If that's maximum pain, well now you know what's going to happen.
The market knows how to inflict maximum pain.
Haha, oh I know, I know.
That's why I'm only doing a single contract!
Just sold 1 AMZN October 21, 2022 put 109 strike price
- Thread starter SoyUnGanador
- Start date
Haha, oh I know, I know.
That's why I'm only doing a single contract!Now, this is a case where the knowledge of technical analysis (with trend analysis) would have helped you instead, of hurt you. Guessing stockmarket direction and thinking you are going to make easy money selling put options is foolish at best? Time decay usually, helps the options seller. However, in this case, the trend is clearly down and chances favor the put buyer. If AMZN really tanks and drops like a rock in the 6 trading days left, the put buyer is going to make good monies. Soy will be losing his monies. Only question is how much?
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I have done covered trades for many years. The only thing to be aware about this strategy is that it is a wash sales if you take the assignment and sell it with 30 days. The broker recorded over $30k wash sales on my tax form and I was pissed.
Oh wow. So when the stock didn't drop you had to report all your premium collections as income/gains, but you could not offset it with your losses from when it did drop based on the wash sale rules? Bummer. Flick the government!!!
Thanks!
Did you miss the fact that you'd have to buy 100 shares, not 1? It's not a "$109 investment" - it's $10,601 worth of notional exposure.
This is AMZN just today. Hopefully, this'll make you realize why you're getting paid that kind of premium on it.
"Did you miss the fact that you'd have to buy 100 shares, not 1? It's not a "$109 investment" - it's $10,601 worth of notional exposure."
Wait, what?
Wait, what?
Shame on you for injecting reality into this fantasy thread.
I know; there's this spot of dark evil in my heart, and it just takes over once in a while. I can't help it... at least that's what I told the judge at my last hearing.
Jeez, ya help old ladies across the street and don't stomp on other people's flower beds any more than you can help it all your life... but throw just a couple of bodies in a woodchipper, and they get all excited and call you nasty names. People are strange, y'know?
I sure hope you're not just trolling here. But on the other hand, if you're serious... you're in for a bit of a surprise.
This is why 2.99 is actually $299 in premium - because it's per share. Each standard option has 100 shares underlying it. So, selling the 109 strike means you'll have to pay $10,900 if you're assigned.
If AMZN expires at, say, 100, you will be assigned/made long 100 shares for a total value of $10,000 plus your $299 premium, and $10,900 will be taken from your cash. Your total P&L at that point would be 10000+299-10900, or $601 in the red. You'll also be long a stock in which you were wrong, and which is heading in a direction that implies more losses for you.
I would suggest firmly sitting on your hands and not touching options - or really, any kind of trading - until you learn these basics.