Author Topic: Options insanity - stupid "rich" skew in Apple and others  (Read 2285 times)

aws

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Re: Options insanity - stupid "rich" skew in Apple and others
« Reply #10 on: September 03, 2020, 11:22:07 AM »
And now we are starting to see the vicious side of that virtuous cycle as dealers sell off their hedges, more people buy puts to balance the put/call ratios, and IV increases makes it more expensive to chase the stocks up further.  The past few days like this such as June 11th and July 23rd turned out just to be blips with stocks continuing on to even higher levels within a couple of weeks.  Who knows if this is the start of a real change, but it was interesting to note that the vix level at the close yesterday was the highest it has ever been at an all time high close for the overall market... the second highest such close was in March 2000.


Castanza

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Re: Options insanity - stupid "rich" skew in Apple and others
« Reply #11 on: September 03, 2020, 11:34:32 AM »
I bought a handful of AMD 11/20 $80 strike puts yesterday. Up 46% right now  :o
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aws

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Re: Options insanity - stupid "rich" skew in Apple and others
« Reply #12 on: September 03, 2020, 01:41:51 PM »
If you bought any decently long-term options last week you might have made money whether you bought puts or calls. 

Those $800 TSLA calls I mentioned in the first post traded at a split-adjusted price of 18 when the stock was at 442.  Today it's 26 with the stock at 407 - so nearly a 50% gain over a week with the stock down 8%.  $350 puts for the same date were 43 last Friday and 63 today.  So those are up about 50% as well.  Guess I should have bought straddles and made money or both sides.

Gregmal

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Re: Options insanity - stupid "rich" skew in Apple and others
« Reply #13 on: September 03, 2020, 04:20:46 PM »
With put options being so cheap, you could sell 1 ATM put and buy ~2 OTM puts with the proceeds. Get 2x the downside protection with no cash outlay.

For example, selling Dec 135 Puts for  $13.93 (mid price) and buy 2 Dec $117.5 Puts for $6.58 (mid price).

You net $77 on the transaction and will profit at prices 13% below today's price. If it keeps going higher, you lose nothing (rather gain $77) and if it drops more than 13% you have the 2x the put protection.

Worst case scenario is that AAPL only falls to $118 leaving you ~$1,700 bucks - but if it falls, I think it's likely to fall more than 10% just given the size of the rally preceding that and it's current 41x P/E.

+1 on this. This got me thinking a bit and I put on a similar but slightly different trade in AAPL and a few other names. Thanks for the unique idea.

TwoCitiesCapital

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Re: Options insanity - stupid "rich" skew in Apple and others
« Reply #14 on: September 04, 2020, 01:27:43 PM »
With put options being so cheap, you could sell 1 ATM put and buy ~2 OTM puts with the proceeds. Get 2x the downside protection with no cash outlay.

For example, selling Dec 135 Puts for  $13.93 (mid price) and buy 2 Dec $117.5 Puts for $6.58 (mid price).

You net $77 on the transaction and will profit at prices 13% below today's price. If it keeps going higher, you lose nothing (rather gain $77) and if it drops more than 13% you have the 2x the put protection.

Worst case scenario is that AAPL only falls to $118 leaving you ~$1,700 bucks - but if it falls, I think it's likely to fall more than 10% just given the size of the rally preceding that and it's current 41x P/E.

+1 on this. This got me thinking a bit and I put on a similar but slightly different trade in AAPL and a few other names. Thanks for the unique idea.

Glad it helped!

I also put on a very similar trade the one described above the morning after posting. We'll see how it turns out!

UK

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Re: Options insanity - stupid "rich" skew in Apple and others
« Reply #15 on: September 04, 2020, 09:11:50 PM »
https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2

SoftBank is the “Nasdaq whale” that has bought billions of dollars’ worth of US equity derivatives in a series of trades that stoked the fevered rally in big tech stocks before a sharp pullback on Thursday and Friday, according to people familiar with the matter.

Spekulatius

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Re: Options insanity - stupid "rich" skew in Apple and others
« Reply #16 on: September 05, 2020, 11:34:27 AM »
https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2

SoftBank is the “Nasdaq whale” that has bought billions of dollars’ worth of US equity derivatives in a series of trades that stoked the fevered rally in big tech stocks before a sharp pullback on Thursday and Friday, according to people familiar with the matter.
Weren‘t  these calls just bought from huge gains from recent trades/sales they did? Maybe they still work out if they are long dated. If SoftBank indeed can unload ARM Holdings, which seems to be a total dog (based on lack of revenue growth and profits since acquired) then they really did hit some jackpots, while also getting good value out their dogs (Sprint, ARM Holdings) except maybe Wework. For a venture fund , that’s actually a pretty good outcome.
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