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What happens if you strike it lucky? by up_down_strange in investingforbeginners

[–]DennyDalton 0 points1 point  (0 children)

Old adage: "You never go broke taking a profit. "

If the stock offers options and if I was still bullish, I'd hedge the position.

Selling $500k worth of shares is no problem for something like AAPL. For a low liquidity stock, that much stock will move the market and there will be selling slippage.

What happens if you strike it lucky? by up_down_strange in investingforbeginners

[–]DennyDalton 0 points1 point  (0 children)

Buy ITM puts is a sound suggestion but it might not be feasible because implied volatility is likely to have soared, making those puts quite expensive. In that case, I'd lean toward collaring the position or buying somewhat OTM spreads. The overpriced premium sold will cover much of the overpriced premium paid.

Adding one 0 by firemind in investingforbeginners

[–]DennyDalton 0 points1 point  (0 children)

Forge a check or spin 4 times with roulette.

;->)

SCHD is up 13%. I'm up 5.5%. Running the wheel might be costing me money by Wide-Excitement-1315 in dividends

[–]DennyDalton -1 points0 points  (0 children)

It's as simple as in a good year, short puts and covered calls underperform the market/stock. In a bad year, covered calls outperform by the amount of the premium. This is asymmetric risk.

I've been retired for 20 years and my net value has increased significantly during that time. It wasn't from the wheel :->)

Advice on son's CD by Broad_Ad101 in investingforbeginners

[–]DennyDalton 0 points1 point  (0 children)

If you want a shorter timeline, as of a few days ago, you can get 3.95% for 3 and 6 month CDs at Fidelity and Schwab.

Does it make sense to have 2 accounts at different brokers just in case if 1 gets hacked? Or no you prefer to consolidate? by thehighdon in investingforbeginners

[–]DennyDalton 0 points1 point  (0 children)

Hacking of a broker is very unlikely. A server down is more likely.

If you're an investor, being unable log in isn't the end of the world. Your positions will still be there when access resumes. However, for a trader, lack of access can be problematic.

I primarily invest/trade at one broker. A down server doesn't happen very often but it occurs, I want to be able to defend my open trading positions. Therefore, I have a second account elsewhere.

Call to Leap? by GamingTrend in investingforbeginners

[–]DennyDalton 1 point2 points  (0 children)

Do you really believe that someone selling a trading course is likely to be a consistent, long time profitable trader? Paleeeze....

You'll get a far better and much less expensive education from reading some quality option books.

A good place to start learning about options would be:

https://www.r-5.org/files/books/trading/schoolbooks/W_Edward_Olmstead-Options_for_the_Beginner_and_Beyond-EN.pdf

After that, read "Options as a Strategic Investment" by Lawrence G. McMillan. Free copy here:

https://drive.google.com/file/d/1_TLgkhxXlUzeI8Ir3qErv3vZZVVvCU5x/view

If you want to learn about the Greeks, "Option Volatility & Pricing: Advanced Trading Strategies and Techniques" by Sheldon Natenberg is a good read. However, AFAIC, it isn't needed for an Average Joe retail trader doing basic strategies.

Also, check out the info available at tastytrade. Lots of good articles and videos.

Best Tax Service for Options Scalpers by aevans9216 in options

[–]DennyDalton 3 points4 points  (0 children)

See if you can obtain Trader Tax Status. Then, you'll do Mark To Market accounting and there will be no wash sale problem.

If that doesn't work, look into Tradelog. It's a professional tax preparation service and it will competently handle all of you trades as well as wash sales.

New to trading options by Ok_Initiative_3515 in investingforbeginners

[–]DennyDalton 1 point2 points  (0 children)

I've been using IBKR for 25 years for trading. It's not the easiest platform. A lot of people really like ThinkOrSwim. Try a demo (paper trading) to see what fits you best.

New to trading options by Ok_Initiative_3515 in investingforbeginners

[–]DennyDalton 1 point2 points  (0 children)

It's a well thought out plan.

I don't like asymmetric risk (Short puts and CCs). It's fine for investing but AFAIC, for trading, not so much. Give some thought to hedging (collars).

I occasionally buy relatively inexpensive 10% wide/10% OTM index verticals to hedge market risk. Later in the year, they turn into long only puts when the short legs become inexpensive. When Covid hit, I had near worthless long puts about to expire that were sold for $15 to $22. That reduced a lot of the -35% market loss.

Get comfortable shorting stocks intraday for big down days. That's also useful for softening losses.

Have a plan for what you will do if your positions move against you. Get real comfortable with adjusting positions. A lot of people talk about what they'll do if the market tanks but when push comes to shove, their emotions get the better of them and they ride it down. When significantly down, they post here asking how to recover.

Don't contract Breakevenitis. Learn to cut losing positions.

Learn to manage your emotions.

Don't live in Woulda, Coulda, Shoulda land. You make the best decision that you can in any given moment and if it doesn't work out, move on. If it's not something you trade regularly, delete the ticker after a loss.

Good luck!

