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PaperclipPerfector  30d ago (text post)   2597 thread views

Friday Fun Thread for March 29, 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've spent three weeks selling short dated covered calls for COIN and walked away with a whopping $250 I didn't have before. Doesn't sound like much, but so far the stock has never come within $50 of my strike price. If, and I understand it's a big if, I keep this up for a whole year, I'll have earned over a 10% return on underlying assets worth $25,000-ish.

The first week was nerve wracking. The second week less so, except for one day where the stock shot up $30 intra-day with $50 left to go to my strike price. But with 3 days left, I sincerely doubted it wouldn't pull back. It did. The third week as soon as I sold my covered call a judge issued a decision allowing an SEC lawsuit to move forward and the price of the option I sold immediately got cut in half.

The more of these I successfully sell, the more I feel I have a buffer to close my position at a loss if things start going badly. I'm more shocked that there are enough degenerate gamblers out there willing to throw a Benjamin at the off chance COIN shoots up 50% in 4 days.

We shall see when I receive my comeuppance.

Covered calls is great until there's volatility and you miss out on a year's worth of appreciation in a few up days or you eat a huge correction and give back several years of premiums.

This sounds less entertaining to me than just putting a hundo on the Bills to win the AFC East.

Is it weird that, to me, the options trading scheme would be a lot more fun than the sports bet?

The bets appeal to different types of gamblers. The NFL future allows for potentially months of sweat, but generally the real adrenaline doesn't start flowing until the last game or two when the outcome is really decided. The options scheme is more of a true gambling experience in that there are semi-constant rushes and downs - more like playing craps at a casino.

Of course from an EV standpoint the options trading is much more likely to be profitable but they are simply different things.

Have you heard the phrase. Picking up pennies in front of a steam roller? You're much better off in an index fund if youre looking for 10% returns.

As I understand it, @WhiningCoil 's strategy of covered calls is the opposite. He's getting a slow but steady return by giving up the chance of a big upshot. It's actually negative EV, because the big upshots are what drives the market, but it can make a living.

For real "pennies in front of a steam roller" you need to sell naked puts... I've been there and it's a hell of a drug...

Yes i didn't notice he said covered. My mistake for sure.

In this case, he's covered since he owns the underlying security. So the worst that would happen is his COIN stock gets called away (at a very inflated price to boot).

It gets called at the strike price; not the trading price.

I guess the strike price is high so he wouldn’t be too bent out of shape at selling.

The loss is the delta between the market price and the strike price.

I think he was liquidating anyways though -- so if he sells on day 1 for market price, he's not getting any appreciation regardless.

In that case, continuing to sell the deep out of the money calls is simply risking the asset dropping in value.

Ah i missed that they were covered. Wouldn't that negate the inflated price thought? That is the whole point of the options people are buying.

I have that too. This is not the only thing I'm up to. Not even the majority thing. Not even the majority of a minority thing. It's a minority of a minority of a minority of my investments. I'm trying it for fun.

I guess then it's worth assessing whether you're actually having fun or if its just the feeling of anxiety/thrill that you want, at which point you could get that by trying roller coasters, skydiving, or just normal gambling at a casino.

Back when I dipped my toe in day-trading cryptos I approximately broke even but it became evident to me that it wasn't a good kind of stress it induced and the attendant compulsion to keep checking the charts distracted from more enjoyable pursuits. Gardening, DIY projects, and futzing around with 3D printers and, more recently, AI media production have been overall more fulfilling to me.

Not that I judge what you do with your time and spare change.

It's less day trading and more week trading. Less gambling, and more selling the lottery tickets to gamblers.

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