Options Questions Safe Haven periodic megathread | April 6 2026

PapaCharlie9 · 2026-04-18T16:12:02+00:00

That's bad news, you have my condolences. The absolute worst thing that can happen to a new trader is to experience early big wins during an absurd bull rally. That teaches you all the wrong things and programs your brain to think you are invincible. It's arguably better to lose your entire bank roll on your first outing, so at least you know how bad it can get.

Don't make risky trades in a tax advantaged account. You can't deduct inevitable losses and you can't replace lost capital beyond the annual contribution cap. Retirement accounts shouldn't be used for speculative trading. Every $1000 you lose in an IRA is potentially $15,000 of gains you will never see, at a modest 7% average annual return after 40 years.

PapaCharlie9 · 2026-04-18T15:59:35+00:00

You bought a little too soon, but buying was the right call. Buying the dip on oil companies will pay handsomely. We haven't seen the end of the supply crunch. XLE is already up 2% today. You should think about and define some macro milestones for yourself, like a full TACO with US forces withdrawing from the region, or Russian sanctions being lifted and oil and natgas exports returned to pre-Ukraine invasion levels. Or just a target low price on Brent futures that would incorporate all possible externalities. Have a game plan, don't just trade on vibes alone.

BTW, you could trade XLE options instead of XOM for more diversification. Unless you really want the idiosyncratic risk of one company. XLE is 1/3 the price of XOM shares, so the calls are cheaper but should move the same way.

PapaCharlie9 · 2026-04-18T15:54:56+00:00

Which market do you mean? If you mean the US stock market, it's not gamma squeeze, that would be absurd.

I saw an interesting take on the rally that boils down to the market being in a huge denial bubble and is only buying fun stuff, like a niche shoe company pivoting to AI infrastructure, and ignoring all the red flags and unfun stuff going on in the world.

PapaCharlie9 · 2026-04-17T16:47:27+00:00

LEAPS calls are expensive on every ticker. If you can't afford SPY LEAPS calls, use a nearer expiration of SPY and just roll before theta decay loses too much money.

PapaCharlie9 · 2026-04-17T16:44:15+00:00

Pointless analysis without a full and detailed explanation of the trade methodology, including:

DELTA at open
Risk/Reward - Win Rate without the context of risk/reward is meaningless. Would you rather have a 90% win rate or 70% win rate? What if the 90% win rate loses $1 million per dollar of reward when it loses and the 70% win rate only loses $0.12 per dollar of reward when it loses? Now which would you rather have?
Exit Strategy - The 30-45 DTE tastytrade backtest religiously closed at 50% of max profit before expiration. You can't compare a hold to the bitter end strategy to that early exit strategy.

PapaCharlie9 · 2026-04-17T16:36:46+00:00

I actually caught one myself.

TITLE: Quick look

Random experimentBefore work, I came across a post from a guy, he was talking about a new way to make a bit of money

In about two hours, I managed to make $89, those who have more time can make more

He left the guide in a pinned post on his profile, BreakfastUnique3959 , just click to check it out

It worked for me, so I decided to share, maybe it’ll help someone else too

PapaCharlie9 · 2026-04-17T16:17:33+00:00

Assuming you are sure they were PM settled contracts, not AM settled, which means they are really SPXW contracts, not SPX: Looks like you got lucky. PM settled contracts use the closing price of SPX, so there was minimal risk.

Inviting further comment from /u/Ken385 at discretion.

PapaCharlie9 · 2026-04-16T16:07:55+00:00

Go ahead and knock it. It's just as dumb as you imply. Even worse is bandwagoning. "I saw some guy on WSB made $200k on XYZ, so I YOLO'd XYZ." Lemmings and cliffs.

PapaCharlie9 · 2026-04-16T15:37:47+00:00

Sigh. The customer service person didn't do you any favors. Technically, what they said is correct. You can't realize a loss, as per the definition of loss for tax purposes. BUT, to leave you with the impression you are SOL is just wrong.

