Buying Naked Calls

destriero said:
I replied to @raVar’s post #20 because it is so woefully misguided but then deleted it as it would cause severe cramps for many people here. Suffice it to say that he is dangerously clueless.

So much wrong with the following that it’s comical:

raVar wrote,

"Buy the calls, six to eight months in the future, with strikes three to four deep ITM. That way, if I'm right? Then hopefully the falling IV will help me enough to overcome some of the other math, and my delta's will thus improve with the passing of time (though time is working against me). BUT IF I'm right, then that might be the best way to go. Mathematically speaking. Six to Eight Months in the future ... 4 or 5 strikes deep in the money."


But he is trying to help, right?
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The GOOGL Jun20 1290C is 114 mid. The 1290P is 80 mid. The Mar20 1260C is 103 mid.

OK, so let's stress the hold of an 8mo call for 100 days.

Shares rally 30 points over three months (held) and vol (and skew) are unch.

On FebEx the Jun20 1290 call will be trading at 103 mid (unch vol/skew) using current curves.

Buy the calls, six to eight months in the future, with strikes three to four deep ITM. That way, if I'm right? Then hopefully the falling IV will help me enough to overcome some of the other math, and my delta's will thus improve with the passing of time (though time is working against me). BUT IF I'm right, then that might be the best way to go. Mathematically speaking. Six to Eight Months in the future ... 4 or 5 strikes deep in the money.

In no way does a falling IV benefit the position. Period. The increase in the gamma position is artifact of a falling IV and the passage of time. Delta is delimited(bounded) to a hundo--hence your gamma drops on price and rallies on time. You're only benefitting from delta and a rise in the vol-line from strips or skew, or both.

A drop in IV is bad. An increase in gamma means you're losing on vol, wrong on price or you've held it for an extended period. If shares rally your gamma will decrease. Duh. IV good. Gamma (increasing), for you, bad.

VOL-RISK: Think of time as synthetic vol. As time passes the position loses to theta or the vol-line must increase. I cannot predict what will happen to the vol-line other than to say it would be advantageous to sell the call a week or two before an earnings release.

@raVar, you don't know anything about vol. Worse, you f*cked it sideways. Up is down for you.
 
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He said he is bullish. He said he expects upside 5-10% in the next 100 days. Seems like should just long the stock or synth long stock than buy deep ITM call.. no?
 
Real Money said:
He said he is bullish. He said he expects upside 5-10% in the next 100 days. Seems like should just long the stock or synth long stock than buy deep ITM call.. no?
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Why synthetic long shares in lieu of natural shares? He needs the reduction in req.
 
Hey des, I'm just confused about the advantages of long ITM call few months out.

Any comment on any of this?

raVar said:

I'd buy calls on the SPY, out six to eight months in the future ... with strikes three or four deep ITM....that's probably the best way to approach it on the put side too.

Now if you're WRONG?

You didn't have as much tied up in going farther in the money.

But you can't hold them for the full six to seven months, or the theta is going to bleed out, and drain the worth of your option. You may want to look at options that are a year or two away, if your periodicity is six months.
 
Real Money said:
Hey des, I'm just confused about the advantages of long ITM call few months out.

Any comment on any of this?

raVar said:

I'd buy calls on the SPY, out six to eight months in the future ... with strikes three or four deep ITM....that's probably the best way to approach it on the put side too.

Now if you're WRONG?

You didn't have as much tied up in going farther in the money.

But you can't hold them for the full six to seven months, or the theta is going to bleed out, and drain the worth of your option. You may want to look at options that are a year or two away, if your periodicity is six months.
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He's arguing for options as a proxy. That's fine. He's arguing for a massive bet on vol without knowing it. Buy a 2Y call. Shares rally 10 and the vol-line drops from 23 to 22. He's just lost $400.

There is nothing worse (in forums) than these Dunning Kruger types. Borderline sociopath. Nobody can have a deeper understanding than a hick that read a blog post on options.
 
There are four basic contributor profiles on here:

1. railbird: just wants to watch the shit show.
2. ego case/flexer: self-explanatory.
3. spitballer: genuine interest in discussing topics for angles, etc.
4. stealth vendor: net loser over the years. Just looking for the one managed account.
4a. Dunning Kruger stealth vendor: dangerous subset. @raVar
4b. NA.
 
Before you get involved in the more advanced nuances of options,you need to answer a couple of questions or should I say have the answers:)

Is 5-10 percent your target and you are out?

If its up 5 -10% are you going to trade with a trailing stop?

Are you punting,i.e. you place the trade and walk away,or will you stop yourself out ?

If you are trading with a stop,will it be based on the stock price or option price?

You are getting a bit ahead of yourself with the other stuff,and its really not complicated..





Bushwacked9 said:
I am curious how far ITM y'all would go? If you have a stock with a solid upward trend and news is all positive so there a solid chance it will still Gain another 5-10% for example in the next couple months.

Do you go more off entry Price and what % that possible loss is to your overall account?

Do you have certain stocks you always follow for this type of option?

Do you base it more on RSI below 30 on a 90,120,180 day RSI trend?

Sorry for the basic stuff... Just starting to play with some strategies here on my paper money account to see if I can come up with my own tweaked strategy
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