/biz/ - Business & Finance

[Anonymous No.1030637]

Long Call
>Potential Losses: 100% of you investment
>Potential Gains: Infinite

Long Put
>Potential Losses: 100% of your investment
>Potential Gains: The strike price

Short Call
>Potential Losses: Infinite
>Potential Gains: 100% of your writing price

Short Put
>Potential Losses: Strike price minus writing price
>Potential Gains: Writing price

With these four possibilities in mind, why would anybody actually write options?

Picture completely unrelated, sorry about that.

[Anonymous No.1030639]

for hedging fortunes

[Anonymous No.1030900]

What's the difference between put and call?

[Anonymous No.1030910]

it's all about expected value. when you write or sell options most of the time you win small but sometimes you lose big. option selling strategies have been very successful in general for the past 5/6 years.

[Anonymous No.1030916]

>>1030900
One is a buy and one is a sell

[Anonymous No.1030950]

>>1030900
No
>>1030916

A call option is a contract that gives you the option to buy stock at the strike price stated in the contract.

A put option is the option to sell your stock at a given strike price.

They're basically insurance against price moves in stock that allow you to enter or exit a position at the time of maturity with the given strike price. Their value is derived relative to how much time is to maturity is left and the price of the stock. You don't have to own stock to buy the contracts.

[Anonymous No.1030969]

>>1030637
fees and principal

[Li_Sheng !n54GAoW8Vs No.1032168]

>>1030637
Whoo boy lets do this.
You're forgetting two other positions long and short stock, there are 6 basic pieces.

Of the naked options the only one worth doing frequently is the short put.

Positioning and structuring matters a great deal.
1 standard deviation Long C/P
Probability of Profit 16+/-2%
1 standard deviation Short C/P
Probability of Profit 78% and 86%

As such naked longs are pure spec and hedge plays.
Naked shorts however are basic high leverage tools.
Naked puts 85% of the time or more you just keep the cash. the other 15% you keep the stock at a 1 standard deviation price - premium collected.
Do you like discounts I like discounts.
Warren Buffet's Preferred Position entrance Strategy.
Short calls are the opposite, bearish, you collect less and there's less probability there. but when shit bursts up, sell a few of these, because no stock has gone to infinity and beyond yet.

Nakeds except the short put are generally not the preferred method of using options.

Covered call- has the same risk as a short put, but often costs more. Acts as a LARGE dividend. and consistently reduces cost basis. 100 Shares and a Short Call.
68% probability, of keeping the cash selling just out of the money calls. 45 days is the sweet spot, so 8 potential dividends a year, at .68% = 5 dividends per year. when managed correctly you keep most of the growth.
Do you like Growth stocks with a large frequent Dividend? I do.
the opposite strategy is the Synthetic Short Call
Short 100 Shares and a Short Put.
Stock market generally Creeps up but falls down hard. with short puts you keep 85% of the gains up, with short shares you keep 100% of the drop. #FlawlessMathematicalVictory
Do you want to go short and Get phat dividends during bulls and phatter gains during bears, I do$$$$

If you're trying to enter a position at the best price sell puts against your stock. Load it up.

Want me to go more advanced?

[Anonymous No.1032171]

>>1032168
Nigga where can I learn more about this

[Anonymous No.1032173]

>>1032168
re you chinese?

[Anonymous No.1032175]

>>1032168

[Anonymous No.1032180]

You can also buy put options if you want to bet that the price of a stock is going to drop, without the unlimited risk of actually shorting the stock.

[Anonymous No.1032185]

>>1032168
Also want to know where I can learn more. Investopedia just offers definitions, isn't helpful.

[Li_Sheng !n54GAoW8Vs No.1032187]

>>1032171
Tastytrade is Fantastic. its live right now. With 2 hot chicks catered to newb to intermediate audience.

I've put the bible of options trading in the DC as well. Options as Strategic investments
>>1032175
Glad you showed up Nassim
I've got your book Dynamic Hedging in here as well.

http://dropcanvas.com/zpf5p

[Anonymous No.1032189]

>>1032168
u a chinamen?

[Anonymous No.1032205]

Guys, can someone tell me something about binary options?

Is this a real business or is all of it fake?
What are it's advantages and disadvantages to "normal" trading?

[Anonymous No.1032229]

>>1032187
>>1032168
Thanks for the info and links. I'll listen to more advanced stuff if you got it.

