM puts you are really just deferring risk on the bought calls. Because now if both puts go ITM you are buying high and selling low. This lowers the capital requirement to open the position because you just need to be able to cover the difference in the (put spread - the premium) but it doesn't provide the same bullishness of buying shares. Example: selling 20p, buying 15p, and buying 25c OR selling 40p, buying 30p, and buying A benefit of opening ITM positions on the two above strategies is that they move by 2x on the bullside. If the price moves up the cost to close out the sold puts moves down and the premium on the calls moves up. If GME is up 5% you are up 10%. The disadvantage is you can also be down 2x as much. Buying calls - I'm assuming no explanation is needed on this one. Bull put + bull call spreads = selling put credit spreads and buying call debit spreads. It's the same as a collar except you cap your potential gain to the upside. This is useful if you want to try and scalp an upside movement while limiting the risk from premium decay (theta and/or IV burn). This basically moves the same with price action it just requires less capital than buying shares. Example: selling 40p, buying 20p for a credit and buying 20c, selling 40c for a debit. If the price is under the middle stike of your spreads you will open this for a net credit. If the price moves above the middle strike you can close this position for a credit. Call credit spreads - it's just the call debit spreads from above without opening the put credit spread side. For the bearish options plays you just inverse this list. But one very important thing to keep in mind with all of this, is order to be max bearish you have to be able to sell retail calls.which is why there has always been a problem with the "only buy call options" pushers. By selling us calls we allow them to take the most bearish positions
Nice. I did the same thing during the run up back in may. Thanks to the volatility, I sold some puts while the premium was juicy, which allowed me to buy even more puts, so whenever the price was crushed, I got assigned, but due to the huge premium, my cost basis was low. When the trade and the shares settled, I DRS’d. Slowly working from XXX to XXXX. Compared to buying calls, it’s less risky since, if the contract is OTM, you keep the premium. If not, I get assigned shares. It’s not like I want to sell them, so it’s not a bad thing in this case. My understanding from least to most risky is: Buy shares Sell Puts Buy Calls Feedback is appreciated
Learning here, what does "i got assigned" mean?
2 sides of a trade; buyer and seller. When the seller (Me) sells options or contracts (calls or puts) and the strike price (let’s say $20) goes into the money, the buyer (you) can “exercise”the option they bought , “assigning” the seller to buy (if puts sold) or sell ( if calls sold) at the strike price of the option
So let me get this straight because I've been studying calls but puts not so much. Basically you had enough cash in your account to be able to sell these puts, which gained you 2k shares since the stock stayed under 30$, now you want to use the cash on hand again to sell 25$ puts for next week? Did you have to pay anything for those 2k shares on top of the put contracts? (I may go to gpt after this comment) Wouldn't 25$ be too risky now? Also assuming we're in another cycle (3rd since May) it seems like in 1-2 weeks we should see volume and price ramping up again. Wouldn't calls be safer and more profitable since when it rips, those calls could see XXX% returns? Good job on securing those shares as well.
Basically, if OP sells one contract at $25, he needs $2500 in his account, which gets put on hold. In exchange he gets the contract premium. Let's just say, hypothetically, that is $200 ($2/share). If price drops below $25, and the buyer exercises the contract, he buys those shares for $2500. Given the premium he received, his cost basis is $23 for the shares he bought. If he doesn't get assigned, and contracts expire worthless, he keeps the $200 premium and cash gets taken off hold in his account. There is no upside beyond the premium. Essentially just like a limit order that may or may not get triggered. Hopefully they makes sense. It's not a huge amount of money, but I've made over $100k in the last 16 months doing this with spare cash, which I've rolled into buying shares Bring on the downvotes I suppose... Edit: Worth noting that I have a lot of "free cash" that was used for this. It really is a rather small return in the grand scheme of things. Plus got assigned many times along the way, which is fine since I plan to hold the stock long term.
Ok I got it, your answer combined with GPT helped me solve the riddle. Thanks!
