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I sold a GME call option with a strike price of $320 and expiration in July today for $200. A pump and dump by novices is easy money if you know how to play it.

I sold a GME call option with a strike price of $320 and expiration in July today for $200. A pump and dump by novices is easy money if you know how to play it. Everyone knows this is going to crash, the question is when?

solaxun 6y ago
You got balls, yes the IVOL is insane and that's a nice premium, but if for some reason you have a repeat of today, you're out $20K plus. This thing will crater, yeah, but shorting it is insane and option volatility is ridiculous right now.
- undefined1 6y ago
  > but if for some reason you have a repeat of today, you're out $20K plus Can you expand on this? Why would they be on the line for $20k+ (or anything) after selling the option?
  - rgossiaux 6y ago
    The option seller needs to buy the stock to deliver the shares when the option expires, so if the price continues rising their losses are unbounded (by contrast, their gains are bounded by how much they originally sold the option for).
    - ra7 6y ago
      > The option seller needs to buy the stock to deliver the shares when the option expires Not just when the option expires. You can be assigned anytime after you sell an option.
    - undefined1 6y ago
      Oh, but that depends on how you sell it? Correct me if wrong, but my understanding with Robinhood is that you Sell to Close (by default anyway), which just goes back into the market. No further obligation?
      - ra7 6y ago
        You can buy or sell an option to open a position. If you want to buy it, you Buy to Open and Sell to Close. If you sell an option, you Sell to Open. If you want to buy it back (at a profit/loss and you're not assigned), you Buy to Close which goes back into the market and closes your position. If you are assigned (i.e. the buyer of your option exercises his right to buy 100 shares at the strike price), you have no option other than to buy those shares at market price if you don't have any and deliver it to the option buyer.
- silexia 6y ago
  I agree with you... There is a (small) risk the stock goes to $1,000 or $5,000. My portfolio won't face any margin calls even with those numbers though... And eventually the price will come back down. I think it was Ben Graham who said the markets can remain irrational longer than you can remain solvent.
  - gjm11 6y ago
    Nope. It's usually ascribed to J M Keynes, buy apparently it was actually one A. Gary Shilling: https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/
  - ra7 6y ago
    Eventually it will come down, yes. But you're the option seller, so you can be assigned anytime. I assume this is a naked call you sold (not covered). So you might be forced to buy shares at a really high price and deliver at $320. The big risk with selling options is early assignment.
    - dash2 6y ago
      Maybe OP thinks it literally can't go tits up?
    - base698 6y ago
      Option sellers eat like birds and go to the bathroom like elephants.
      - silexia 6y ago
        I agree, I put in a market order to close the position last night and it filled at market open, so I am safely out.
  - Domenic_S 6y ago
    No you'll just get assigned and lose $500k.
  - 6y ago
swiley 6y ago
Man I would have closed that position this morning if I were you. Holy crap.
teekert 6y ago
Why do you call it a pump and dump by novices when it seems to be the opposite that was being done by shorters, they just got caught and now they have to pay, seems like the novices just beat them at their own game. [0] [0, as posted by colllectorof] https://lbry.tv/@rossmanngroup:a/why-mainstream-media-s-slander-of:c https://lbry.tv/@rossmanngroup:a/why-mainstream-media-s-slan...
- silexia 6y ago
  Most people on WSB understand the game here is a short squeeze. They all expect the stock to return to $5-50 when the squeeze is done. That means that the ones who currently own GME or it's call options plan to sell those in short order when whatever target price is achieved. Hence my calling it a pump and dump... They are pumping the stock up with highly positive videos like the one you posted and comments on WSB to get the price higher faster so they can sell and make a max profit. But for this to happen, they are going to need a buyer who buys at the very top. Who is that buyer going to be? No savvy investor will go near buying a pump and dump with a ten foot pole. Sadly, it will be the newbies on WSB and the newbies watching this Rossmann video who buy at the top and lose everything as it plummets down. You might say, "Well I am not going to be that newbie"... But only a very few will sell at the top... Maybe 1-5%. A few more will make solid returns. But all that profit for those guys on top will come from gullible retail investors. That is why MSM is calling BS.
  - teekert 6y ago
    But that buyer must be the shorter right? That's shorting, the shorter must return his borrowed stocks. So the people with the stock have a guaranteed buyer in the near future. That so dangerous about shorting, the losses are unbound. I'm just a noob correct me if I'm wrong.
    - silexia 6y ago
      The buyer could be anyone. But if the stock is so overpriced that no one will buy it except people forced to by margin calls, then what you are describing is a short squeeze... short squeezes are illegal.
ww520 6y ago
Naked call option?
boring_twenties 6y ago
There was a post on WSB yesterday evening imploring readers to exercise their calls instead of selling them, specifically to screw with options sellers. Caveat vendor.
- dehrmann 6y ago
  Nit: caveat venditor
  - boring_twenties 6y ago