[Anonymous No.1032234]

>>1030637
Well, intelligent market right? so without insider info you just have the books to look at which have been picked over by big money investors already, so a price going up is a total gamble

How the markets going to respond to xyz in a negative fashion is more up for debate so concievably betting on a stock dropping in price would be more accurate more times in the long haul, case in point martin schmegma and that biotech company he took over like a month ago? price went from 0.40 to 40.00 in like 3 days, now it did that because he owned 70% of the available stock and everyone else shorted the shit out of it, but most of the shoirt positions were in place prior to his anouncing he had taken over

this info was "available" but not to the general public, the general public read that he was going to be running a company and hating him : proceeded to jump in on the short.

profit to martin and anyone who had held through the initial squeeze.

So IMO the factors leading to a stocks price dropping are more fluid, whereas other than emotionalism and actual profits prices dont generally rise.

Also (and I could be talking out of my ass on this one) , when prices fall they can fall a shit ton, rarely does a stock with any length of existence go up more than a single digit at a time

[Li_Sheng !n54GAoW8Vs No.1032257]

Now for smaller accounts we have Spreads.
You reduce probability of profit slightly but in smaller accounts the risk mediation is far improved.

Say you've got a $10 stock. you're selling the 9 put for .50 Your break even is $8.50. Since options are written in 100xShares increments
Thats $50, risking $850, 1:17 reward:risk not great. So combo up.
Buy 8 put at .30 Sell 9 put @ .50
$20 risking $80 1:4 risk Breakeven @ 8.80

Calls spreads are the same thing in reverse.

The Risk is the distance between the Strikes - Credit Received.

The above was a Credit Spread.
You can have a debit Spread, but most of the time they're useless.

Those are the 3 basic structures Naked Options, Covered Options, and Spreads.

Lets Discuss teh Jade Lizard, invented by pic related.
Short Callspread and short put.
The trick is the put is sold for more than the width of the call spread.

So $100 stock
Sell at the money put for 3.50 and sell 1 std dev 3 dollar wide call spread for credit say .50
-99 put @ 3.50 | -104 call @ 1.80 | +107call @ 1.30
Max profit stock is between 99 and 104.
Total Credit Recieved is $4, so break even down is 95$, because the put credit $350is greater than the width of the call spread $300. even if the stock goes buzz lightyear moon man on us we make $50.
This is a neutral to bullish strategy

The concept of Neutrality of movement is how most options traders make money. 2015 was basically unchanged. Say it was $2000 when it started. The at the money SPX LEAP options (annual expirations) Jan 1 2016 to Dec31 2016
the at the money strangle is trading for $360 So the breakevens were 1640 and 2360
If 2016 were to be similar to 2015 with a high around 2100 and a low around 1800. You would have made 36000 on your roughly 150000 necessary to make the trade.

reduce your capital outlay on that Trade, You can turn it into an Iron Butterfly. 150k is a lot.
the 2400 calls are 5$ and the 1600 puts are 65$. Thats $29k gain and 43k risked

[Anonymous No.1032278]

>>1032257
bro don't be telling everyone my secrets g we gotta keep this info lowkey...

[Anonymous No.1032279]

I want you to be my mentor, please teach me your ways.

[Anonymous No.1032280]

>>1032279
na bro don't listen to him u just gotta find way OTM long calls that is how u get rich trust me im a billionaire

[Anonymous No.1032282]

Forgot to quote
>>1032257

[Anonymous No.1032283]

>>1032168
I just fucking have to ask, are you chinese?

[Anonymous No.1032284]

>>1032280
A billionaire? To accumulate such great fortune is near impossible if you browse 4chan. I don't want a billion, I just want to learn.

[Anonymous No.1032286]

>>1032283
He is fucking smart, good at math and his first and last name both seem to originate from China, need more clues?

[Anonymous No.1032287]

>>1032284
well how am i gonna get rich if this dude is givin out all my secrets for free

[Anonymous No.1032291]

>>1032287
Top kek, your secrets? It's not a secret if someone else knows.

[Anonymous No.1032294]

>>1032291
well shit he must have stole them from me - good point

[Anonymous No.1032296]

>>1032291
naw but 4 real covered stock purchases is the spread strategy I have the most success with - look it up - called a covered call

[Anonymous No.1032297]

>>1032296
How much bank you make boy?

