Author Topic: Do you have the balls?  (Read 18578 times)

PJM

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Re: Do you have the balls?
« Reply #80 on: March 20, 2020, 12:59:29 AM »
I already have ATM calls.  Take for example the $20 strike WFC put, expiring a month from now on April 17th.  The bid is $1.25.

19 months x 1.25 == $23.75.   That's so high you certainly don't need to commit all of the cash to the endeavor.
Am new to options world so just trying to understand it better.

You are assuming that your puts will expire out-of-money, but what if WFC falls to 20 before expiry. In that case will you just take the hit and roll over the options to new OTM put or will you take delivery of WFC. If your puts gets hit 2-3 times over the 19 months period you stand to loose all the money from option writing even if WFC price bounces back.

Also with your ATM LEAPS that you buy, at what point would you roll them over especially if WFC price does not move much or goes down over the next 18 months.

Thanks in advance.


LightWhale

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Re: Do you have the balls?
« Reply #81 on: March 20, 2020, 04:16:12 AM »
This thread is turning into 'Ask Eric! II'  :)  And it's about time.

Kaegi2011

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Re: Do you have the balls?
« Reply #82 on: March 20, 2020, 06:02:38 AM »
I already have ATM calls.  Take for example the $20 strike WFC put, expiring a month from now on April 17th.  The bid is $1.25.

19 months x 1.25 == $23.75.   That's so high you certainly don't need to commit all of the cash to the endeavor.
Am new to options world so just trying to understand it better.

You are assuming that your puts will expire out-of-money, but what if WFC falls to 20 before expiry. In that case will you just take the hit and roll over the options to new OTM put or will you take delivery of WFC. If your puts gets hit 2-3 times over the 19 months period you stand to loose all the money from option writing even if WFC price bounces back.

Also with your ATM LEAPS that you buy, at what point would you roll them over especially if WFC price does not move much or goes down over the next 18 months.

Thanks in advance.

This may be helpful for you to get some background on the strategy.  You kinda have to commit to it a bit (e.g., if the put is in the money, cash settle and write put again at lower strike).  Otherwise you might get bounced around. 

http://www.cboe.com/micro/buywrite/bondarenko-oleg-putwrite-putw-2019.pdf


ERICOPOLY

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Re: Do you have the balls?
« Reply #83 on: March 20, 2020, 07:11:57 AM »
You are assuming that your puts will expire out-of-money, but what if WFC falls to 20 before expiry. In that case will you just take the hit and roll over the options to new OTM put or will you take delivery of WFC. If your puts gets hit 2-3 times over the 19 months period you stand to loose all the money from option writing even if WFC price bounces back.

Also with your ATM LEAPS that you buy, at what point would you roll them over especially if WFC price does not move much or goes down over the next 18 months.

Thanks in advance.

I see two distinct questions here that you are asking:

#1.  I will hold WFC at least until it is at $60 or $70 if I get 'put' the shares at $20.

#2.  After January, the 2023 series will be available.  I can't roll anything until after that time, but I won't be waiting for the last month to do so.  A few months before expiry there will still be a good amount of volatility premium. 

I probably didn't need to buy 2 yr leaps at-the-money LEAPS, given my liquidity.  I could have and perhaps should have waited for a less volatile time to roll them, or waited for price dislocations and rolled them when they were not at-the-money.  Oh well.  Or maybe I made the correct choice in paying $5.65 a share for the $27.50 calls.  I thought they were not too expensive, all things considered.

« Last Edit: March 20, 2020, 07:15:45 AM by ERICOPOLY »

stahleyp

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Re: Do you have the balls?
« Reply #84 on: March 20, 2020, 01:05:52 PM »
Sold most of what I had purchased over the last couple of days thanks to Eric and muscle. If the ballsiest investor I've ever known has so much cash, I might be missing something. I've been adding calls. Some lady at my wife's work just came down with this...so yeah. They still don't have enough masks for people.
« Last Edit: March 20, 2020, 01:08:11 PM by stahleyp »
Paul

ERICOPOLY

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Re: Do you have the balls?
« Reply #85 on: March 21, 2020, 07:37:29 AM »
Sold most of what I had purchased over the last couple of days thanks to Eric and muscle. If the ballsiest investor I've ever known has so much cash, I might be missing something. I've been adding calls. Some lady at my wife's work just came down with this...so yeah. They still don't have enough masks for people.