    Appreciate the correction, no pun intended.
blackrock 6y ago
Shit. You wrote a naked call on GME today? That’s insane. Even if you think you know what your doing. This is the steam roller. And you’re the guy picking up the penny in front of it. But, the premiums can be pretty juicy. Looking at the 29Jan 320 Call options, if you were good, and called today’s top. Then you could’ve wrote the call at 145. Then held it for 90 mins, when it bottomed out at 89. Netting you a cool $56 per contract. If you wrote 1 contract on this play, then 56 x 1 x 100 = $5600. So, $5600 of net profit in 90 minutes. If you’re lucky. It’s best to have a large war chest to play this strategy. But, if you’re unlucky, then a short squeeze can even happen during normal trading hours, and it would probably wipe you out. You can call the wrong top, and the spreads are so wide, that the loss is heavier to exit the position. And if you ran this strategy yesterday, at a lower price point, and held it overnight, then you would’ve been wiped out this morning, when the stock spiked in overnight off-market trading. So it’s best to keep this strategy to a daytrade. I don’t recommend this strategy to anyone. The odds of you consistently calling the top, correctly, all the time, is very low. And the crazy phenomenon going on right now, is that the retail traders, are somewhat collectively operating like a hive mind. Whether they can really succeed to achieve their objective of hitting $1000/share, remains to be seen. But, I’m not going to challenge this one, at this time.
- silexia 6y ago
  You are probably right. It would suck if the stock went to $1,000 and the buyer of my call option exercised at that point. That would be a loss of $68,000. On the other hand, if I am right that this is about the peak, then I get $20,000. I could either close my position, or I could potentially buy the same call option strike with a shorter expiration for cheaper... Most likely the run up on GME will be over by then. If not, I could just buy another call option with a further strike on top of it. Perhaps my strategy should be selling call options dated for 79 days from now with a strike of 320 for $190... Then buy call options for when I think this thing will end... Say 9 days out with the same strike for $152. If things go crazy high, then I can use my buy call option to cover the sell call option. If it doesn't, then my profit is $192-152 = $40. My theory is the stock has run insanely high, and even Elon Musk has made comments that are priced in. At this point, WSB users may have all their money they want in this play invested... Who else comes in to sustain the current price or drive it higher? What if GME execs decide to sell some shares to raise funds? Or if the SEC asks them to to stop the short squeeze? The stock almost reached the WSB pie in the sky goal of $1000... How many people are going to make sure they aren't the last fool in the stock holding the bag? But if I am really wrong, and the stock went to $5000 on a short squeeze, that would hurt. $5000-320= 4,680 x 100= $468,000. I probably should buy a shorter run buy side call option to cover my risk. $20,000 with high probability outcome vs $468,000 with a low probability outcome... Who exactly sells call options anyways? Someone has to be selling these naked in order to provide the volume that is out there, right? Probably people doing it behind an LLC shield so they can't take unlimited losses and will leave their broker ("too big to fail") holding the bag?
wolverine876 6y ago
I know nothing about the parent, but because most such claims are false, it should mean nothing to rest of us. And I think the parent shouldn't make it, as they are inflaming and encouraging a situation that will hurt a lot of people. We know well that random people on the Internet aren't reliable. For those who respond, why are you taking it at face value?
base698 6y ago
Seems like a great recipe for $gme to hit $1000 and have it excercised against you.
wp381640 6y ago
Individuals selling call options into any stock is risky. Doing it into one of the most volatile stocks of the past few decades is insane. Bragging about it being "easy money" is just sheer lunacy. You got lucky - you have nothing to brag about. Your actions are 100x worse than anything i've seen in WSB.
conanbatt 6y ago
--- My friend Andrew Left of Citron Capital, who was up 155% last year, was publicly short GameStop, so I called him last night to ask for his thoughts. He had plenty – and gave me permission to share them: The market has come to its lowest form. This is even crazier than Tilray (TLRY) [see below] and Tesla (TSLA). The Reddit crowd apparently said, "Let's find a company that's completely dead – and because everyone knows that, there's a big short interest – and engineer a short squeeze." There's not a five-year-old in the country who can kick my ass… but 1,000 of them probably could. That's what happened here. Even so, my losses have been minimal – and I'm making it back by selling ridiculously priced calls. For example, when the stock was at $75 today, I was getting paid $18 for $90 strike calls and $14 for at-the-money calls that expire on Friday! If you're a professional player, you adjust to the market to make money off it. ---
- silexia 6y ago
  He wrote naked calls with a strike price of $90 and now the price is $350... Shouldn't he be wiped out if anyone exercised their call options?
  - conanbatt 6y ago
    If he did what he said, he definitely lost. Might have had a stop-loss. I mentioned that quote from someone that thought in the same lines as the OP, had more money and was a professional in the area, and still lost his shirt - twice.
risyachka 6y ago
With how things go your break even price of $520 seems optimistic.