[Anonymous No.1032299]

>>1032296
ANNUALLY

[Anonymous No.1032302]

>>1032297
if i buy a stock for $4000 (1000 shares) and sell a call for $150 a month it all depends on if the underlying goes down or not. probably 12% a year but idk

[Anonymous No.1032303]

>>1032302
>>1032299
and that is a conservative estimate - no work involved just keep rolling out the calls

[Anonymous No.1032305]

>>1032303
It's something

[Anonymous No.1032307]

>>1032305
thanks playa - i used to lose a lot of money trying to do directional plays - but covered calls just keep working for me

[Anonymous No.1032311]

>>1032307
How much more cash needed until break even? Assuming you gambled away more money than you've got so far.

[Li_Sheng !n54GAoW8Vs No.1032312]

>>1032279
Bro, just started in May, I'm not mentor material. I'm also painting an idealized scenario, with fees and taxes and shifting volatility gains are reduced, but after about in an account they're nominal.

I've put 8k into the account, and fees are wrecking my shit. Just under 5k in account currently. commissions and fees ytd 4500,
379 trades, Biggest Drawdown 700 biggest win 2400.
We'll see in may after having been doing this for a year if it was worth it.

Did a directional play in chipotle and got fuxxed, oil stocks also not doing great.

[Anonymous No.1032315]

>>1032311
i started trading for real last april and broke even in early fall. i basically lost only $600 in 3 bad trades

[Anonymous No.1032317]

>>1032311
i'd trade with more but i'm about to buy a house - so this is basically for fun for me

[Anonymous No.1032318]

>>1032312
That's unfortunate man, any beginner tips?

[Anonymous No.1032321]

>>1032317
Why buy a house? Are you settling?
I'd say renting a house would be more financially beneficial if you're not settling yet, you sound young.

[Anonymous No.1032322]

>>1032321
i rent an apartment now but I am going to move to texas and buy a house.

[Anonymous No.1032326]

>>1032321
anyways gotta get back to work - but seriously look into covered calls they require a bit more capital than just buying options spreads but are a lot safer in my experience

[Anonymous No.1032328]

Too much kung-fu for me mates, did you got burned by longs? or didn't find interesting stocks?

[Li_Sheng !n54GAoW8Vs No.1032338]

>>1032318
I went in expecting to lose it all, so far winning.

Duration beats direction when rolling. Take your profits when they appear.

When volatility is low do calendars when volatility is high sell premium.

So far don't bet against amazon,
and believe the buy the rumor sell the news adage.

[Li_Sheng !n54GAoW8Vs No.1032389]

>>1032328
once you learn it bro, its like 6 clicks max per trade instead of your current 2.
The software does all the math for you.

if you want to learn with pictures
Dough.com is your best bet.

[Anonymous No.1033158]

>>1032168
This could have been written better. I get the gist, but it took quite some effort.

[Anonymous No.1033165]

>>1032312
>doing a directional play on CMG
>not realizing it was a bubble that's popping

I mean, c'mon, it was 2015!

[Anonymous No.1033166]

>>1032389
The reason you are getting burned by active trading spreads is because you don't have enough money in your account and you are trading too thin.

$5 wide is the thinnest you should go. Otherwise you can never roll your spreads when you get fucked.

Here is how rolling saves bad trades, you can't do this with narrow spreads. https://www.tastytrade.com/tt/shows/anatomy-of-a-trade/episodes/linkedin-lnkd-07-17-2015

[Anonymous No.1033174]

>>1033158
>This could have been written better. I get the gist, but it took quite some effort.
The person writing it has only six months trading experience. It's like a first grader teaching things to a kindergarten class.

[Anonymous No.1033185]

>>1033174
I meant gramatically more than anything.

>Stock market generally Creeps up but falls down hard. with short puts you keep 85% of the gains up, with short shares you keep 100% of the drop. #FlawlessMathematicalVictory

[Anonymous No.1033210]

>>1030916
Not exactly a buy and a sell. When I was learning options I wanted to keep it that simple, but you have to also keep in mind that you can

Buy and sell puts to open
And
Buy and sell calls to open

Selling a put or call to open is just shorting, and you can use he analogy that you are basically a casino manager who watches your client's money slowly decay away into your pockets.

[Anonymous No.1033212]

>>1033185

blyat

He not only speaks english, he speaks manderian and probably other languages as well.

How is your manderian? Is it better than his English? prick

[Anonymous No.1033214]

>>1032168
>Do you like discounts I like discounts

Nice explanation otherwise, for those of you who want to learn more, watch videos about options trading (esp. statistically). Also look at options percentage charts too as they helped me understand much quicker concepts such as covered calls/puts and butterfly spreads, etc.

