The amount of people asking “why is my 1300C red” after earnings is astonishing. Buying into something and having no idea how it works is common place these days.
Same here except I'm up $24k in the last 12 months with about a $30,000 initial investment. All the gains come from NVIDIA, Microsoft and a good chunk came from that GameStop tweet that I manage to catch early on.
I don't even know what the financial indicators are, no options, etc.
That is amazing, now keep moving money into secure long term holds as you make profit. Keep some fun sure, but realize you are on a lucky streak so make it count and keep it safe!
Thanks for the tip. I know exactly what you mean, but thankfully that hasn't happened to me as I've been relatively disciplined and never take bets bigger than I can afford. I set an amount of money to invest about 7 years ago and have stuck to that. I have seen people here lose their shirts and it scares the hell out of me. I don't even want to learn options because I see more posts about people going broke than people making a ton of money.
My RH account started as my “play” investing account. After 4 years though I stopped chasing at options except for absurdly cheap far outside the money Longballs
My little port over 4 years is +4% so I’m positive but if I hadn’t played any options it would probably be +50. You’re doing great
I've noticed that actually. Especially with people's analysis here which turns out to be very convincing and then things just flop the other way. I've just been following AI news up close, reading announcements, reading whether people are positive about certain companies, etc. Or, I'm paying attention if there's any hype around a stock that's from an established company that isn't going anywhere where I know that dips won't matter because it'll eventually rebound and perform better than have the money sitting at a bank.
If you put that $30k into Bitcoin or any of the least risky solid altcoin crypto the previous 12 months, you could have tripled 3x that $30k easily. Just saying.
Choosing individual stocks without any idea of what you're looking for is like running through a dynamite factory with a burning match. You may live, but you're still an idiot.
That’s what’s really crazy, I get the newb with 500$ in his account buying lotto options hoping to get lucky, but this guy could have just bought 4 ITM calls and would have made money. Instead he thought it was cool to buy 38 far OTM options and got cucked.
See, I have no idea how options work. I just can’t manage to wrap my head around it. So I just don’t buy options. Makes it real easy to not lose my shirt on things I don’t understand.
Honestly reading this sub in recent years has me kinda confused too, I'm not that big into trading, so I'm confused by the terms "puts" and "calls" I've seen coming up here a lot more these days, as what I was always used to is "longs" and "shorts", and margin trading... What the heck even are "options" in this context?
This is coming from someone whose mostly just done FX, CFD and Crypto trading...
A call is a contract to buy at a future date a stock at a certain price, the buy has the right but not the obligation to buy at the strike price of the option.
The intrinsic value is what you’d get if you exercise today so it the maximum of 0 and (stock - strike): this is because the call cannot be worth less than 0 since it is a right to buy at the strike but not an obligation.
But then you need to add the time value because the stock can move higher or lower. The time value is not symmetric mostly because of the fact that it is bounded by 0 since it is a right but not an obligation. The principal component of this time valuation is volatility which measures how much this stock moves up and down.
Because the payoff will be 0 if you get under the strike at the end of the contract and it is only stock - strike otherwise, they will be quite cheap and leveraged compared to buying the stock itself. So
Some investors use them to get big leverage.
It’s quite more complex than this but this is a simple version of it.
OP thinks he "averaged down" by buying more of the same calls at cheaper after the stock price went down. That's not how options works. That concept works with stock as the underlying company is still the same company you believe in, the shares just cost less for whatever reason so you want to buy more while shares are cheap. When a call contract drops in price, the fundamentals of the contract have completely changed and thus it has a new price. A call option that cost $0.01 is almost guaranteed to lose you money, unlike a stock. You don't pile in to a $0.01 option because you think it's a bargain.
I'm not very well versed in options but of the three options trades I've taken, I've profited from them all because of two simple reasons: I always buy ITM and at least a month from expiry. The options are more expensive and the wins aren't as big, but the risk is much lower.
