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PaperclipPerfector  2mo ago (text post)   2487 thread views

Friday Fun Thread for March 8, 2024

Be advised: this thread is not for serious in-depth discussion of weighty topics (we have a link for that), this thread is not for anything Culture War related. This thread is for Fun. You got jokes? Share 'em. You got silly questions? Ask 'em.

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So, I have this idea, and I'm curious if I'm on the right track.

I've generally avoided stock options, because the only thing I know about them is that's how you lose all your money. They expire worthless all the damned time. However, selling covered calls seems like a good way to be on the right side of that, and the only risk is you miss out on potential gains. You are literally selling contracts to people you are betting will be worthless by expiration, and pocketing the cash, and even when you are wrong, you still get the full value of the stocks you sold them at the price you agreed on in the contract.

I'm sitting on a shit ton of COIN, and I'm planning on selling half when it doubles. This actually coincides wonderfully with the size of an option contract (100 shares). So I'm thinking, every week I sell an option contract at my price target, pocket some extra cash I wouldn't have otherwise, and it eventually sells at that price just like I had pre-committed to do anyways.

It's win/win/win right?

First of all, congrats. You've been the recipient of incredible luck. The market gods have smiled on COIN and bestowed upon it a share price far outstripping any reasonable valuation.

If it were me, I'd sell the entire lot at market open on Monday. I can't guarantee that today was the top, but the supply of greater fools is limited. Coinbase may not be the stupidest bubble stock (that would be CVNA), but is not far behind. Despite everything, Coinbase still doesn't make money. And the share count only goes up.

In a sense, it's a good thing to sell covered calls because this reduces your overall exposure to COIN.

But overall, the Buy-Write strategy hasn't performed well in recent decades. For a long time it was considered a way to generate great risk-adjusted returns. Things have changed in the post-Bernake era of easy money. For example, QYLD has returned 42% in the last 5 years vs. 159% for QQQ, and with higher taxes too.

Yeah, I have a significantly different thesis for Coinbase. Crypto isn't going anywhere, they are the custodian for Blackrock's ETF, along with all but 2 of the others. Pretty sure they will execute a regulatory monopoly. Also you may have missed their last earnings. Reducing operating cost and making institutional clients 50% of the revenue got them pretty solidly in the black. Plus they are sitting on a mountain of cash. The stock has at least 6 months to stretch it's legs as the bitcoin bull market runs a bit further. I mean, anything can happen, but I'm putting my money where my mouth is for at least that long.

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