solaxun 6y ago

You got balls, yes the IVOL is insane and that's a nice premium, but if for some reason you have a repeat of today, you're out $20K plus. This thing will crater, yeah, but shorting it is insane and option volatility is ridiculous right now.

undefined1 6y ago
> but if for some reason you have a repeat of today, you're out $20K plus Can you expand on this? Why would they be on the line for $20k+ (or anything) after selling the option?
- rgossiaux 6y ago
  The option seller needs to buy the stock to deliver the shares when the option expires, so if the price continues rising their losses are unbounded (by contrast, their gains are bounded by how much they originally sold the option for).
  - ra7 6y ago
    > The option seller needs to buy the stock to deliver the shares when the option expires Not just when the option expires. You can be assigned anytime after you sell an option.
  - undefined1 6y ago
    Oh, but that depends on how you sell it? Correct me if wrong, but my understanding with Robinhood is that you Sell to Close (by default anyway), which just goes back into the market. No further obligation?
    - ra7 6y ago
      You can buy or sell an option to open a position. If you want to buy it, you Buy to Open and Sell to Close. If you sell an option, you Sell to Open. If you want to buy it back (at a profit/loss and you're not assigned), you Buy to Close which goes back into the market and closes your position. If you are assigned (i.e. the buyer of your option exercises his right to buy 100 shares at the strike price), you have no option other than to buy those shares at market price if you don't have any and deliver it to the option buyer.
silexia 6y ago
I agree with you... There is a (small) risk the stock goes to $1,000 or $5,000. My portfolio won't face any margin calls even with those numbers though... And eventually the price will come back down. I think it was Ben Graham who said the markets can remain irrational longer than you can remain solvent.
- gjm11 6y ago
  Nope. It's usually ascribed to J M Keynes, buy apparently it was actually one A. Gary Shilling: https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/
- ra7 6y ago
  Eventually it will come down, yes. But you're the option seller, so you can be assigned anytime. I assume this is a naked call you sold (not covered). So you might be forced to buy shares at a really high price and deliver at $320. The big risk with selling options is early assignment.
  - dash2 6y ago
    Maybe OP thinks it literally can't go tits up?
  - base698 6y ago
    Option sellers eat like birds and go to the bathroom like elephants.
    - silexia 6y ago
      I agree, I put in a market order to close the position last night and it filled at market open, so I am safely out.
- Domenic_S 6y ago
  No you'll just get assigned and lose $500k.
- 6y ago

swiley 6y ago

Man I would have closed that position this morning if I were you. Holy crap.

teekert 6y ago

Why do you call it a pump and dump by novices when it seems to be the opposite that was being done by shorters, they just got caught and now they have to pay, seems like the novices just beat them at their own game. [0] [0, as posted by colllectorof] https://lbry.tv/@rossmanngroup:a/why-mainstream-media-s-slander-of:c https://lbry.tv/@rossmanngroup:a/why-mainstream-media-s-slan...

silexia 6y ago
Most people on WSB understand the game here is a short squeeze. They all expect the stock to return to $5-50 when the squeeze is done. That means that the ones who currently own GME or it's call options plan to sell those in short order when whatever target price is achieved. Hence my calling it a pump and dump... They are pumping the stock up with highly positive videos like the one you posted and comments on WSB to get the price higher faster so they can sell and make a max profit. But for this to happen, they are going to need a buyer who buys at the very top. Who is that buyer going to be? No savvy investor will go near buying a pump and dump with a ten foot pole. Sadly, it will be the newbies on WSB and the newbies watching this Rossmann video who buy at the top and lose everything as it plummets down. You might say, "Well I am not going to be that newbie"... But only a very few will sell at the top... Maybe 1-5%. A few more will make solid returns. But all that profit for those guys on top will come from gullible retail investors. That is why MSM is calling BS.
- teekert 6y ago
  But that buyer must be the shorter right? That's shorting, the shorter must return his borrowed stocks. So the people with the stock have a guaranteed buyer in the near future. That so dangerous about shorting, the losses are unbound. I'm just a noob correct me if I'm wrong.
  - silexia 6y ago
    The buyer could be anyone. But if the stock is so overpriced that no one will buy it except people forced to by margin calls, then what you are describing is a short squeeze... short squeezes are illegal.

ww520 6y ago

Naked call option?

boring_twenties 6y ago

There was a post on WSB yesterday evening imploring readers to exercise their calls instead of selling them, specifically to screw with options sellers. Caveat vendor.

dehrmann 6y ago
Nit: caveat venditor
- boring_twenties 6y ago
  Appreciate the correction, no pun intended.