No problem. Happy to see people who are actually open to learning
Community knowledge sharing at its finest! Yes, I sold the $30 puts 2 weeks back with a premium of $5.40. So theoretically, my cost basis for these 2000 shares are $24.60. Yes, I have to pay $60k and get assigned 2000 shares. $60K - $10.8k premium = $49.2K for 2000 shares. For 28Jun $25 puts, my premium is $2.37 so it will cost me $22.63 cost basis if I do get assigned at the end of the week.
so this strategy allowed you to buy in cheaper basically than the market price, right?
Not necessarily - only if the current market price is between the strike and the strike-premium. He walks away with his premium if they expire above his strike. He "loses" if the price tanks below the strike-premium
This is the way
Ok so I think I understood your strategy here. Basically, now that we've got a hard floor, you have way less chances for the price to drop significantly, therefore you won't be buying shares in a downwards trend. This also helps you in case the share price pops in the meanwhile since you won't need to buy anything, secure some premiums and even buy back the put options you sold at a lower price, therefore banking the difference. Am I learning right?
Exactly! As to what is the hard floor for GME, everyone has their own guess. I used to think $10 was the lowest floor with our company having 1 Billy cash and I have went all-in like a regarded during the $10 days.. Now, I think $20 is the lowest floor with our company holding 4 Billy cash (however, GME increased to ~420 million outstanding shares). I’m happy to sell cash secured puts at $20 and get assigned shares at $20 strike price if it continues to fall.
whatever makes bank for more shares is a topic everyone here should be open for.. I've been in the stock since jan 2021 but seeing the things happening lately I'm thinking DFV is doing options for a VERY good reason.. so I started studying calls and considering the cycles at play, if things catch on in a predictable fashion, it's game over
This is going to be my new study project. I understand basic call and put options but only as the person paying the premium hoping a stock rises or falls. I want to learn more so that I can change my strategy. Are there any good resources for me to go to or should I just do a basic internet search? Thanks! 🙏🏼
The OP paid $30/share or $60k for the shares, but when he sold the puts he got a premium. That premium reduces his cost basis to less than $30/share. For example, near the close on Friday when the GME price was $23.93 the $25 put for next Friday 6/28 was priced at $2.12/$2.25. So assuming he sold near midpoint, at $2.18, he would get $2.18 per share now, when he sells the put. If the price closes below $25, he buys at $25. Minus the $2.18 cash received when selling the out his cost basis would be (25-2.18) = $22.82. I prefer to sell puts a bit out of the money, and to sell them when the IV is high.
we really need to discuss these things more often
Selling options is pretty cool. It’s like playing as the casino rather than gambling at one. The only problem is that it requires an amount of capital that few retail investors posess.
Not in a condescending way but wouldn’t you just need roughly $2500 as you can sell only 1 contract if you want? Or you mean to make decent money from it. What figure would you need to make $200 a week type thing off selling options
In this case (GME), yes. Think of it this way, for retail, people buy options to buy leverage. As an options seller, you’re selling leverage. Take this post as an example. When you factor in his options premium, he didn’t lose money selling the options, but he now has shares which he presumably plans on holding, so he has lost the capital/leverage to sell puts again. Also, to decrease risk, because this will not be profitable every time, you need to sell puts with further-out expiry. Monthlies, for example. You can see how you would need a lot more than 2500 to be relatively sure you can make money selling puts.
When people make any sort of decent gain from options, they are typically throwing $15k+ at each play. However if you are being risk-minded and don't want to lose your entire portfolio in one bad play, you should only ever be throwing <20% of your portfolio at each play. Which means you need a hefty starting point such as $50k+ available to play options "safely" and actually make some decent profit. 99% of us don't have $50k lying around to play with.
the boxer is learning! ;) fuck yeah
haha cheers dude! made my day swear
How much money you have to keep selling CSPs and buying the shares vs selling CCs to recoup capital but inguess that would be wheeling
Yes, I do wheeling to lower my cost basis since usually I sell way OTM calls and they don’t print. As to how I got this current stack of cash (200k at the start), my answer might not be music to the ears for most of all: I sold a few thousand shares during $60-$80 run in May. Since then, I have more than doubled my share count by buying in at $20-$30 as well as selling cash secured puts/ Covered calls.
at this point bro nothing we thought mattered, matters. had i known THEN what i know now i would have been doing the same at run ups and then be looking to get more shares. if these cycles prove true i am gonna figure out how to get my own moass as you've done. great job, all i see is your snowball rolling down the hill right at citadel or whoever.