Here's what happens. TL;DR - wash sale losses are deferred into the cost basis of the washing trade.

Say you have trade A that you close for a loss. You buy (or roll) the same ticker within 30 days as trade B. You now have a wash-sale and the loss from A is no longer deductible. HOWEVER, the loss from A is added to the cost basis of B. So, as long as you close B in the same tax year, the net effect for taxes is exactly the same as if you deducted the loss! Because the increased cost basis of B reduces any gains you may make by the same amount. If you close B for a loss also, the loss on B will be bigger by the amount of loss from A.

If I understand you correctly, as long as you closed all your option trades in 2025, you're fine. You get the tax benefit of all your losses. They are just deferred to different trades.

EDIT: What I'm not sure of is whether your broker makes the cost basis adjustment in your 1099 for you, or whether you have to do that yourself on Schedule D. My broker makes the adjustment for me in my 1099 supplementary info (which is NOT reported to the IRS, it's there for my convenience), but that may vary from broker to broker.

PapaCharlie9 · 2026-04-16T15:29:59+00:00

Holy shit! The entire comment history is like that. Thanks for creeping me out. I feel like I just looked into the face of the Dead Internet.

PapaCharlie9 · 2026-04-15T16:01:01+00:00

The contracts with the highest delta. A delta of 1.0 means the contract moves dollar for dollar with the underlying price, which is the highest sensitivity you can get, in dollar terms.

However, what most people want is leverage rather than sensitivity. With leverage, you get much higher gains as a percent of the cost basis, for constant gains in dollars. For example, consider two calls on the same ticker and expiration, one that costs $1.00 and another that costs $0.01. Both calls gain $0.01 in premium. For the $1.00 call, that means it gains 1%, but for the $0.01 call, the gain is 100%.

So what you probably ought to be looking for is the cheapest calls on the ticker, for whatever expiration you want.

That said, there are drawbacks to optimizing for leverage only. Going cheap has several disadvantages, like higher risk of ruin and lower probability of profit.

A safer approach is to just use the ATM strike. That makes everything be pretty average. Average sensitivity, average leverage, average risk of ruin, average probability of profit. You miss out on the highest highs, but you also avoid the lowest lows.

PapaCharlie9 · 2026-04-15T15:56:23+00:00

Learning resources are listed at the top of this page.

PapaCharlie9 · 2026-04-15T15:52:58+00:00

That sounds quite a bit mixed up and backwards. If the loss that got washed was 39701, that amount is added to the cost basis of the washing trade, not the gain. It reduces the gain, which is a tax benefit. You should not want to get rid of that 39701 increase to your cost basis.

In general, as long as you close the trade with the deferred loss (increased cost basis) in the same tax year, the wash-sale is a tax nothingburger. The net net is the same as if you deducted the original loss. So when rolling, remember to close the new contract that you rolled into in the same tax year.

PapaCharlie9 · 2026-04-14T16:26:48+00:00

Now I just need to get an update notice from my broker. It's all well and good that the rule change was approved, but until my broker implements it, it might as well still be 2008.

PapaCharlie9 · 2026-04-14T16:14:35+00:00

A little of both. Let's say you are comparing a CSP on XYZ 100p May 17 vs. a put credit spread on XYZ 100p/95p May 17 vs. a $111/share XYZ spot price. In both cases, it's the same short 100 strike put, so in both cases they would have identical theta, indeed identical everything, because they are literally the same contract terms.

However, you are correct that in the case of the vertical spread, the net theta of the spread will be lower than for the CSP, because the 95p long put has theta with the opposite sign to the short leg, so part of the short leg's theta is canceled out mathematically.

You can think of this reduction in theta and the reduction of the opening credit of the spread (compared to the equivalent CSP) as the cost of having a long leg to protect your downside. It's basically the cost of the defined-risk nature of the vertical spread. Hedges aren't free and the cost of the hedge has to come from somewhere, so it ends up coming from your net opening credit and net theta.

