Options payout during bankruptcy

[long]

Whatever it is he should just dump it now and let someone else worry about a stock going bankrupt. Dump it and buy some way out of the money puts to get his gambling fix for the month.

 

[wxytrader]

If you think the company is in good health, then WHY are you buying puts thinking they will go bankrupt and you will lose all your $10K position? LOL

https://www.investopedia.com/terms/p/protective-put.asp#:~:text=A protective put is a,a fee, called a premium.

You contradict yourself. If you think the company is in good health, then WHY are you buying puts thinking they will go bankrupt and you will lose all your $10K position? LOL Anyway it's meaningless to say whether you will be completely hedged or not without knowing the purchase price of your long position. You don't hedge the long position on the shares on the whole, you do it leg by leg. You don't say oh my whole position is $X amount, so all I have to do to hedge against it is to buy the same $X amount in options. That's not how it works. So unless you bought your shares at $7 (still don't understand why you need to keep your purchase price of the undie as a secret unless you never bought the security and this is just a theorizing exercise), exactly the strike of the put, your puts won't protect your longs unless the undie really falls to below $7, that's what I am trying to tell you.

You need to read the Investopedia articles that I gave you to learn about puts specifically. And actually you need to read all of the Investopedia articles on options starting from the basic, to learn about what they are, how they are priced, how they work before you trade in them.

I already posted my position lol. ??

And again, you are still not understanding what is being discussed. If I thought GME was going bankrupt then why am I not selling my shares and shorting it? lol

There is no point delta hedging, or delta zero or position delta or whatever traders do to manage their own incompetence, because the put options are being held until expiry so everything will be intrinsic value.

No, no posting of his actual positions, stocks or options. I don't think he's in any GME positions tbh. He's just theorizing atm I think. He has no idea how puts work and how they are priced. He thinks GME is going bankrupt by October of this year and that's why the puts are so cheap. and all he needs are puts so OTM to protect his long positions in the undie which he refuses to share any details except it's $10K in total book value.

Anyway he will learn.

Do you not understand what a going concern means in accounting? I said the opposite of what you think I said.

What Is Going Concern? Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary. This term also refers to a company's ability to make enough money to stay afloat or to avoid bankruptcy.

This is interesting because clearly GME is a going concern at this point due to how cheap these puts are. Put prices are basically a barometer of a companies health more so than any financial report. I would assume prices would jump up prior to any bad news being released.

Whatever it is he should just dump it now and let someone else worry about a stock going bankrupt. Dump it and buy some way out of the money puts to get his gambling fix for the month.

Why do you guys think this is a bankruptcy play???? It's a bankruptcy HEDGE! lol



Here maybe you all should read this:

 

[long]

If there is a conceivable possibility for bankruptcy why would you buy the stock? Just buy cheap OTM puts. I mean if bankruptcy is on the table then upside is limited. If it’s not a possibility the puts are a waste of money.

 

[Overnight]

I don't think you understand what is being discussed. I have a long stock position that has a book value of 10k. If GME goes bk then I lose the whole 10k. So I was looking into hedging by buying OCT18 $7 strike puts for .30.

The cost of buying 15 contracts is $450. Should GME not go bk by then, I lose $450. If they do go bk, then my stock position is worthless, and the put options will be worth about $7 (intrinsic value) each or about $10,500 total.
(or I could exercise 5 contracts to cover the 500 shares that I own @ $7, for $3500, and then sell the remaining 10 put contracts for $7000=$10500)

A going concern means the company is in good financial health, so having cheap bk puts would indicate that the market agrees that GME is healthy financially...at least enough to stave off bk by October.

Going concern is an accounting term for a
company that is financially stable enough to meet its obligations and continue its business for the foreseeable future.

I don't understand options, but even I understand that description.

 

[wxytrader]

If there is a conceivable possibility for bankruptcy why would you buy the stock? Just buy cheap OTM puts. I mean if bankruptcy is on the table then upside is limited. If it’s not a possibility the puts are a waste of money.

I thought we already came to this conclusion. If puts are so cheap then clearly the market doesn't think bankruptcy by October is possible...at this time I don't see any reason to hedge.