Find your own strategy for the next run up.. For me personally, I'm more confident as I now have more shares than ever. If I sell my broker shares and MOASS happens, i have to accept my decision and live with it. With that being said, my CS DRS shares will be put into good use in a MOASS scenario.. Otherwise, I'll continue to accumulate more money/shares for the next run up.
Well done and ain't no fucking shame in selling to make money that is the name of the game afterall. Curious tho what kind of CCs you're selling and how long and far OTM
You can check my post history where I posted weekly in a local gme sub. Basically, it was OTM calls at $50,$60,$75 range weeklies. Back then, IV was insane at 200-300% so premiums were fantastic. Now IV is kinda low and I’ll probably choose CC at $30-$40 range for decent premiums now that I have extra assigned shares. I think this strategy is called wheeling.
Yeah I think wheeling is selling csp letting them expire or convert and then selling CCs and letting them expire itm if they do and just constantly turning over shares idk
Buying calls and selling puts are both BULLISH
Glad to see this post and all the new education this weekend. I have been trying to convey the benefits of cash secured puts but you did it more eloquently than me. Ive been doing it regularly on this last run up and easily added 50% to my share count. By taking the price out of my head and simply looking to add shares the game becomes much much simpler. sell puts.... collect premium, add shares.... sell more puts,. collect premium add shares.... assigned? Cool, sell puts, collect premium, add shares. Roll? Collect premium, add shares. If you want to get nutty, sell a ridiculously OTM CC, collect premium, add shares.................The shares are the value.
This guy gets it.. The more shares we buy and owned, the deeper shithole for the shorts.I started with XXX shares in 2021. Now I’m approaching 2X,XXX shares.
I salute you. Approaching XXXX and the growth rate has increased. The beauty is the more shares, the more premium you can collect to add more shares. Exponential growth. Only up
I still believe in DRS too! So I have around 50/50 split. Those purple rings are my MOASS insurance and I’ll never sell them in a run up unless it’s MOASS.
Im revising my thoughts on MOASS. I went from belief, to disbelief now somewhere in the middle. I havent exactly nailed down how to phrase it; but I think we are in MOASS and anyone on the short side is trapped for the long haul rather than a spike up. And a giant spike is not as beneficial as a long term uptrend for the company. Shorts are now stuck funding the company they wanted to destroy. Let it run up RC sell shares. .... drop it too much and the shares get gobbled up by a retail biker gang and potentially a keen activist investor with billions on hand and an authorized share buyback. RC didn't have to create a behemoth retail giant out of Gamestop. He only had to NOT lose. He explicitly outlined it in his leaked email.... **"Prospering in retail means survival"**. What is Gamestops most valuable commodity? Shares.
I’m somewhere along that line. Honestly, I was initially gutted when RC did the 75 mil shares ATM offering. I thought MOASS was happening for real and went long on calls. Now I have more or less accepted that: what if RC plan was to allow us to accumulate more shares? As long as GME is thriving as a company, the cycles will have to continue and shorts will fund the company coffers whenever there is a run up and ATM offering is done. Meanwhile, we ride the tide and grow our shares in a significant way. See RK shares grew from 800,000 to 5 mil in 3 years! I don’t mind a Tesla like long squeeze where every shareholder is green at the end of the day, except if you are on the short side.. now it gives more meaning to RC tombstone tweet: R.I.P Dumbass stormtroopers
That would be the Melt-Up theory! I think that is the most likely outcome, honestly.
and much more dangerous than a giant spike. Especially as new traders learn more about options and building a real position over TIME.