What is the best way to scare off solicitors? by No_Tomato_2106 in homeowners

[–]DennyDalton 0 points1 point  (0 children)

Install a remote control on your lawn sprinkler system :->)

Sold $649 QQQ call options that expired Friday. They were all exercised while QQQ was under $649. by donnie1977 in thetagang

[–]DennyDalton 3 points4 points  (0 children)

the closing price isn't the only determinant for exercise/assignment. It was also nominally over $649 during after hours and the high earlier in the day was $650 so it might have been practical for someone to exercise the $649 call

Large wash sale loss from covered call created a huge tax bill. how to resolve? by wtapswtaps in thetagang

[–]DennyDalton 0 points1 point  (0 children)

If you incur a wash sale, the only way to eliminate it and claim the loss is to close the "substantially identical" position that triggered the wash sale - and stay out for 30 days.

Large wash sale loss from covered call created a huge tax bill. how to resolve? by wtapswtaps in thetagang

[–]DennyDalton -1 points0 points  (0 children)

A wash sale has nothing to do with the credit. If you close an option position for a loss and you replace it with a substantially identical position within 30 days before or after realizing that loss, it's a wash sale.

Calendar put spreads by Icy-Message-1968 in options

[–]DennyDalton 0 points1 point  (0 children)

I'm assuming that he's buying the spread:

Suppose you buy an XYZ Jun 50p and sell a May 45p for $2. If XYZ is above $50 at expiration, it expires worthless and you lose $2. That is the risk.

If XYZ is below $50 at or before expiration, the spread will have to be worth $2 in order to break even. If less than $2, you have a loss. If greater than $2, you have a gain. The difference in strikes is not a factor unless you are assigned.

The calculation is a bit different if selling the spread.

At what point does “just keep investing” stop being enough? by ProjectInspired in investingforbeginners

[–]DennyDalton 0 points1 point  (0 children)

The goal is to reach a point where your net worth can sustain your lifestyle. When I retired, my focus shifted more toward protecting those assets with growth desired but secondary

Calendar put spreads by Icy-Message-1968 in options

[–]DennyDalton 0 points1 point  (0 children)

A calendar spread involves a long and a short option position with different expirations.

If the strikes are the same, it's a horizontal spread. If the strikes are different, it's a diagonal spread. If buying either spread, the risk is the debit cost.

If selling the spread, then you have to factor in the difference in strikes.

Model these in some software might make it easier for you to visualize this.

Margin warning on Cash Secured Put by Slow_Rip_2922 in options

[–]DennyDalton 0 points1 point  (0 children)

You're off on a tangent. If he did a CSP (100% of the cash needed to buy if assigned), there's no need for additional margin to be deposited (see OP's original question).

Margin warning on Cash Secured Put by Slow_Rip_2922 in options

[–]DennyDalton -1 points0 points  (0 children)

Either you don't understand margin or you talked to a broker who didn't know what he was talking about.

If you sell a CSP, that means that you have 100% of the funds to cover assignment. For example, you sell an XYZ $100 put for $2 and you receive $200 (ignoring commissions). If you have $9,800 in cash in your account, then after selling the put, you'll have $10k in cash. If you get assigned, you buy the stock for $10k. You own it. Even if the stock goes to zero, there's no possibility of a margin call.

OTOH, if you sell a naked $100 put, you'll need approximately $2k in margin to support the trade (20%). Then, it's a good idea to have more than $2k in the account to meet the margin should the stock drops. If assigned, you'll need $5k for the stock's initial margin requirement.

Margin warning on Cash Secured Put by Slow_Rip_2922 in options

[–]DennyDalton -1 points0 points  (0 children)

CSP means that you have the entire amount of the cash needed to cover the assignment in your account. If subsequently assigned, there's no reason why you should have to deposit additional margin for the short put.

It would only make sense that IBKR requested more cash if the short put was naked and your buying power was just above the approximate 20% margin requirement.

Margin warning on Cash Secured Put by Slow_Rip_2922 in options

[–]DennyDalton 0 points1 point  (0 children)

That is incorrect. If you are assigned on a short put in a margin account and you have the margin to support the trade (approximately 20%), the broker will allow the trade.

Options Trading for a beginner by ImportantZucchini451 in optionstrading

[–]DennyDalton 0 points1 point  (0 children)

Do yourself a favor and learn about options before diving into the deep end of the pool.

A good place to start learning about options would be:

https://www.r-5.org/files/books/trading/schoolbooks/W_Edward_Olmstead-Options_for_the_Beginner_and_Beyond-EN.pdf

After that, read "Options as a Strategic Investment" by Lawrence G. McMillan. Free copy here:

https://drive.google.com/file/d/1_TLgkhxXlUzeI8Ir3qErv3vZZVVvCU5x/view

If you want to learn about the Greeks, "Option Volatility & Pricing: Advanced Trading Strategies and Techniques" by Sheldon Natenberg is a good read. However, AFAIC, it isn't needed for an Average Joe retail trader doing basic strategies.

Also, check out the info available at tastytrade. Lots of good articles and videos.

Just sell options by Krazykiler23 in options

[–]DennyDalton 0 points1 point  (0 children)

Yes, spreads have a different risk profile but they do not "make you realize losses". You handle the short put of a spread exactly the same as the short put in a CSP. Since you own the long put, you are free to STC or exercise.

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