3 ms·
Earlier last year around May, when the stock market seemed to pick up after the COVID crash, I purchased a number of deep OTM LEAPs (long expiry options; until
by dannyw 6y ago
Earlier last year around May, when the stock market seemed to pick up after the COVID crash, I purchased a number of deep OTM LEAPs (long expiry options; until early this year). They were incredibly cheap. I often had trouble finding a market maker for those.
I only chucked about $2000 in, but these options have grossed $15,000 in realised returns and $25,000 in unrealised returns.
Options allowed me to make a “bet” that stocks would go crazily up. Options can be a valuable tool if you know how to use it.
- skinnymuch 6y agoCongrats! I sometimes will do what I should not do and do regret day dreaming of if I had done more than just think about what you actually did back around same time.
- nemo44x 6y agoOf course money is made. Likewise the same amount of money was lost by the people on the other end. You won this one. However, long term you’d also lose some and in the end you’d probably be about even in terms of cash won and cash lost. Unless you’re an options guru which I don’t know exists. The market maker who gets the contract fee and hedges the contract is the only guaranteed winner long term. Saying that I trade options when I sense opportunity and have had some outsized winners compared to my losers. However taxes need to be considered too, especially when you have a year with a net realized loss that’s greater than what the IRS let’s you deduct. The way I’ve seen people get wiped out with options is not managing their bankroll. They’d have just too much of it spread across numerous options bets thinking they were diversified. And then the bottom falls out of nearly everything and the whole thing goes to 0. It happens. Congrats on the win!
- notyourday 6y agoI think it is rather well known since Taleb's book came out that deep OTM options, including LEAPs tend to be mispriced as there's just not enough data to model better pricing.
- base698 6y agoI know a lot of people here probably have read Talebs book. A far larger amount of them have read /r/wallstreetbets
- dbancajas 6y agowhat is Taleb's book?
- notyourday 6y agoThe Black Swan
- konha 6y agoNicholas Taleb - Antifragile Might also be one of his other books like Black Swan (I haven‘t read them all), but I think Antifragile mentions using options to mitigate risk in a portfolio.
- nico_h 6y agoI've been looking into 12 / 18 / 24 month calls for Tesla, AMD, NVDA, AAPL and there is nothing cheap available anymore, even the really OTM stuff. There was some stories about 12 / 24 month sub dollar OTM Tesla calls that printed between march and the split, but alas, no such things anymore. There are some deep ITM prices that sell for around the delta, but then might as well buy the shares. What are you looking at these days?
- eloff 6y agoHow did you find those options and decide they were a "good deal"? I'm curious about the details around how you implemented your strategy.
- dannyw 6y agoMy original thesis was that the coronavirus may continue to grow and impact meatspace businesses for years (like until 2023), and hence tech stocks like Google, Facebook, and Shopify has huge upside. I also reinforced this viewpoint with “momentum”: academic studies over centuries show today’s winners are more likely to be tomorrow’s winners.