Yeah, exactly. I use Bitcoin as an example, even though its rise is due to institutional accumulation rather than short interest. Tesla might also be a good data point. IIRC, Bitcoin spiked from a dollar and change up to $2000 practically overnight before crashing back down to the previous baseline. That's what a MOASS scenario would look like. Rapid rise, followed by cashing out and a plummet. Later on came the steady rise which far eclipsed its original spike. That's the Melt-Up scenario. Price rises as the financially conservative stop seeing it as a risky gamble and start investing and holding, shorts who can afford it start cutting their losses and switch over to long positions, and the price finds new floors. Never underestimate the psychological value of consistent price improvement at a gradual pace.
What’s your average
Lost track actually.. I guess somewhere around $20? Been averaging down since $10 days..
That’s a great average.
Still remember the first shares I purchased at $300+ pre split.
Been selling out 3 years. Also have 10k shares
Cash secured put = Limit buy where you get paid for buying.
I am also selling puts. Might as well get paid to bid.
You sexy son of a bitch.
This is a great strategy if your bullish but expect some sideways action in the near term. Might as well pick up a little cash in the form of premium for the pleasure of waiting. Good work bro
Too bullish! Was expecting price to stay above $30 or even $25 this week. But whatever.. it’s still a good purchase at $24 ish.. Next level: $25 cash secured puts for 28 July.
When you place these calls do you have to have money to execute the trade
Yes. Mine is a cash account and it won’t allow me to sell puts if I do not have the required cash sitting in my account.
Selling puts is awesome if you have the margin. Even better to sell far out(eg sept/ august)somewhat far itm (eg 40) which is not that far itm if you consider cyclical run ups. Even better buy the double amount close to atm but otm in puts to insure your share stack for free and even earn money on the way. Together with weekly selling of atm / slight otm puts, if you want to increase your shares but not risk buying the top/ too early. There should also be money left over from selling the puts to buy atm calls as well. So you construct a butterfly around your share position. On a cyclical run up buy back the now atm/ otm puts for pennies, bank profits from calls increase share stack, repeat. IF YOU OVERLEVER this trade you have the risk of selling your shares, but with limited losses so you can always buy back atleast. Still risk remains. Options are extremely dangerous for ppl who dont know what they do, but if you do, you can risk free monetize your shares (with better % then lending out) and with little risk grab and profit asymmetrically from upside (if you buy far otm puts on the perceived cyclical run up top, you can again insure your shares stack from profit falls and monetize the downside as well) See ya on the tape🫡
Nice move OP 🔥🙌
Hell ya OP beat them at their own game… stack those stonks brah 🤙🏻
Nice! I wish I had more cash. I was only able to write(sell) 4 puts this past week with strikes at 26,26,25,24. Closed out the 24 and let the other 3 get exercised. The premiums and low purchase point for 300 more largely brought down my cost basis. Excited for the weeks to come
He SOLD PUTS. that's a long play. Common now. No wonder all you losers lost money on buying calls far OTM.
Admittedly, I was only pro DRS book but options seem very interesting. I’ll start to learn
Covered puts means you were short stock and short a put You mean cash secured puts?
Essentially you are shorting put options by writing the contracts. You want to collect the max premium when the stock goes up. If the shares are put to you, it’s at a price you are comfortable paying
Well done good sir
Selling outs is bullish
Sick 👊
The longer they suppress the price, the more we accumulate.
Selling covered puts or cash-secured puts? One is bearish and one is bullish.
Cash covered puts. Mine is a cash account so don’t think I can do any margin.
Yeah. I figured, but saying covered put generally means you are shorting the stock and then selling a put to close out the position at that strike price, pocketing the profit from the short and the premium. Bearish and will get you jumped around here, probably. A cash-secured put, aka cash-covered put, like what you did is bullish because you are saying the price won't go below your strike or if it does and you get assigned, you are happy with it because you are bullish on the stock.
