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.
- 145
- 1
Jump in the discussion.
No email address required.
Notes -
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?
What if those contracts are not worthless by expiration? Indeed what if they are worth more than what you sold them for? Do you think this possibility is not taken into account while pricing them?
I work at a small options trading firm at a non trading role. I interact with the guys working on modelling and pricing options every day. One thing I know is that these guys are really fucking smart and spend most of their day and night hours thinking about how to very efficiently take your money and getting very well compensated for this. I would advise anyone away from competing with these guys unless you really know what you are doing. Derivative trading is meant for institutional investors to hedge certain risks. Options are to be bought as well calculated insurance policies and not as a way to gamble with leverage. It’s a pity that they became a very efficient tool in the crypto world to part fools with their money.
Let me put it like this. The alternative to me selling these covered calls is to just set a limit order to sell 100 shares at my price target. One way or another they are getting sold, I'd rather sell the covered calls in the meantime. None of this is on leverage. I don't care if someone else makes more money if I still get my 100%+ return on holding them for 1-2 years.
When my NVDA 10x'ed I sold 20% to take out 200% of my initial investment. The other 80% that I let ride has gone up another 100%. I regret nothing. I plan on selling 10% more soon and taking out another 200% of my initial investment. I'm not trying to time the top perfectly, or make more money than everyone else, I'm trying to end up with more money than I put in. Preferably beating a benchmark of 10% annual returns. Worst case beating a benchmark of HYSA returns.
I can't believe that when Wall Street Bets posters were getting rich off of NVDA back in 2017 I thought I had missed the boat.
Are you managing all of your savings yourself or are these stock picks some small portion of your total assets? I'm just curious—I'm not going to tell you to stop or buy index ETFs.
Well, these stocks were a small portion of my total savings. I used to have 3x as much in a nice conservative 401k. And they were also a small portion of my overall non 401k brokerage portfolio. But their growth has so outpaced everything else, its gotten a bit lopsided.
Edit: Wrote that up on mobile, and realize it might be unclear. My 401k was 3x the size of my regular brokerage account. In my brokerage account, COIN and NVDA were about 1/4.
Then there's my BTC which was about 1/5th the size of my brokerage account.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link