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  • Options! Options! Options!

     inca-beast updated 1 year, 2 months ago 6 Members · 12 Posts
    AMC
  • StockinAF

    Member
    June 16, 2021 at 12:51 pm

    Am I the only one who feels entirely stupid when it comes to options? Part of me thinks I am doing this all wrong by buying a few shares at a time… should I be purchasing Calls? But I don’t quite “get” it. Am I buying the interest? Can I chose how many I am buying? For Instance the first one says Bid: 5.80 Ask: 5.95 Vol 6,776 and Op Int is 21,923… does this mean I need to be able to purchase 6,776 shares at $5.95? What does the strike mean too? Just wondering what this is about and if I should be looking at options or just doing exactly what I am doing.
    Thank you Gabe for creating this community, way easier to navigate then the Discord sites on other places and I just like your approach! Either way I am here for the long haul!

    • This discussion was modified 1 year, 3 months ago by  StockinAF.
  • Curunir

    Member
    June 16, 2021 at 1:01 pm

    Options aren’t that complicated at their basic form once you get into it, but they ARE risky.


    For the AMC play you will probably be looking at buying Calls to open. The small numbers are the per-share premium you will pay for each Option. That will be x100. So a $5.00 premium will mean $500 to buy one Option. If it tanks the worse you may loose is $500.

    The Premium range is bid, mid, ask. You will often get filled at the Mid but if your order is not being filled then you may need to shift toward the bid or ask based on how the market is moving. Sometimes this range is only a couple cents, sometimes a lot more.

    If the stock goes up higher than the strike then your basic profit is ( Current Price – Strike Price )x100. So if it’s a $60 strike and you sell when the price hits $75, that’s $1500. But there are a lot more variables in play that actually make that number look better in most situations. For AMC the swing in value is so high that some of these other factors (Theta, for example) don’t have as much impact when you sell. But for “real” Options trading they are critical.

    You can mess with a calculator like this to see how different Options may play out:

    https://www.optionsprofitcalculator.com/calculator/long-call.html

    Always consider Options a bigger gamble than stocks. Always assume you may loose your premium and be sure you are able to absorb that.

    Check out at least the first video in this series:
    https://www.youtube.com/playlist?list=PLQ0LTUCMrK7p9fjZ3Iqega6lpIV4TzNxU

    Don’t want to hit you with TOO much info at one time, but feel free to send me a message and we can chat more here or off-site. I’ve made a few Options mistakes and also some pretty lucky events that I learned from.

    • StockinAF

      Member
      June 16, 2021 at 1:34 pm

      This is amazing thank you! I think I am also intimidated by the risk! I just heard about “Sink or Swim” and have a TD Ameritrade account, it is nice because it gives me a faux account but lets me play around with actual stocks like AMC to see what my gut would tell me to do and if I am actually grasping the concept. I just put in a bid with PaperMoney to see how I will do… It is just to see if I am understanding the grasps of the concept.
      Another thing when putting in a Call Option are there options we can place that would hurt the stock? Such as if me bidding to buy the stock for a lower price does that drive it down for other investors?

    • StockinAF

      Member
      June 16, 2021 at 1:38 pm

      I guess at the end of the day, me doing a call option does not mean I am owning this stock at this price? For instance I can’t hold onto those 100 shares like I do the shares I have bought individually? If I do hold on does that mean I have to pay interest on them?

      • CrayonMuncher

        Member
        June 16, 2021 at 1:57 pm

        Also, you can think of options as “speculating” what the actual price will be in comparison to the strike price you are targeting on the day of expiration. How close you get and beyond is the ITM (in the money) and good for you. The opposite if you are wrong is OTM (out of the money) and bad for you.

        This is oversimplified, I get it it. But to answer your question, no you will not be owning the shares by doing options if you sell the contract or let it expire worthless. You will own them though if they are ITM and you decide to exercise the contract. Exercising them means you will buy them at the target price (the cheaper price).

        If you want to directly affect the actual stock price in the market, either purchase the stocks or exercise the options.

    • robodrill

      Member
      June 16, 2021 at 2:46 pm

      I also have a question.

      When a person buys an option at a strike price and the stock goes up dramatically, can they exercise their option at that time, or are the married to a date range or are may they only exercise the option of the expiration date?

      • CrayonMuncher

        Member
        June 16, 2021 at 3:03 pm

        You can exercise it any time up until the expiration date, so yes, you can right away if you wanted or wait until later (as long as it hasn’t expired yet). The timing is the tricky part because the price could move one way or the other during your contract time. It could affect how much “in the money” or not you are at a given time. The further it grows past the strike price before expiration, the more “in the money” you are and the more you will make. Also, look into “the greeks.” Delta, Gamma, and Theta play big roles in options and how much you make/lose.

  • Curunir

    Member
    June 16, 2021 at 1:01 pm

    And welcome to the party!

    • StockinAF

      Member
      June 16, 2021 at 1:45 pm

      Thank you been holding and buying since January but I kind of ignored the stock market when it started to go down.. I do that so I don’t wig myself out.. which was kinda stupid because I should have been buying more. I kind of liked the simplicity of just buy a few shares and holding… options is intimidating!

      • Curunir

        Member
        June 16, 2021 at 3:55 pm

        Options are not the best…well…option…in the case of the AMC play. Real shares work best with the buy-and-hold concept. You don’t have a time limit so you don’t have to care about any dates. They are also safer by far.

        Plus, if the MM has to buy shares to cover the Options going ITM, then when people chose to roll them instead of exercising those same shares get sold back. Only exercising and holding takes those numbers out of play.

        The advantage of Options is just in leverage. It was far more attractive a few months ago when the numbers were low. Most of my Options that expire this week I got a couple months ago. My $14 strikes were only $0.80 / share at the time for example. But I want to get all of those converted to real shares ( at that $14 price ) now rather than rolling them to future options.

        I made the mistake last week of not exercising some of my Options early. All of mine are still ITM so I’m good, but at one point I was up over $200k and even over $100k for the next few days after that. A big mistake I made was not selling a few of my options for this week, waiting for a good dip and buying a lot of shares. Instead I had hope we had a good support in the $60 range but watched as that fell through < $40. Due to all the factors that go into valuation of Options moment by moment I won’t recover all of that even if we get back into the $60s.

        I have learned to view Options more as a tool rather than a holding.

  • Zoe Grow

    Member
    June 16, 2021 at 1:14 pm

    Thx man

  • inca-beast

    Member
    July 16, 2021 at 2:41 pm

    Rookie question (1k+ share hodler here): If I buy an ITM call option, does the stock price need to go down to the strike price in order for me to sell and profit the intrinsic difference before expiration ? i.e. Today’s price is $36 approx, if I buy a long call at a $30 strike price with expiration let’s sayyy September……and price never goes back down to 30$ am I still entitled to profits if I sell the option in let’s say August? Many many thanks fam. Gabe thank you for this platform brutha

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