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Thread: So Ya Wanna Know About Options - Compound Strategies (Part 3)

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    Default So Ya Wanna Know About Options - Compound Strategies (Part 3)

    So @ee2k calls me a retard and @riander5 thinks I poach everything from investopedia. You guys ain't smrter than me - I read the Calgary Sun! The truth is that I only poach the graphs from that site. I will knock it off. Henceforth, ALL illustrations will be done on MS Paint.

    In the least pissy manner, I will explain some compound strategies. We're basically using multiple options to build a strategy to fit a desired risk-return profile.

    We'll start with SPREADS.
    VERTICAL SPREAD : 2 similar options with different strike prices, same expiry date
    HORIZONTAL SPREAD : 2 similar options with the same strike price, but different expiry dates
    DIAGONAL SPREAD: 2 similar options with different strike prices AND different expiry dates

    A common vertical spread is the BULL CALL. This is structured by a LONG CALL at a lower strike price + a SHORT CALL at a higher strike price. You do this because you think the stonk will appreciate higher than the lower strike price, but not the higher strike price - so you use the premium from the higher strike price to lower your breakeven cost. This is an over simplification unless you are super smart option experts like @ee2k and @riander5 . A reminder - I'm just a pot hole spottin' janitor.

    For example: PLTR JAN 21 25/35 BULL CALL is asked at $3.30.

    999.jpg

    You are buying a $25 CALL for $8.30 and selling a $30 CALL at $5.00. The payoff diagram looks like this. Please refer to @ee2k and @riander5 if you have any questions.

    afdsdfa.jpg

    A HORIZONTAL SPREAD is also referred to as a Calendar Spread. This is less common and you do this when you have an option on the date and want to reduce your capital at risk.

    For Example: PLTR Dec/Jan 25 CALENDAR CALL is offered at $1.70

    888.jpg

    You are buying a Jan 15, 2021 $25 CALL at $8.30 while selling a Dec 18, 2020 $25 CALL at $6.60. You do this when you believe that the stonk will reach $25 in January, but not in Dec. Rather than a capital outlay of $8.30, you are spending $1.70.


    The payoff diagram looks like this.

    dasfds.jpg

    A DIAGONAL SPREAD combines the two of spreads above, representing all kinds of fuggery. I actually find this useful if you have a good idea of what you want to accomplish.

    For Example: PLTR JAN/DEC $25/$30 DIAGONAL goes for $3.60.

    777.jpg

    This is a purchase of a Jan 21 $25 CALL at $8.30 while selling a Dec 18 $30 CALL at $4.70. You do this when you think that a stonk will appreciate at a lower strike in Jan over a higher strike in Dec.

    All of these are reversible and highly modifiable. Using puts instead of calls, reversing the dates for different exposures, etc.

    Once again, these are over simplifications because that's all my tardy brain holds for today. Kindly contact @ee2k and @riander5 for more in-depth explanations.
    Last edited by The_Rural_Juror; 11-26-2020 at 07:35 PM.
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    Beyond, bunch of creme puffs on this board.
    Everything I say is satire.

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    Payoff for the Diagonal.

    666.jpg
    Quote Originally Posted by 89coupe View Post
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    Beyond, bunch of creme puffs on this board.
    Everything I say is satire.

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    I don't know what's going on but I support it 100%.
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    Quote Originally Posted by SKR View Post
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    I don't know what's going on but I support it 100%.
    I didn't know what was going on before this round of not knowing what's going on started. It's some kind of inception bullshit, but I'm clearly too simple to get it.
    Quote Originally Posted by Tik-Tok View Post
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    I'd be lying if I said I didn't disagree.
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    His name isn't NICEramos.

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    Quote Originally Posted by ExtraSlow View Post
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    I didn't know what was going on before this round of not knowing what's going on started. It's some kind of inception bullshit, but I'm clearly too simple to get it.
    Rural Juror is a smart feller and we're a couple of fart smellers.
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    I just want someone to e-transfer me $50 to buy a bootleg second run keychain.
    Last edited by The_Rural_Juror; 11-26-2020 at 07:33 PM.
    Quote Originally Posted by 89coupe View Post
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    Beyond, bunch of creme puffs on this board.
    Everything I say is satire.

