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Stock Thread (15 Viewers)

pecorino said:
The underlying stock does not even need to go to $20.90 per share. All it needs to do is rise quickly. If a stock goes up 10%, the near-the-money call options roughly double (this is my own rule of thumb and there is much variability, but I've found it to be a good rough gauge). So it is not necessarily true that the buyer of the call option believes the stock will get to that strike price by expiration but he does think the stock will rise and probably fast. A bought call option as described almost certainly would be resold (for a profit or a loss) before the expiration date.
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Good post.  People that buy options (puts or calls) aren't usually looking to obtain the shares.  They're speculating that the SP will rise or fall in their favor. They're looking to profit on volatility.  The option price doesn't stay the same throughout the trade's lifespan.  They paid the $3.40 in anticipation of selling the option (closing the trade) for much more.  As the SP gets closer to the strike the option price will get higher.  Someone buying calls on a stock is bullish that it will go higher, not because they want the stock at the strike but because the option price will be much more than when they bought it (profits on their $3.40 investment).  They simply want to sell the option for more than what they bought if for before the expiration date.

It's the same reason closing (or getting out of) a trade gets more expensive for the option seller as the SP gets closer to the strike price.  

 
pecorino said:
On selling covered calls: I have soured to this especially lately. With such volatility in the markets, it is a good thing to be able to exit a position quickly. If you sell a covered call for one month out, sure you keep the premium. But if the stock tanks, you need to re-buy that call before you can sell the underlying. And if you get a pop in the stock price, you cannot sell and lock in that profit. Selling covered calls is the most conservative options strategy so there is a time and a place for it, but these are times where agility is important so I don't recommend selling covered calls as strongly as I would in a tepid market.
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I only sell covered calls when the stocks they are covering are making new highs in a bull market. Some downside protection with collecting rich premiums. I go no more than 4-5 months out and try to sell at least 10% out of the money so we have some wiggle room. 

This is the worst time to be selling covered calls. 

This is the best time to be selling cash secured puts on companies you want anyway. I do employ this strategy for some clients for yield enhancement on the total portfolio...and once in a while we get put. The puts I sell go out a max of 6 months....I try to sell 12-15% out of the money. I typically do them on industrials in this volatile markets as the premiums are juicy. 

 
ghostguy123 said:
Is this a strictly BLMN crowd or is anyone looking CAKE?
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I have been watching CAKE. 

I just am far more bullish on BLMN for short term trades as their curbside has been a huge success during the pandemic. they have maintained an average of 60% of their normal business with curbside take out.....that is very very impressive and the best results in the casual dining landscape. 

People want that Onion!!!!!

 
Polish Hammer said:
I missed my chance for a cheap bite of the onion. Should I jump in now as it approaches $10?
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I am targeting 12.50-13 to exit.....so still some upside from here for the trade I want to make.

MGM target is 15-15.50 for me then see ya. 

And hopefully we get to do it again one more time...if not....we did very very well on trading these two times inside 3 months.

 
Todem said:
I am targeting 12.50-13 to exit.....so still some upside from here for the trade I want to make.

MGM target is 15-15.50 for me then see ya. 

And hopefully we get to do it again one more time...if not....we did very very well on trading these two four times inside 3 months.
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Doubled my DHT holdings this morning.  Purchase price $6.29.  Holding for the dividend.  We'll see if it drops 5% from my purchase price.

 
Bossman said:
Great point and one that I don't consider.

I assume many option traders are "in and out" several times before it ever gets to strike date. 

I do love the fact that I'm able to take advantage of these type of trades.
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I used to sell puts and calls and try to hold until expiration so I could keep the full premium.  This worked well for awhile and my favorite stocks to do it with were AMZN TTD, CMG.  I also did a lot with RUT and SPY.  But when Trump started a tweet war with China, among others, things didn't always work out so well.  

So I started using a different approach.  Instead of holding trades to expiration (it also ties up funds for too long) I tried to get 40-50% profit, then exit the trade.  I found that 35-45 days or so out was a good spot to enter and then half that time (say 20 days before expiration) I'd look to close the trade and get around ~50% profit.  It allowed me to do more trades.  Couldn't always get 50% but any profit is good.  Some I'd close for a 10% profit while others I'd get 70%.  Tried to remain conservative.  I know you're much more aggressive.  

Disclaimer:  This was done prior to the pandemic. Before covid-19 I did mostly option trades while holding a few stocks.  With the fall in March I moved to picking up beaten down stocks, like so many others here.  Since March I've only done a small handful of option trades.  Don't want to tie up funds when the opportunity comes to buy on the cheap.  I've piggybacked off one that you brought up awhile back and love hearing your success stories.  Keep it going and good luck.  

 
BassNBrew said:
@Todem time to double down on Comcast?
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Long term it is a solid entry point. It is only what....10% off it’s low. I like the company a lot looking  out 18-24 months. Solid growing dividend, excellent brand names (I know it is fashionable to ##### about Xfinity and all that but we are talking about making money in here). 

I would buy it here with confidence. 

 
In on DFS.

I already have some DAL, but may pick up more as it drops as I think they may be one of the few airlines to come out of this relatively healthy. 

 
The General said:
Thank you to whoever it was pimping DKNG. Someone in here mentioned it quite a few times last week. Would have never pulled the trigger on that without that. 
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Same here.  I didn't realize the site is venturing outside its bread and butter DFS.  #headinsand I guess.  I was mildly interested in the ipo but I'd always used Fanduel and then moved to Yahoo DFS for playing.  Had an account on Draftkings but really never liked the platform/interface that much.  

