Ridgeback
Footballguy
I just put 2/3 of my cash from my Roth in one as I won't be buying anything for awhile and that's at least something against inflation. I'll be doing the same in a cash account next week when funds clear.
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Stock Thread (14 Viewers)
- Thread starter St. Louis Bob
- Start date
Steeler
Footballguy
I couldn't find the options thread so I'm just posting this scenario here. I have never placed an option trade so I might be way off base.
I have 1600 shares of UWMC @ ~3.70 and I'm willing to hold indefinitely. I was looking at the options chain for various dates on Yahoo and saw the last price for the Jan 17, 2025 (~28 months out) expiration was .73 cents (current bid is only.20 so this might be moot anyway). So if I sell 16 contracts at .73 I would get a premium of $1168. If I'm planning to hold anyway what's the downside? If the price approaches $4 why can't I just close out the contract by purchasing a call for way less that .73?
Again, totally new to options so I have to be overlooking something obvious.
I have 1600 shares of UWMC @ ~3.70 and I'm willing to hold indefinitely. I was looking at the options chain for various dates on Yahoo and saw the last price for the Jan 17, 2025 (~28 months out) expiration was .73 cents (current bid is only.20 so this might be moot anyway). So if I sell 16 contracts at .73 I would get a premium of $1168. If I'm planning to hold anyway what's the downside? If the price approaches $4 why can't I just close out the contract by purchasing a call for way less that .73?
Again, totally new to options so I have to be overlooking something obvious.
FreeBaGeL
Footballguy
Why are you thinking the call price will go down if the stock price goes up by 25%?
In general if the call price is .73 with the stock price at $3, the call price will likely be quite a bit higher than .73 if the stock price runs up to $4, and it will cost you more to buy them back than the premium you collected from selling them.
Of course low liquidity and time to expiration can change that, and I haven't looked at the spreads on UWMC specifically, but in general if the stock price goes up 25% it will be more expensive to buy your calls back, not less.
Gmail
Footballguy
I agree. Seems a bit risky to sell calls at that.
Me and risk are besties too as I bought another 100 of SOXL this morning.
Steeler
Footballguy
I was thinking selling a call for a shorter timeframe would be cheaper based on what Yahoo was showing me. What's the best (free) method for reviewing options prices / spreads / etc.?
Dr. Octopus
Footballguy
Good day to add some AAPL.
2Squirrels1Nut
Footballguy
If I didn't have so much already I would be adding.
In my opinion, this is a really bad idea. First of all, you're looking over two years out to sell calls which is a huge amount of time. If, between now and then, the share price pops, you will be kicking yourself because you cannot just buy back the calls to sell the stock. It'll cost you almost all of the gains. Also, these options are very thinly traded. The volume today was only three contracts (on the $4 strike call, which is what I assume you were looking to sell but you never stated the strike price.). It would be wise for you to sell a single covered call on a much higher price stock that you own (like, say, if you had 100 shares of AAPL) and for which you would not mind if the shares get called away. And with a time horizon of like a month or two, not 28. You should try on for size the practice of selling covered calls before doing so on a speculative name for 28 months out.
ericttspikes
Footballguy
Any opinions on why bank stocks are mostly still at lows and haven't really rallied in a rising rate environment? I'm sure I'm missing something, but would've thought they would've been buys like 2 months ago. JPM looks cheap to me right now.
Desert_Power
Footballguy
Generally speaking, shape and speed of the move matters. Banks rallied as the curve steepened, but it is flat to inverted at many points straining margin. You also have to think about how quickly rising interest rates cause the value of bonds held in their portfolios to fall reducing (near-term) earnings, capital, and liquidity. Degradation in the last two would then lead banks to need more market-priced funding further compressing spreads.
Today's even better!
Yeah, this isn't something to "get your feet wet" with on options. By the way, the volume on that $4 strike was zero, those 3 contracts traded last week.
I get why he's trying to do something, the stock has been complete dog $hit, but this isn't a good idea.
ghostguy123
Footballguy
Stonks don't go up anymore
This, and when rates rise this far this fast and are projected to continue, business slows down- even if margins increase in certain business lines that will be offset by declining volume. There's also the increased probability that we're heading into a recession, the severity of which is tbd.
FreeBaGeL
Footballguy
Dead cat bounce yesterday, I guess.
Honestly, it’s barely moved considering the news. Most tech stocks get blitzed with bad news. Apple is holding up pretty well considering.
I think we are just going to be stuck in a rut for a while. Not a horrible thing if you are putting money in every month. I’m not young but I sure ain’t retiring for a while so if I can sock away some of my last working years cheaply before the next bull run, so be it.
ConstruxBoy
Kate's Daddy
Got some BTI this morning. People still have addictions in a recession.
