4 ms·

I’m not big on trading individual stocks, but I own a bunch of long puts on Nikola. I don’t know any other company that seems as likely to go to zero (other tha

I’m not big on trading individual stocks, but I own a bunch of long puts on Nikola. I don’t know any other company that seems as likely to go to zero (other than companies like Hertz, where everyone knows so the options are priced appropriately).

toomuchtodo 6y ago
Be careful with those puts. It’s entirely possible to be right and still not be able to close out your position because the underlying is halted/delisted.
- rohitb91 6y ago
  The market can stay irrational longer than you can stay solvent I think the flood of retail investors with disposable income and government benefits is leading to absurdities in market pricing. See: Hertz skyrocketing after announcing bankruptcies. After all, the stock has dropped 90%, how much lower can it go right? Well, to the new investors, all the way to 0.
  - URSpider94 6y ago
    This is not even that. The parent is talking about the case where the stock does indeed go to zero and get de-listed from the exchange, in other words the market becomes rational. At that point, you're holding put options that are ridiculously in-the-money, but you can't execute or sell them to take your profit because the underlying stock is gone. So, your highly valuable stash of Nikola puts becomes worthless ...
    - mdorazio 6y ago
      Someone correct me if I'm wrong, but I'm pretty sure that's not how it works. If it gets delisted, you would buy the pinks to get the shares. The stock doesn't just disappear when it's delisted.
  - deleted 6y ago
    [deleted]
- ssanders82 6y ago
  Halts are temporary (generally a few hours to a few days). If it's delisted from NASDAQ it will almost certainly move to another exchange (OTC / pink sheets) and the stock will still trade. If the stock truly is wiped out and common shareholders equity is 0, you can exercise the put, receive 100x the strike value per contract, and deliver nothing. Source: https://www.optionseducation.org/referencelibrary/faq/splits-mergers-spinoffs-bankruptcies https://www.optionseducation.org/referencelibrary/faq/splits...
  - deleted 6y ago
    [deleted]
fossuser 6y ago
Yeah, I'm pretty confident Nikola is a total fraud that will go to zero but it's still hard to make money even knowing that. How long will the fraud last? Isn't your return limited by the difference available under the put? I generally stick to calls because it's way easier to make money in a company you know is good and it's easier to capture the upside (Peloton for me recently). Market seems skewed this way, it's a lot harder to correct the price even when you know it's total bullshit. Seems likely to allow frauds to go on longer.
- objektif 6y ago
  How is Peloton a good company can you please explain?
  - fossuser 6y ago
    - Really good product (most important). - Subscription model makes sense and is sticky with good margins. - Undercuts gyms while providing better experience. - Well timed growth during pandemic. If I use a product and think it's really excellent I'll check out the stock and the company. This has largely worked for Apple, Tesla (bought in 2012), and now Peloton.
    - antoniuschan99 6y ago
      Peloton is actually really good. I subscribe to their digital service for 12.99 a month and you get to access all the classes. Basically like online bootcamp/yoga. Not sure why the consensus overlooks this part and focuses on their expensive hardware (I don’t have any of that).
    - deleted 6y ago
      [deleted]
    - objektif 6y ago
      Fair enough let me know next time you like a product :)
  - deleted 6y ago
    [deleted]

toomuchtodo 6y ago

Be careful with those puts. It’s entirely possible to be right and still not be able to close out your position because the underlying is halted/delisted.

rohitb91 6y ago
The market can stay irrational longer than you can stay solvent I think the flood of retail investors with disposable income and government benefits is leading to absurdities in market pricing. See: Hertz skyrocketing after announcing bankruptcies. After all, the stock has dropped 90%, how much lower can it go right? Well, to the new investors, all the way to 0.
- URSpider94 6y ago
  This is not even that. The parent is talking about the case where the stock does indeed go to zero and get de-listed from the exchange, in other words the market becomes rational. At that point, you're holding put options that are ridiculously in-the-money, but you can't execute or sell them to take your profit because the underlying stock is gone. So, your highly valuable stash of Nikola puts becomes worthless ...
  - mdorazio 6y ago
    Someone correct me if I'm wrong, but I'm pretty sure that's not how it works. If it gets delisted, you would buy the pinks to get the shares. The stock doesn't just disappear when it's delisted.
- deleted 6y ago
  [deleted]
ssanders82 6y ago
Halts are temporary (generally a few hours to a few days). If it's delisted from NASDAQ it will almost certainly move to another exchange (OTC / pink sheets) and the stock will still trade. If the stock truly is wiped out and common shareholders equity is 0, you can exercise the put, receive 100x the strike value per contract, and deliver nothing. Source: https://www.optionseducation.org/referencelibrary/faq/splits-mergers-spinoffs-bankruptcies https://www.optionseducation.org/referencelibrary/faq/splits...
- deleted 6y ago
  [deleted]

fossuser 6y ago

Yeah, I'm pretty confident Nikola is a total fraud that will go to zero but it's still hard to make money even knowing that. How long will the fraud last? Isn't your return limited by the difference available under the put? I generally stick to calls because it's way easier to make money in a company you know is good and it's easier to capture the upside (Peloton for me recently). Market seems skewed this way, it's a lot harder to correct the price even when you know it's total bullshit. Seems likely to allow frauds to go on longer.

objektif 6y ago
How is Peloton a good company can you please explain?
- fossuser 6y ago
  - Really good product (most important). - Subscription model makes sense and is sticky with good margins. - Undercuts gyms while providing better experience. - Well timed growth during pandemic. If I use a product and think it's really excellent I'll check out the stock and the company. This has largely worked for Apple, Tesla (bought in 2012), and now Peloton.
  - antoniuschan99 6y ago
    Peloton is actually really good. I subscribe to their digital service for 12.99 a month and you get to access all the classes. Basically like online bootcamp/yoga. Not sure why the consensus overlooks this part and focuses on their expensive hardware (I don’t have any of that).
  - deleted 6y ago
    [deleted]
  - objektif 6y ago
    Fair enough let me know next time you like a product :)
- deleted 6y ago
  [deleted]