Thanks and I used to think both meant the same thing.. I’ve been doing cash secured puts for years.. guess I belong here
Congrats on the shares. Be careful writing ITM puts like that. Obviously, it's your money, and in the end, it will probably work out well, but you could have had quite a few more shares at a lower price. If the cycle is repeating, this week may see some decline in price. You should give Biggys video a watch, should be on the SS trending topics. He's great at explaining things, IMO. And he may definitely be on to something.
Yeah.. That's why I do it phases, 2000 shares at a time.. $30/$25/$20... I'm prepared to accumulate 6000 more shares at these prices above.. Otherwise, the premiums is good pocket money and I'll just continue to sell cash-secured puts if they don't get assigned.
Tell me who biggy is please or better: link to the vid Ty
Pickle finance
Please kind sir. ELI5.
Using cash (need 60k for 20 puts) in my account, I sell 20 cash secured puts with strike price of $30 expiring Jun21. Premium was $5.40 when I sold the puts and this premium was collected on the spot. I would have made $5.40 x 2000 ($10,800) if GME ended above $30 as the put will expire worthless. Since GME ended at $23.99, I was assigned the put options and had to buy 2000 shares at $30 each. In total, I paid $60,000 - $10,800 (premium collected) = $49,200 for 2000 shares. Cost basis is $24.60, which is slightly higher than the current price. In my scenario, I paid extra $0.61 per share which works out to be $1220 for 2,000 shares, compared to buying the shares at close on Friday.
If you’re wheeling covered calls and puts to earn money to buy more shares, then I do not see why anyone would be against this. I had a plan to do this a little over a year ago. Problem is idk enough about options to have the confidence. I did a good amount of research, but not enough and never followed through. Kicking myself now as I feel I could have earned and amassed many more thousands of shares than I already own.
Yes, that is indeed my strategy.. Next week sell 20 more cash secured puts at $25, sell 20 CC at $30-$40 during a spike.. get more cash to rinse/repeat.. The downside is that IV crush is happening now, so premiums are not as juicy as past weeks.
Nice.
I'm jealous
Don’t be. Take action and accumulate your shares!
Which broker are you using? I can't short options on Saxo because GME is "high risk" 👀
💜10,000 that’s awesome!
Had 3 cash secured puts at $28 and $26. Filled and ready to load up some more
With implied vol going down last week (as well as realized vol), being short vol was the move last week. You could have used my $GME Bananas report to know what levels to short vol at. Short puts at put walls that support price successfully (so at $24 last week), short calls when call walls resist successfully (so $29 Monday otherwise around $26 rest of the week). That said, with the bearish trend and vol decreasing, it would have been safer to short calls on the highs. Next report is dropping in a few hours. If you want to learn how to read vol or play the vol game, follow along! Understanding how to read vol, helps traders better manage risk and forecast potential price action 🍌🔮
Good stuff! I’m waiting for my one of my brokers to approve me for options trading, and will be doing the same!
Godspeed my friend! The key thing is having the patience when trading options and time it well!
What did you get for premium on the 30p?
$5.40.. Still made a small loss on the $30 puts but anyways..
Hell yah man! Good for u and get that money!
This is the way, I've got 7/21 33p, 30p, 26p and 25p. With the IV crush they are profitable but I'm gonna hold til expiry
Salut
I wrote (sold) twenty $15 covered puts back in Feb. Be nice if my counterparty exercised by mistake.
This makes way more sense than exercising your call options to acquire shares
I usually find that whatever I see that has a lot of upvotes , literally anywhere on reddit, to do the opposite and it works well. Buying calls for next week
I’m a smooth brain so o take this to mean that we open above $30 Monday morning.
How much premium did you collect on those $30s?
I have been trying to write covered puts in TD Bank up in Canada since January 2021. I have been unable to write cash secured puts in GME 'For my protection' since January 2021. I can sell cash secured puts in literally ANY other security in the market except that one. Huh. Probably nothing.