blackrock 6y ago

Shit. You wrote a naked call on GME today? That’s insane. Even if you think you know what your doing. This is the steam roller. And you’re the guy picking up the penny in front of it. But, the premiums can be pretty juicy. Looking at the 29Jan 320 Call options, if you were good, and called today’s top. Then you could’ve wrote the call at 145. Then held it for 90 mins, when it bottomed out at 89. Netting you a cool $56 per contract. If you wrote 1 contract on this play, then 56 x 1 x 100 = $5600. So, $5600 of net profit in 90 minutes. If you’re lucky. It’s best to have a large war chest to play this strategy. But, if you’re unlucky, then a short squeeze can even happen during normal trading hours, and it would probably wipe you out. You can call the wrong top, and the spreads are so wide, that the loss is heavier to exit the position. And if you ran this strategy yesterday, at a lower price point, and held it overnight, then you would’ve been wiped out this morning, when the stock spiked in overnight off-market trading. So it’s best to keep this strategy to a daytrade. I don’t recommend this strategy to anyone. The odds of you consistently calling the top, correctly, all the time, is very low. And the crazy phenomenon going on right now, is that the retail traders, are somewhat collectively operating like a hive mind. Whether they can really succeed to achieve their objective of hitting $1000/share, remains to be seen. But, I’m not going to challenge this one, at this time.

silexia 6y ago
You are probably right. It would suck if the stock went to $1,000 and the buyer of my call option exercised at that point. That would be a loss of $68,000. On the other hand, if I am right that this is about the peak, then I get $20,000. I could either close my position, or I could potentially buy the same call option strike with a shorter expiration for cheaper... Most likely the run up on GME will be over by then. If not, I could just buy another call option with a further strike on top of it. Perhaps my strategy should be selling call options dated for 79 days from now with a strike of 320 for $190... Then buy call options for when I think this thing will end... Say 9 days out with the same strike for $152. If things go crazy high, then I can use my buy call option to cover the sell call option. If it doesn't, then my profit is $192-152 = $40. My theory is the stock has run insanely high, and even Elon Musk has made comments that are priced in. At this point, WSB users may have all their money they want in this play invested... Who else comes in to sustain the current price or drive it higher? What if GME execs decide to sell some shares to raise funds? Or if the SEC asks them to to stop the short squeeze? The stock almost reached the WSB pie in the sky goal of $1000... How many people are going to make sure they aren't the last fool in the stock holding the bag? But if I am really wrong, and the stock went to $5000 on a short squeeze, that would hurt. $5000-320= 4,680 x 100= $468,000. I probably should buy a shorter run buy side call option to cover my risk. $20,000 with high probability outcome vs $468,000 with a low probability outcome... Who exactly sells call options anyways? Someone has to be selling these naked in order to provide the volume that is out there, right? Probably people doing it behind an LLC shield so they can't take unlimited losses and will leave their broker ("too big to fail") holding the bag?

wolverine876 6y ago

I know nothing about the parent, but because most such claims are false, it should mean nothing to rest of us. And I think the parent shouldn't make it, as they are inflaming and encouraging a situation that will hurt a lot of people. We know well that random people on the Internet aren't reliable. For those who respond, why are you taking it at face value?

base698 6y ago

Seems like a great recipe for $gme to hit $1000 and have it excercised against you.

wp381640 6y ago

Individuals selling call options into any stock is risky. Doing it into one of the most volatile stocks of the past few decades is insane. Bragging about it being "easy money" is just sheer lunacy. You got lucky - you have nothing to brag about. Your actions are 100x worse than anything i've seen in WSB.

conanbatt 6y ago

--- My friend Andrew Left of Citron Capital, who was up 155% last year, was publicly short GameStop, so I called him last night to ask for his thoughts. He had plenty – and gave me permission to share them: The market has come to its lowest form. This is even crazier than Tilray (TLRY) [see below] and Tesla (TSLA). The Reddit crowd apparently said, "Let's find a company that's completely dead – and because everyone knows that, there's a big short interest – and engineer a short squeeze." There's not a five-year-old in the country who can kick my ass… but 1,000 of them probably could. That's what happened here. Even so, my losses have been minimal – and I'm making it back by selling ridiculously priced calls. For example, when the stock was at $75 today, I was getting paid $18 for $90 strike calls and $14 for at-the-money calls that expire on Friday! If you're a professional player, you adjust to the market to make money off it. ---

silexia 6y ago
He wrote naked calls with a strike price of $90 and now the price is $350... Shouldn't he be wiped out if anyone exercised their call options?
- conanbatt 6y ago
  If he did what he said, he definitely lost. Might have had a stop-loss. I mentioned that quote from someone that thought in the same lines as the OP, had more money and was a professional in the area, and still lost his shirt - twice.

risyachka 6y ago

With how things go your break even price of $520 seems optimistic.