[Anonymous No.1033218]

>>1032257
Best thing about options is that you have a variety of spreads to choose from, and in different market conditions different spreads are more effective. So profitability in my opinion is much higher if you educate yourself correctly.

[Anonymous No.1033227]

>>1032168
What are your thoughts on iron condors, nig?

[Anonymous No.1033241]

>>1033212
Why is some chinese guy with six months of trading experience and a poor grasp of english giving people financial advice? Is this bizzaro world?

[Li_Sheng !n54GAoW8Vs No.1033642]

>>1033174
>first grader teaching pre-k
That's all I'm claiming to be, at least in options trading.

>>1030900
The mnemonic that was taught to me, is the phone analogy, when buying options. CALL UP on the Phone, and PUT DOWN the Phone.
on the sell side its the Opposite.

[Anonymous No.1033656]

>>1033241
because "suck dick" ain't financial advice pigfucker.

[Anonymous No.1033677]

Li_Sheng, you seem to have basic grasp of options so far. However, you've gotta understand the greek profiles of your options, otherwise at some point you're gonna get fucked and lose a lot of money when one of your stocks gaps and you couldn't predict it - options create leverage, you have to be careful.

I work on a flow based trading desk in options - the way professional traders at banks / hedge funds will actually use options is to have a volatility view, not so much as a view on the outright direction of the underlying. While this can be different when taking positions on individual stocks as opposed to e.g. FX, it's something to bear in mind.

Also, you said sell premium whenever vol looks high.. trust me markets are very sophisticated and there will be a good reason for this, it could easily be priced in. I've often seen vol prices look very high/expensive across events and the underlying stock/asset still move even more than market, this can happen regularly across large events (e.g. NFPs, rate decisions in the states).

Anyway, if any of you guys like the idea of personal account trading, options could not be a worse place to start unless you really know what you're doing, the same applies to other derivatives (CFDs etc). Start with something simple like buying the actual underlying stocks.

[Anonymous No.1033689]

>>1030637
>what are credit spreads

[Li_Sheng !n54GAoW8Vs No.1033704]

>>1033227
Iron Condors are not my favorite trade.
+1Call
narrow
-1 Call
wide
-1Put
narrow
+1 Put

You can describe it two ways, a selling a Call Spread and selling a Put spread, or a Strangle with a slightly wider straddle.

The risk Reward ratio for this trade is usually 1:4 with around 62-68% probability at 1 std dev.
The wider the space between the short call and short put the greater the probability.

Pros
Delta Neutral
Defined Tail Risk

Cons
Usually pretty slow to collect
Lower Probability than Strangles
4 Legs = Maximum expense per trade

Most of the time a wider strangle is better, they are easier to manage if the trade goes against you, With the Iron Condor you committed to risk mitigation up front, and are pretty much locked in.
Sure you get fucked a little harder sometimes, but recall that hotness and craziness coincide.

For defined risk, Iron butterflies suit me much more.

[Li_Sheng !n54GAoW8Vs No.1033854]

>>1033677
Delta (directional risk) and Theta (premium Decay) I seem to have a good intuitive grasp of. Vega (Volatility risk) I have at least an operational understanding of. Gamma still eludes me as the derivative of delta I can verbalize its meaning as the acceleration of direction. but in practice I can't seem to make decisions on it beyond doing some trades wider and some trades narrower.

Volatility is the leading driver of profit in options selling, Generally, in introductions to people like OP who speak in terms of risk reward you talk in risk reward terms should you try to convert them.
https://www.tastytrade.com/tt/shows/the-skinny-on-options-modeling/episodes/deconstructing-option-prices-to-isolate-volatility-08-05-2015

Sometimes the options are mispriced, Past performance is no guarantee and options are priced on past performance. and you have to be on top of events. That's just the truth. But often even though they blast through, often they return, I forget the rate but it was high, like 75% of the time they'll come back within 90 days.

on personal trading I disagree. equities is one of the last things you do. Trading is serious and it should be treated that way. Options are fairly uniform and do not require much rote memorization, unlike futures. However they very quickly force you to learn the mathematical side of securities trading. Because People and not math are the weakest point in trading it behooves new folks to achieve a firm mathematical foundation upon which to apply their unique personal risk profiles. There is no argument that naked underlyings are simpler. however, in my experience the simple things are uniquely powerful and most often underestimated.
By going full robinhood, you open the door to mysticism, "indicators," and other situational at best voodoo.
Also the Brokers often have checks and balances in place to protect new traders from themselves.
It is a little bit harder to start with options but not much

[Anonymous No.1033904]

>>1033854
I've downloaded all of your drop-downloads. Is this all you've used for autodidacting?

