Reddit trader behind GameStop rally says he lost $13M in one day

[Bugsy]

I assume you are buying the shares and not the options.
May I know why shares and not options?

Why buy options with a boiling time decay on them that force the need for share price to meet a call date deadline when you can hold the underlying shares for time unlimited? Markets can be difficult to time, and buying csll options with a time variable can erode the profit margin if that timing is off on the slightest.

I think Put options are a good strategy over shorting because share prices have an unlimited upside and all it takes is one time a company being bought out for the share price to double or triple overnight to lose 2 to 3 times my accounts total value, as the poor prick who shorted a Bio with like $20,000 total in his account and woke up to owe like $187,000. With a Put option I just lose the premium. With the actual shares I could lose 2 to 3 times my account value. However, with shares long the worst I can lose is the value invested or traded in those shares alone. Whereas with call options I could lose a portion or all if the market does nothing before my strike price is achieved, and for what, extra leverage?

 

[zghorner]

Why buy options with a boiling time decay on them that force the need for share price to meet a call date deadline when you can hold the underlying shares for time unlimited? Markets can be difficult to time, and buying csll options with a time variable can erode the profit margin if that timing is off on the slightest.

I think Put options are a good strategy over shorting because share prices have an unlimited upside and all it takes is one time a company being bought out for the share price to double or triple overnight to lose 2 to 3 times my accounts total value, as the poor prick who shorted a Bio with like $20,000 total in his account and woke up to owe like $187,000. With a Put option I just lose the premium. With the actual shares I could lose 2 to 3 times my account value. However, with shares long the worst I can lose is the value invested or traded in those shares alone. Whereas with call options I could lose a portion or all if the market does nothing before my strike price is achieved, and for what, extra leverage?

pretty much yes to your final question, I trade long options because they provide a way to leverage my capital without using margin...And in return I accept the increased risk. Also (im sure you are probably aware), there are various strategies using a combination of long & short calls & puts to define risk as well as move the odds into your favor. I'm much too retarded to employ any of them though.

 

[Bugsy]

there are various strategies using a combination of long & short calls & puts to define risk as well as move the odds into your favor.

Iron condors, strangles, and straddles. Each of them employs a variation of price prediction. One you buy a call and put with same strike price right before an earnings call you predict will create extreme volatility in one direction or the other moving you deep in one direction with a high enough Delta to offset losing the premium on the one that will expire worthless. The other basically involves knowing the price won't move at all. I'm not super knowledgeable on options so forgot which is which and how the no price movement benefits the strategy.

 

[zghorner]

Iron condors, strangles, and straddles. Each of them employs a variation of price prediction. One you buy a call and put with same strike price right before an earnings call you predict will create extreme volatility in one direction or the other moving you deep in one direction with a high enough Delta to offset losing the premium on the one that will expire worthless. The other basically involves knowing the price won't move at all. I'm not super knowledgeable on options so forgot which is which and how the no price movement benefits the strategy.

Flat/sideways movement (no Increase in IV) allows Time decay to eat away at the value of the OTM contracts you sold/shorted until they expire worthless and you keep all of the premium. Not at all a strategy for me but a lot of people make money doing it as IV is almost always higher than historical V providing a pricing skew that can be exploited.

I sold some options short not long after learning about them...tastytrade and optionalpha had me jazzed up and convinced that it was the way. It was 100% my fault for being an overeager twit and not knowing what I was doing but i got burned hard...really learned what “picking up pennies in front of a steamroller” means.

 

[Bugsy]

Flat/sideways movement (no Increase in IV) allows Time decay to eat away at the value of the OTM contracts you sold/shorted until they expire worthless and you keep all of the premium.

Ahhh so it's for when you actually write an option, and not just buying an already open option. Makes sense.

 

[TrailerParkTed]

pretty much yes to your final question, I trade long options because they provide a way to leverage my capital without using margin...And in return I accept the increased risk. Also (im sure you are probably aware), there are various strategies using a combination of long & short calls & puts to define risk as well as move the odds into your favor. I'm much too retarded to employ any of them though.

I made the blunder of buying MMM when it fell from $184 to $175. April Calls were $9 at $175 price. Three days later it’s $179 and my calls are $9! Compared buying APPS yesterday $80s at $4, now $12 last I think they were. Holding “To the Moon”! Options are a trip, wish Master Destiero did a podcast, he’s a god! Still learning because they offer limited risk.

 

[zghorner]

I made the blunder of buying MMM when it fell from $184 to $175. April Calls were $9 at $175 price. Three days later it’s $179 and my calls are $9! Compared buying APPS yesterday $80s at $4, now $12 last I think they were. Holding “To the Moon”! Options are a trip, wish Master Destiero did a podcast, he’s a god! Still learning because they offer limited risk.

Vega is a mother fucker.

 

[TrailerParkTed]

Vega is a mother fucker.

I need to learn so much, any option books that stand out as good for the trader without a MS or PhD in Finance?

 

[zghorner]

I need to learn so much, any option books that stand out as good for the trader without a MS or PhD in Finance?

this book was recommended to me a little while ago and I found it to be beneficial.

this book was recommended by Destriero and i liked it quite a bit. It is essentially organized like a college text book (because that is probably what it is), I learned a ton about commodities also which i enjoyed even though i dont trade them.

Also the OIC Educational videos are extremely helpful.

https://www.youtube.com/user/OptionsEdu/videos

EDIT: both of these books have PDF versions online that can be downloaded for free.

 

[rallymode]

His position topped out at 47MM unrealized, and we will see how much he is going to be able to book eventually, but again, he is playing with casino money at this point.

No such thing as "casino" money. All PnL is real PnL and it's all YOUR money. Only a fool and/or a degenerate gambler lets a 47M stake turn into 13 on the pretense he cashed out some predetermined stake.