Last week I looked around the site and demoed some of their casino games.  A handful of states have legalized online gambling but I didn't know Draftkings offered so much in that arena.  Also the sports books where you can bet on games, races, ping pong matches, even the 2021 NFL draft odds (Lawrence or Fields at #1, for instance).  

Could really be big if states continue to legalize online gambling.  I bought at 20 and looking to add more when I can.  

 
Don't Noonan said:
There is a reason that the options for NERV are trading with such high premiums, that is for sure.  I think you found a good investment but there is risk of a large movement either direction.
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I got out of my position with NERV - don’t like the pattern in that chart. 

 
BassNBrew said:
I'm seeing a potential perfect storm where the earnings from other companies in the sector hit right around the time this dividend is paid.  I'm going to take the risk that DHT doesn't drop 5%.
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BassNBrew said:
Doubled my DHT holdings this morning.  Purchase price $6.29.  Holding for the dividend.  We'll see if it drops 5% from my purchase price.
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You seem skeptical.  :lol:

The dividend WILL drop the share price by the same amount- of course, there are always other factors that impact the stock price, so it will move more or less than the dividend amount based on those factors, but it won't have anything to do with the dividend itself. Again, there is no "free money", if there was everyone would do it.

 
So what is with the "dividend will drop the share price".  You mean if they say they arent paying the dividend right, and not a drop right after they pay it?

 
Jayrok said:
Good post.  People that buy options (puts or calls) aren't usually looking to obtain the shares.  They're speculating that the SP will rise or fall in their favor. They're looking to profit on volatility.  The option price doesn't stay the same throughout the trade's lifespan.  They paid the $3.40 in anticipation of selling the option (closing the trade) for much more.  As the SP gets closer to the strike the option price will get higher.  Someone buying calls on a stock is bullish that it will go higher, not because they want the stock at the strike but because the option price will be much more than when they bought it (profits on their $3.40 investment).  They simply want to sell the option for more than what they bought if for before the expiration date.

It's the same reason closing (or getting out of) a trade gets more expensive for the option seller as the SP gets closer to the strike price.  
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This is my strategy.  I never have any intention of actually buying the stock. 

The one thing that is important is taking profit and not getting too greedy.  Its not uncommon to be 25-30% up quickly (or down), really need to weigh how long you want to hold.  It's not often where I feel its a good idea trying to hold out for a huge gain.  Just take your profit and move on.  Definitely have been burned trying to get a much bigger gain than I should have so that's a key part to this IMO.  That being said, if you are right, you can have huge gains.

One of my weaknesses is that I need to be better at cutting losses quicker before it gets away from me.  This is where it gets dangerous on the losing side.  You can easily lose most of your investment if you hold too long when its trending away from you.

That being said, there is so much risk in this.  High risk, high reward.  Money management is critical. Got to keep the trades small in comparison to your portfolio if you are going down this path.  
 

 
humpback said:
You seem skeptical.  :lol:

The dividend WILL drop the share price by the same amount- of course, there are always other factors that impact the stock price, so it will move more or less than the dividend amount based on those factors, but it won't have anything to do with the dividend itself. Again, there is no "free money", if there was everyone would do it.
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I don't disagree but tankers are the rare, earnings payout % company. They're supported by the Net Asset Value of the tankers which they are more or less trading at. There is an argument that they shouldn't really drop too much below NAV. So will be interesting to see if the stocks trade up into the dividend or rebound afterwards. 

I haven't studied one-time dividend payouts but would be interested in a study on how stocks react before or after a larger one-time dividend payment. 

For instance, EURN is going to pay $1.10 in dividends in June. It's a weird situation in that they're paying a semi-annual dividend and moving to a quarterly dividend so it's abnormally high (essentially a 3 quarter dividend). But with the stock at $9.80. You're getting 11% back for holding for a month plus. I guess my argument is that NAV won't magically drop by 10%. 

 
Oil & gas stocks have to rebound.  Most down 50%.  This is probably a two year play & beware of smaller companies going belly up.  IMHO.

 
ghostguy123 said:
So what is with the "dividend will drop the share price".  You mean if they say they arent paying the dividend right, and not a drop right after they pay it?
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Well if they don't pay the dividend, the stock is likely to drop for a lot of reasons. But say a company is trading at $100 and is going to pay a $1 dividend. If you bought the stock right before the dividend trading at $100, collected the $1 and the stock still traded at $100, you just made a 'free' 1%. So everyone would do this. Humpback can correct me if I'm wrong, I think there is usually some leakage with this. I.e. the stock doesn't always go down the full dividend amount but that may have more to do with tax consequences than anything else. 

 
sporthenry said:
Well if they don't pay the dividend, the stock is likely to drop for a lot of reasons. But say a company is trading at $100 and is going to pay a $1 dividend. If you bought the stock right before the dividend trading at $100, collected the $1 and the stock still traded at $100, you just made a 'free' 1%. So everyone would do this. Humpback can correct me if I'm wrong, I think there is usually some leakage with this. I.e. the stock doesn't always go down the full dividend amount but that may have more to do with tax consequences than anything else. 
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Conversely, does the price run up prior by the dividend amount?

 
BassNBrew said:
Conversely, does the price run up prior by the dividend amount?
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In theory, it should be priced in to the stock. For a lot of regular dividend payers, it already is. For a special dividend or an increase in it, the stock usually moves once its announced. I doubt it runs up to the dividend date. If anything, with taxes, I could see people sell it, then buy it back afterwards. I haven't studied the nuances enough, but we're talking about a few pennies either way, not something that is likely to produce 10% moves either way.  

 
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