Yes, I didn't want to beat a dead horse but I actually ignored the most relevant reason why this won't work. He won't get 0.73 for selling those options. That's not a real price. Sure, it is in the middle of the bid / ask, but the actual sale price could be closer to 30 cents per contract. It is so thinly traded that you don't know what you're going to get for a price and it probably won't be a good one. Then you have the same hassle if you ever try to buy the calls back. There's just no one on the other side of the trade. You need to meet the price of the market makers and they're not going to give you a good price on either end of the transaction.
This is not a rut, it is a slide. Last year at this time, it seemed there was nothing could keep stocks from going up. Insane P/E ratios? Ho hum. Not turning a profit? We don't care. This is now the flip side of the coin. Sentiment has turned so negative that anything on the positive side (like yesterday's inexplicable pop) gets swallowed up in no time on the way downwards. Don't get me wrong, I am still long and I wish I had more cash to invest. I used to wonder "who is buying these growth stocks at these prices" and now it is "who is selling at this level?" The momentum is powerful. That's probably my biggest takeaway from the past 12 months--fight inertia at your own peril. That nugget cost me a lot of money but there it is.
Caveman33
Footballguy
I think MU earnings this afternoon are expected to be a Nasdaq catalyst. We are very close to the 52 week low on QQQ, and given that MU already warned of something like softening demand, I want to gamble on sep30 calls but $1.10 for the $277 strike still looks too expensive.
Momentum and sentiment are powerful for sure, but that's not what this is IMO. This is a universal re-pricing of assets to reflect the massive change in underlying conditions. Unfortunately I don't think it's been fully priced in yet, and often times we go too far (which we aren't even close to IMO).
I’m not talking about today as much as the next few years. I think we’ll stay in a rut and I see that as a long term opportunity. Some people may turn off their 401k or other investing being scared of worse and worse. I know I should have sold more than I did back at the end of last year but I’m not selling now. I’ll just continue our $5k a month max out and see where we are in a few years. Won’t be touching the retirement money for a decade+ or way more (no one takes out 100% day 1 regardless), but I could see us in that 2000-2010 flat decade. Might seem like suckitude but if you can add a nice chunk, you’ll enjoy the next 2010-2020+ run up.
fruity pebbles
Footballguy
Finally taking out the two remaining stalwarts of the market. Think the destruction of Apple and Tesla help bring us down to the low 3000s on the S&P as our panic leg.
2Squirrels1Nut
Footballguy
Earlier than planned but buying back in.
fruity pebbles
Footballguy
Yesterdays rally was so odd. BOE is printing money again because their entire economy is in real danger of collapse………woohoo rally hats.
skol asylum
Footballguy
Gather ye rosebuds while ye may.
Caveman33
Footballguy
Thanks for all the input on my (dumb) covered call questions. What are the best tools to find good covered call options? Any free software? Any other options?
Options Calculator
OIC's options calculator, powered by iVolatility.com, helps investors understand American-style and European-style options, volatility and pricing.
I like to use this calculator to get an idea for what options might be priced at in the future at hypothetical price points. The implied volatility has a huge impact on option prices, so if I was planning to sell covered calls, I would become familiar with the normal IV range of that particular stock and try to sell calls when IV is relatively high.
Today was a good day for me. I sold puts this morning for +65% and then bought and sold calls this afternoon for +50%.
General Malaise
Footballguy
My god. :(
fruity pebbles
Footballguy
Small nibbles for me. I’ll take bigger bites around 3400 and lower. Currently 55% stocks, 20% bonds, 25% cash.
Ridgeback
Footballguy
Just a heads up that it's up to 3.9%. One year is about 4.2%. In this environment, I'll take it over a cash account.
Klimtology
Footballguy
The difference is negligible .3 so I'll prolly go with the the 6 month.
How about you?
How about you?
Ridgeback
Footballguy
I did half in each. There's a chance I'll put some funds back into play in six months, depending on where we're at.
fruity pebbles
Footballguy
Decisive break through all of the prior lows. We headed lower boys.
General Malaise
Footballguy
Today's the kind of day where I'm glad I don't work in a building taller than two stories.
fruity pebbles
Footballguy
Lol jump out and twist an ankle
Desert_Power
Footballguy
Brutal day. Got paid though, so threw in about $2k into VOO and sprinkled amounts into F, FLGT, and UPST into the close. Haven't put any other any money in equities for over a month.
SE with a nice day helping out the relative portfolio performance.
SE with a nice day helping out the relative portfolio performance.
2Squirrels1Nut
Footballguy
Pretty sure I would die.I was thinking of you GM. Buy more IMO. Juggernaut for 4+ decades and the youth loves their product.
It also seems like Nike and Adidas are constantly moving in opposite directions. Of course times are weird right now.
ghostguy123
Footballguy
Apparently Carnival's earnings didn't look too good eh?
fruity pebbles
Footballguy
That’s not what capitulation looks like