[Anonymous No.1033947]

>>1033677
I actually think options are as realistic as financial markets get and are therefore an ideal starting point.

I agree that too many people ignore greeks but the same exposures exist in equities. Timing risk is commonly cited as a risk stocks don't have but this is feelgood nonsense. "Paper" losses mean net worth hits and a hit to net worth restricts ability to pursue future opportunities. Put another way, volatility drives ability to sell in a timely manner at price paid, which is the definition of liquidity, which people accept as a driver of asset value.

We are all trading vol, all the time. Options make this explicit.

[Anonymous No.1033965]

>>1033854
Delta is directional exposure. Gamma tells you how quickly your directional exposure may change as market conditions change. So a gamma neutral strategy would mean that your delta exposure will remain constant regardless of market conditions, and a strategy that is delta AND gamma neutral would mean your delta=0 even if world war 3 starts tomorrow.

So maybe today your delta looks low and you feel pretty safe, but the underlying gaps overnight and suddenly your delta exposure is massive at market open. Gamma would have warned you that was possible.

[Anonymous No.1034002]

>>1030637

>2016
>Not knowing exactly how your investment is going to turn out before you bet it
>not knowing about risk management
>Not knowing about hedging

In plain language, your portfolio is a collection of risks. puts and calls make it easy to counteract risks (if it goes up, i win, if it goes down, i win)

this is what the wall street magicians are paid to do

[Anonymous No.1034183]

>>1034002
>2016
>believing this
No wonder there's no one wealthy on this board.

[Anonymous No.1034205]

>>1034183
Why.

[Li_Sheng !n54GAoW8Vs No.1034462]

>>1033904
oh god no, these were simply a few mvps and best of the best. I've got TBs of programs, and have sunk about $4k into seminars and Investment clubs.
I just heard this guy and its turning out very well. Basically the anti-Tai Lopez

Dan Pena
thepiratebay (dot) se/torrent/11795112

>>1033965
Thanks for the plain english. I'm going to need a much bigger account if I'm going to make a delta-gamma neutral portfolio that makes money.

>>1034183
You can do the math man. guy's right.

[Anonymous No.1034498]

>>1034462
I'm not surprised you too believe in "wall street magicians" and their mystical options strategies. You've admitted to having less than 6 months trading experience, virtually no capital, and no track record of success.

You apparently read a lot, cut-and-paste a lot, and shill for websites a lot. What I don't see is you making any fucking money.

There is literally no reason for you to give advice to anyone. Anyone who, for even a moment, considered you a source of useful information is a bigger idiot than you. Not that any of this is surprising on 4chan: classic case of the blind leading the blind.

[Anonymous No.1034500]

>>1030637
>not being a scalper

THANKS FOR THE FREE MONEY

LOL

PEASANT FAGGOT.

[Li_Sheng !n54GAoW8Vs No.1034634]

>>1034498
believe in. No I just like the math, and the concept, I'm still testing out its practicality in the real world. I'm no where near confident enough in options trading to call it a belief. I'm just gathering the data, and will evaluate in one full year of trading. Arbitrary but I think it will be sufficient.

Maybe you can post your successes in another thread to guide us mere mortals.

[Anonymous No.1034648]

>>1034634
Don't worry, I contribute my advice quite often. But this isn't a general advice thread; its a thread about options strategies.

I'm glad to hear you don't even try to refute my criticisms. You're a terrible source of advice, but at least you don't actively roleplay. However, you really should include a disclaimer every time you post. Its misleading to give advice when all you do is copy bits and pieces from options shills. You deliberately give the misrepresentation that you yourself are knowledgeable, experienced, and/or successful when in fact you are none of these.

Rest assured, I will remind the good folks of /biz/ of you lack of bone fides every chance possible unless you suddenly discover a conscious and start doing it yourself. You're a fraud and your advice is harmful, no matter how much you pretend otherwise.

[Anonymous No.1034759]

>>1034648
stop trolling, this thread is 100x more useful than typical biz shitposting

[Anonymous No.1034823]

>>1034759
It's sad that all you can do is accuse me of trolling, rather than refute any of the criticisms I've levelled.

There's a word for that: denial.

[Anonymous No.1035057]

>>1034462
Have you thought about joining thevault.bz? I think you'd fit in great.

[Anonymous No.1035217]

>>1033854

> doesn't understand gamma
> trading options for 6 months
> mfw