 

[long]

I thought we already came to this conclusion. If puts are so cheap then clearly the market doesn't think bankruptcy by October is possible...at this time I don't see any reason to hedge.

The puts cost $450? That’s 5% of the value of your position instantly lost. What’s your current profit on the position? That makes a huge difference when calculating how much the puts are costing you. If you forked out 9k for the initial position your current return is 10%. The puts would instantly drop that to 5%. You’d probably be better off buying VOO and keeping a full time job to keep adding to that. If you really think there is a high chance of bankruptcy you should dump it and search for better prospects. The best way to lock in current gains is to just take your profit and run. Search for other opportunities. In the equities world I haven’t found a reason to hedge.

You last statement implies the chance of bankruptcy is low. So your considering giving up gains for a lottery ticket?

 

[wxytrader]

The puts cost $450? That’s 5% of the value of your position instantly lost. What’s your current profit on the position? That makes a huge difference when calculating how much the puts are costing you. If you forked out 9k for the initial position your current return is 10%. The puts would instantly drop that to 5%. You’d probably be better off buying VOO and keeping a full time job to keep adding to that. If you really think there is a high chance of bankruptcy you should dump it and search for better prospects. The best way to lock in current gains is to just take your profit and run. Search for other opportunities. In the equities world I haven’t found a reason to hedge.

You last statement implies the chance of bankruptcy is low. So your considering giving up gains for a lottery ticket?

It's $450 for 6 months lol. You think I'm trading GME to make 10%? I think in terms of 10 baggers not 10%...thus the (2008) Lambo

 

[long]

It's $450 for 6 months lol. You think I'm trading GME to make 10%? I think in terms of 10 baggers not 10%...thus the (2008) Lambo

Without knowing the initial cost of your current position we can’t know how much of your current profit you’re giving up. If you’re confident it’s a moon shot you could sell out now and buy back in when it’s 450$ higher and be in the same position as buying the puts. I’d run a close stop and get back in on a break after it’s triggered. The problem with this thread is you won’t provide the details of your position. You’re just trying to steer us to your chosen answer. You can’t get a complete answer when you withhold several key variables.

 

[wxytrader]

Without knowing the initial cost of your current position we can’t know how much of your current profit you’re giving up. If you’re confident it’s a moon shot you could sell out now and buy back in when it’s 450$ higher and be in the same position as buying the puts. I’d run a close stop and get back in on a break after it’s triggered. The problem with this thread is you won’t provide the details of your position. You’re just trying to steer us to your chosen answer. You can’t get a complete answer when you withhold several key variables.

Why are you guys obsessed with how much profits you are giving up all the time? I don't buy anything that doesn't have 10x potential, and I don't use stops. It's either profits or bk. Those are the two possible outcomes. $450 would be a drop in the bucket to hedge a 10k position for 6 months.

Also, profiting $450 does not put me in the same position as buying $450 worth of puts...if it goes bk the $450 I made isn't going to help much is it?

 

[TheDawn]

Why are you guys obsessed with how much profits you are giving up all the time? I don't buy anything that doesn't have 10x potential, and I don't use stops. It's either profits or bk. Those are the two possible outcomes. $450 would be a drop in the bucket to hedge a 10k position for 6 months.

Also, profiting $450 does not put me in the same position as buying $450 worth of puts...if it goes bk the $450 I made isn't going to help much is it?

Ok so you just want to make sure you don't lose everything when and should the company goes tits up, anything less than that, you don't give a shit cuz that's incompetence and you don't believe in delta-hedging against that. You can lose $9K, $8K in addition to the $450 option cost (btw when the company goes bankrupt, you are not gaining $450, you are still losing that $450 just so you know cuz that's purchase cost of options that you will never get back) up to Oct. 18 and you will be fine with it but total bankruptcy of the company and losing everything, oh that's big, that's not incompetence, that you need to hedge against. LOL We get it now.

Well I give you the seal of the approval. You are completely hedged against bankruptcy. You didn't miss anything. There! In the meantime, GME is going to go sky high with 10X potential just like back in Jan. of 2021. Why? Because Roaring Kitty says so now again. LOL