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    Lol, call out justified. I mean it's nice what you're doing and all just struck me as odd and a shitload of work. The only way to learn options is to start trading em tbh, but nice to have a primer.

    And honestly none of the option education matters unless you have an edge.. aka technical trading, trend trading, some fundamental advantage. If you trade an option just because you think the stocks going up eventually, you have 2 out of 3 variables working against you....

    Edit - Unless you do one of the more complicated spreads, but then you're betting its going to end up in a certain price zone at a certain time, even more of a needle in the haystack.

    In reality, just buy QQQ calls a month out every time it touches its 20 SMA, you'll be living in Aspen in no time

    Tried to rep you for the apt call out but apparently I have done it too recently
    Last edited by riander5; 11-26-2020 at 08:24 PM.

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    So...no more MS Paint?

    IMHO...technical analysis is neckbeard virgin bullshit. Quantitative analysis does a whole lot better but that is for another thread.
    Also...I'm just kidding around.
    Quote Originally Posted by 89coupe View Post
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    Beyond, bunch of creme puffs on this board.
    Everything I say is satire.

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    Quote Originally Posted by SKR View Post
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    I don't know what's going on but I support it 100%.
    pretty much. this guy is GTSJeff2.0 lol

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    Quote Originally Posted by The_Rural_Juror View Post
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    So...no more MS Paint?

    IMHO...technical analysis is neckbeard virgin bullshit. Quantitative analysis does a whole lot better but that is for another thread.
    Also...I'm just kidding around.
    I subscribe to “FDScanner” scrubs some data, puts it into simple metrics... fun stuff. Few different things they do but my favourite screen is probably this one, this is what’s used with their other calculations to figure out which strikes for which stocks yield the best chances of hitting a big return:

    DC4CEFEB-146C-4DAF-BE60-58CBDD7A8DFD.jpg

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    in conclusion options is the adult version of over/under bets

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    Quote Originally Posted by max_boost View Post
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    pretty much. this guy is GTSJeff2.0 lol
    It is obvious that I am GTSJeff, B18C, and VWEvo's alt because dentists can't leave an online trail. But they can leave a trail in your mouth when you are sedated.
    Last edited by The_Rural_Juror; 11-26-2020 at 10:15 PM.
    Quote Originally Posted by 89coupe View Post
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    Beyond, bunch of creme puffs on this board.
    Everything I say is satire.

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    Quote Originally Posted by The_Rural_Juror View Post
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    It is obvious that I am GTSJeff, B18C, and VWEvo's alt because dentists can't leave an online trail.
    Pfff... they get wholesale on oral B!

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    Quote Originally Posted by ercchry View Post
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    I subscribe to “FDScanner” scrubs some data, puts it into simple metrics... fun stuff. Few different things they do but my favourite screen is probably this one, this is what’s used with their other calculations to figure out which strikes for which stocks yield the best chances of hitting a big return:

    DC4CEFEB-146C-4DAF-BE60-58CBDD7A8DFD.jpg
    Thats an interesting tool. Can we see what you were looking at on Patreon too?

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    Quote Originally Posted by ercchry View Post
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    Pfff... they get wholesale on oral B!

    Rurjur just wholesales oral

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    Quote Originally Posted by riander5 View Post
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    Thats an interesting tool. Can we see what you were looking at on Patreon too?
    That’s the login... think he has changed it since then though. Also has a momentum tracker too which is neat

    Edit:

    Another fun one:

    3B579262-BA3D-4C2C-A5B4-CA209A74481B.jpg
    Last edited by ercchry; 11-26-2020 at 10:22 PM.

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    Quote Originally Posted by ercchry View Post
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    That’s the login... think he has changed it since then though. Also has a momentum tracker too which is neat

    Edit:

    Another fun one:
    I wish i could see the time of day these transacted, or if the majority of them transacted at X time

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