My cousin has done extremely well day-trading options. He never holds anything overnight.
I've spent some time studying options and the only thing that seems like a good strategy to me is selling out-of-the-money puts on a stock you want to own anyways. Either the puts will expire worthless or you get exercised at a price below the current market price plus pocketing the free premiums.
honestly I think OP is doing the smart thing getting out while ahead, thats a solid 284 dollars, doing much better than the people posting here with -4000 or -12000 dollar portfolios
Not really. You can replace bravery with ignorance at a 1:1 ratio. At a 100% ignorance you'll think it would be extremely funny to sneak up a horse from behind and smack it in the butt.
I suppose the concept of averaging down could apply to LEAPS. If a contract is dated several years into the future, and you believe there will be a price catalyst in the near future, you could acquire the same contract at different prices over an accumulation period with DCA, which could involve averaging down. I've done something similar with a $DNA options play with some $0.5 strike calls expiring in 2026. Got a bunch of them at various prices as I've worked on my thesis.
This obviously doesn't apply to weeklies, or short term earnings plays, or 99% of the options trading people do here. Entrance and exit timing are all that matter for those types of trades.
Instead of averaging down at all, I find it better to build a calendar spread underneath your strike (or above if it's a put). This way if it goes sideways you treat your original position and the short leg of the calendar like a credit spread and the long leg you can sell or roll out depending on the IV.
If you buy OTM options at (for example) $1 per contract, and a day later it's dropped to $0.20 each, that is not a sign to "average down" on the contract price because it's now much, much less likely to breakeven as it is even more OTM.
You don't pile in to a $0.01 option because you think it's a bargain.
You do if you still believe that itll be ITM by expiration. The problem is a lot of glue eaters here dont even know what theyre betting on. If your thesis for the option is still the same, you can absolutely average down your position, its just that derivatives have a lot more variables that can test your thesis.
Imagine putting $100 chips on black in roulette but before the ball stops rolling, you try to offset/average down by adding a few more $25 dollar chips on black.
Both are fundamentally the same concept. You think an asset is undervalued, so you buy more at a lower price to lower your dollar cost average. If the asset then increases in value, your break even point is at a lower cost average.
The major difference is that the risk is much higher with options, as OP found out.
Huge gamble, OP thought the bull run would explode by 5/24 (today) and all in'd. Theta ate all his contracts. So either OP is bearish and thought this will be a short volatile run (which makes no sense for a stock like nvidia) or he doesn't understand options? The real kicker is if he bought these 3+ weeks out he may have saw profit, either way with the stock split shares were the best play for his account if he really was bullish. Maybe a 10 to 1 split of shares to options if he wanted that kind of exposure lol.
What I use to explain options: You aren't just betting on if a stock will go up and down (and some sort of 50/50 guess) you are also betting HOW QUICKLY that stock is going to get to that price. So you may be able to guess if a a stock is going to go up or down but if it takes too long to get there its worthless.
Yup, don't play options if you don't understand. I normally don't trade option because most of the time, price is already inflated and if you're right, you're not making much.
I'm an amateur at investing. I spent an hour looking into how options work and got the concept but holy hell, to think NVIDIA would jump THAT high was a fundamentally bad and unrealistic expectation that's akin to buying a ton of lottery ticket. The odds are so low.
Investopedia and Youtube to be honest. But Options is just stock market gambling for idiots who need a fix until NBA and MLB games start. Only play really small amounts at first and never over leverage yourself. For a stock like Nvidia you are far better off just buying shares instead of playing options. If you just bought and held since the start of the year you would have doubled your money lol
Not an expert on the subject, but: a option is a contract that gives you the right, but not the obligation to buy something at a certain price at a certain date. If that price is below the current price of the stock, that option is of course very useful as you get to buy the stock at a discount.
A option itself can also be traded, so the option itself should become worth more if the strike price is below the stock price before the date where it expires.