I am down quite a bit, but my goal is to be able to afford more shares than I could afford back when the year began (and I was counting the Dhandho investment in that figure).

Right now, I can afford that many shares with my incoming cash + my accounts present vale (without counting the Dhandho investment).

So I feel like I'm kicking ass right now despite being down by a lot.

Whether I include or not include the Dhandho has infected my thinking to some degree, but I kind of think of that as in liquidation (because it is).  I was offered the opportunity to cash out completely earlier this year, but I turned it down because I want the share of the fund manager.  Mohnish is incredible at talking the panties off of ladies (I mean, raising cash from investors).  Perhaps he is great at the ladies too, but I cannot confirm that.  I want a share of that future income, whatever it may be.

Mephistopheles

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Re: Do you have the balls?
« Reply #86 on: March 21, 2020, 10:53:06 AM »
Eric,

Glad that you have resurfaced. I feel nostalgia for 2011 BAC-WTA days.

A few questions:

1. What is your opinion on buying ATM WFC calls vs. buying WFC equity on margin + puts?

2. Why at the money calls vs. in the money or out of the money?

Thanks

I have bought up a mixed bag of atm, in the money, out of the money calls on BAC, WFC, USB, BRK

ERICOPOLY

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Re: Do you have the balls?
« Reply #87 on: March 22, 2020, 12:45:34 AM »
Eric,

Glad that you have resurfaced. I feel nostalgia for 2011 BAC-WTA days.

A few questions:

1. What is your opinion on buying ATM WFC calls vs. buying WFC equity on margin + puts?

2. Why at the money calls vs. in the money or out of the money?

Thanks

I have bought up a mixed bag of atm, in the money, out of the money calls on BAC, WFC, USB, BRK


1.  No affinity -- I only have one account to trade in now, my Roth IRA, so margin+puts isn't a possibility for me
2.  When it was near $48 I bought $47.50 strike calls.  Near $40 I bought $40 strike calls.  Near $27.50 I bought $27.50 strike calls.  Intend to hold them all, and I intend to buy more for certain if there is a further drop.

Along the way I had some shorter term in-the-money $30 strike calls, but traded out of them (at a loss) when I could sell the volatility at-the-money (softened the loss I took).





plato1976

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Re: Do you have the balls?
« Reply #88 on: March 22, 2020, 11:15:31 AM »
June 18, 2021 @27.5 call is 4.15/5.20 bid/ask
Jan 21, 2022 @27.5 call is 4.95/5.65 bid/ask
feels the call will be much cheaper (less premium) when vol goes down, but we can say wfc may rebound a lot when volatility goes down from this level


Eric,

Glad that you have resurfaced. I feel nostalgia for 2011 BAC-WTA days.

A few questions:

1. What is your opinion on buying ATM WFC calls vs. buying WFC equity on margin + puts?

2. Why at the money calls vs. in the money or out of the money?

Thanks

I have bought up a mixed bag of atm, in the money, out of the money calls on BAC, WFC, USB, BRK


1.  No affinity -- I only have one account to trade in now, my Roth IRA, so margin+puts isn't a possibility for me
2.  When it was near $48 I bought $47.50 strike calls.  Near $40 I bought $40 strike calls.  Near $27.50 I bought $27.50 strike calls.  Intend to hold them all, and I intend to buy more for certain if there is a further drop.

Along the way I had some shorter term in-the-money $30 strike calls, but traded out of them (at a loss) when I could sell the volatility at-the-money (softened the loss I took).

ERICOPOLY

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Re: Do you have the balls?
« Reply #89 on: March 22, 2020, 02:15:43 PM »
June 18, 2021 @27.5 call is 4.15/5.20 bid/ask
Jan 21, 2022 @27.5 call is 4.95/5.65 bid/ask
feels the call will be much cheaper (less premium) when vol goes down, but we can say wfc may rebound a lot when volatility goes down from this level

Agreed.  I feel they are worth their price.