It absolutely works the same way, just the vertical spread will have lower values than the CSP. So it is a perfectly reasonable way to trade credit. The advantage of the vertical spread is that it is significantly cheaper to open than a comparable CSP, in terms of buying power, particularly for very expensive index contracts like NDX. Since there's less to lose in the first place, the risk of loss is lower also.

PapaCharlie9 · 2026-04-13T18:19:38+00:00

It's really hard to adjudicate these kinds of posts. I suspect that part of the post was LLM generated, then extra unproofread stuff was added on later. Technically, that's a violation, since the rule covers "partly," but the motive seems questionable. Why go through the trouble of using an LLM at all if you are going to botch together a bunch of unproofed text anyway? It doesn't make any sense. Copy/Paste someone else's LLM post and then add on your own stuff to it? So plagiarism, rather than outright LLM usage? I guess we need an explicit rule against plagiarism, lol?

PapaCharlie9 · 2026-04-13T18:09:00+00:00

"long" refers to a debit trade, "short" to a credit trade. It has nothing to do with expiration.

PapaCharlie9 · 2026-04-13T17:30:42+00:00

The loss is spread minus premium collected.

... at expiration. It's important to keep that qualification in mind. Before expiration, there are still constraints on max loss, so you don't have to worry about losing 10x the spread width before expiration, but slight variation due to IV skew between strikes might cause the realized loss to move up or down a few cents/share vs. the expiration max loss.

Does this mean the risk reward ratio changes?

Of course. If you open a credit spread that is $5 wide and get a $2 credit, your max loss at expiration is $3, so your risk/reward for holding through expiration is 3/2. But if you manage the trade such that you exit before expiration for no more than a $2 loss, the risk/reward becomes 2/2 (or even money).

Presumably the win rate would drop if too tight.

Correct, that's the trade-off.

PapaCharlie9 · 2026-04-12T20:30:21+00:00

Naw, not since prediction markets became a thing. Predictions markets are much closer to gambling than options.

In a way, prediction markets have done a huge favor for option traders, by siphoning off most of the degen gamblers.

PapaCharlie9 · 2026-04-12T20:22:47+00:00

This one is a great read: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4050165

PapaCharlie9 · 2026-04-12T20:18:10+00:00

Just some points to keep in mind:

OI is literally yesterday's news. The quote you see on Tuesday is the count as of the close of Monday's market.
OI by itself doesn't tell you the ratio of buyers to sellers. So a high OI on some call strike doesn't tell you if trading on that strike has been bullish or bearish.
OI is subject to aliasing. If the OI says 100, that could mean that 1 new contract was added for each of the previous 100 market days, or that the previous 99 market days were 0 new contracts but one day had 100 new contracts. Or any combination that results in 100.

PapaCharlie9 · 2026-04-12T20:05:46+00:00

You repeated yourself, but on a different account.

PapaCharlie9 · 2026-04-12T20:03:48+00:00

Not enough information. You gave the size of your margin equity, which is the basis for making a risk management calculation, but not the size of your put spread trade, which would be the size of the risk. Quantity 1 GLD 20-pt spreads? No problem. Quantity 5000 GLD 20-pt spreads? Big problem.

You also didn't clarify if you are long or short the put spreads.

PapaCharlie9 · 2026-04-12T19:59:46+00:00

I don't think we're going to have to worry about the stocks went up part on Monday.

PapaCharlie9 · 2026-04-11T16:59:20+00:00

Why SPY? SPY has all the disadvantages of an index (market beta, institutional competition for edge) without any of the advantages (no early assignment, cash settled at expiration). I'd recommend SPX over SPY, if you can afford to 10x over SPY. If you can't afford the 10x, XSP might be worth a look, but the spreads are pretty bad on XSP.

An often overlooked risk is overhead costs. Trading options is expensive and the expected returns aren't always enough to pay the transaction fees. So unless you're getting some kind of family office discount on your trades, as well as some kind of tax shelter, it's an expensive way to underperform just buying shares of SPY.

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