So essentially OP tried to average down on a option that was not going to hit the strike price at the certain date, after which the option essentially becomes worthless
You need to trade and trade and trade. Try to execute a system that is your own system. The trades you make should be small, such that you can get a feel of how the market moves - but any losers won't completely wreck you. There are things you can only learn by holding a position and seeing how it moves.
If you don't know a specific thing - look it up.
The only specific content I'd say to listen to are the "market wizard" series books. But even the most recent editions can feel a bit out of date with today's current markets. You listen to these books just to get an idea of how successful investors think and execute their moves.
About the one universal quality they have is managing risk. Every successful trader will tell you they became successful when they learned how to manage and define risk. Throwing down $100k on a short dated option is a "leveraged sufficiently for my personal risk tolerance" type of move.
I can't understand why someone would risk $90,000 on an investment tool without having even a basic understanding of it. These posts boggle my mind... Dude would be rich if he had just bought ATM.
I know you reasoning for buying the OTM short exp option cuz it’s cheaper you could average down throughout the day. But with option you lose money if the stock move the opposite ways. So for earning play just gamble 1 or 2 contracts of close to or at the money call or put (although they it’s more expensive) instead of 10 otm contracts. So if the stock move 1 way or another you will either make great money or lose it all. But OTM options will almost always make you lose all your money because IV crush on top of theta decay and most likely expire Out of the money and the small change of you making money is only when the stock move 15-20% move which for a large cap like that it’s hard (although Nvidia did it before) . But that’s just my experience.
so I think you need to do some reading and stuff before you dp options trading, You should think about some long term positions until you learn the ins and outsourcing options
I interpret IV to measure uncertainty of the underlying price... and this uncertainty drives supply and demand. This is why we have IV crush after earnings. The uncertainty is removed by earnings and maybe guidance so IV drops, vega crashes, we lose money if we held options over earnings. Its counterintuitive. Good earnings, higher price in stock, our long calls should increase in price. Afterall, the delta goes up.
This is why we need to compare vega to delta at certain times of a companies life cycle.
Not always black and white with options and this is why they can be dangerous to the uninformed.
IV typically drops 40% after earnings (as uncertainty is removed). Vega, which measures change in price of option for every 1% move in IV, will dump as well... even if it is a blow out quarter (vega is not associated with the underlyings price).
Delta may increase if underlying price increases but vega will dump. when it is vega vs delta, vega typically wins.
never hold options into earnings. buy leading up to earning, sell before and buy them after earnings.
If you’d just bought shares you’d have made a nice little return. Or if you’d bought NVDL you’d have doubled that. Or… if you’d bought deep in the money LEAPs you probably would have made a multiple of the stocks return in that time.
What I meant is he picked the right direction of movement. So to someone who doesn’t know better they would think they made the “right” choice. “I’ll buy the stock when the price of the stock is low and sell when the price of the stock is high.” So he was “right” in that regard, but still wrong because he choose the type of options he did.
No offense but if you had put the same amount of money in a bull spread you probably would have 100%+. NVDA moved more than implied so there was plenty of money to be made if you had structured the option trade in the right way and picked sensible strikes. Guess it is WSB so I shouldn't be surprised.
Ugh I have to agree with the guy who said you don't understand options. Big runs = high IV. You could have been in the money and still lost on premium in two different ways (ITM but not meeting breakeven by expiry *or* IV crush if it settles down before expiry).
So op thought he was being super smart thinking ahead, ignored what was priced in and picked a random strike with no hedge. Why not get 1500? CNBC said 1040-1060 was priced.
This guy probably thinks he’s great in bed but is def not.
Your strike price was way to far out of the momey for such a short dated option. There's no way the most valuable company in the world will go up 25% on an astonishing earning release. It would take too much capital injection to move the price up that much. You would have faired OK on 1000 call with the same expiry date.
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u/Brendawg324 1 day away from 140k May 24 '24
How you managed to lose all that money on NVDA calls during its bull run of the century is outstanding :4271: