re: Options Trading Thread

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For example.. if a random UVXY call buyer elected to exercise early, could it so happen be that his were the specific securities you sold the market? I’m not sure if this makes sense

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Yes, the question makes sense. Basically any long holder, not just the one you sold your option to (as he may have already “sold to close” his position before it went in the money), may elect to exercise any American-style option prior to expiration if it’s in the money. And at expiration, most brokerages will automatically exercise an assignment of the option if it’s $.01 in the money.

Although several years ago, I had sold short some Apple puts, and even though the stock was something like .15 ITM (best I can remember), I didn’t get assigned shares. I would have been OK with that assignment, because a couple of hours after the close, the stock popped .50 or so back OTM. But normally, something like that doesn’t happen and there would have been an assignment.

As a side note, there are options traders who employ short options strategies (planning on executing an ITM assignment) to capture dividends. It’s not something that I’ve ever done, but both Tom Sosnoff and Kirk Du Plessis have spoken about the strategy before. It’s a more sophisticated and less capital intensive way of capturing divs than just buying an equity and hoping that it recovers to your purchase price after the ex-div date passes.

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I’m interested in learning about options trading. I know almost nothing now but I’ve read that covered calls of stocks you already own are a good place to start.

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I think the first thing you’d want to ask yourself is what type of investor are you and what are your goals? As you’re getting approved for different levels of options trading, those types of questions will be in the questionnaire or asked by a brokerage rep. So if you’re a conservative investor with a primary goal of capital preservation, you’ll likely only be approved at the base or Level 1: Covered Calls & Cash-Secured Puts.

Most people do start out by writing covered calls, then on to cash secured puts. Those trades only require a basic approval designation and you wouldn’t necessarily have to have margin approval (as you can even write those contracts in a tax advantaged account).

Different brokerages have different terminologies and standards. But Level 2 is typically what’s needed to buy or go long options.

What I would suggest is that you read, read and then read some more (legit YouTube sources like TastyTrade and Options Alpha are also good). Then paper trade to learn the mechanics of entering and exiting trades. People who suggest that you should just jump in and give it a whirl are leading you to an accident on the highway.

I don’t paint myself as a know it all expert by any stretch. But I’m a full time index options trader now, though on occasion I still trade small lots of equity options in a non-business account. I’m not an advisor, but I, along with the other folks here, would be happy to help you on your journey however we can.

Thanks for the thorough response. I signed up for a TastyLive account (new name for TastyTrade education site) and bought some Audible books. Looking forward to learning more. I have a background in statistics and probability analysis so I think this type of trading is interesting.

Do you keep everything cash secured?

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Do you keep everything cash secured?

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Only in tax advantaged accounts, because I have to. Otherwise, no. In my non-business trading account, if I’m trading equity options, I tend to favor strangles and jade lizards.

Kirk doesn’t seem to be updating his podcast these days. But you’ll still get a huge amount of information and knowledge from his older episodes. Additionally, he has (had?) been good about answering basic questions by email. Nice guy too.

He’s also a UVA Wahoo, so I’d be hard pressed to say anything bad about him.

In today’s action, I’ve got several lots of 0DTE SPX iron condors/synthetic strangles. Short options at 5105C(alls)/4955P(uts).

As I structured these this morning, I legged in and launched the call spreads first. By the technicals, I saw more risk to the downside than a melt-up to the upside. So as the market began to lose steam, I then put on the put side, tagging S&P 5000 to have meaningful support by the close. We’ll see if that read was accurate.

Me. And my calls are printing like Jpows money printer.

inb4 “lucky call on Israeli war news”. We wouldn’t be reacting this way if volatility hadn’t been at such compressed levels for so long. Tomorrow is monthly opex and yesterday was vixperiation so tomorrow should be spicy. Hopefully big dump off open then bounce.

Ok..... 0DTE.... what are you thinking guys?

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Ok..... 0DTE.... what are you thinking guys?

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That pop in the VIX certainly raised the “wage rate” for us premium sellers today.

So yes, in my business account I put on a decent sized 0DTE far OTM/5delta short put spread position on SPX earlier in the afternoon. I had to be away from my screens until about 3PM and I didn’t want any dramatic surprises. As the S&P bounced off 4950, they turned to dust by 3:15 or so.

In my investment account, I had a couple of small lots of 4/19 cash covered puts on AXP at 205 and 210 strike, MO at 40 and WHR (became the proud owner of WHR @ 105 strike) and some 19 strike covered calls on KMI. I’ll likely do several earnings trades in the investment account during earnings season, but not so much that it distracts me from my actual “job” of trading.

Very good week. Hopefully vol will hold this range (or go higher) and I can make up for the low vol days this year.