$2,000/Month With Poor Man's Covered Calls
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- Опубликовано: 28 сен 2024
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𝐋𝐞𝐠𝐚𝐥 𝐃𝐢𝐬𝐜𝐥𝐨𝐬𝐮𝐫𝐞: I’m not a financial advisor. The information contained in this video is for entertainment purposes only. Before investing, please consult a licensed professional. Any stock purchases I show on video should not be considered “investment recommendations”. I shall not be held liable for any losses you may incur for investing and trading in the stock market in an attempt to mirror what I do. Unless investments are FDIC insured, they may decline in value and/or disappear entirely. Please be careful!
Anybody notice his "worst case scenario" is the stock trading sideways? Isn't worst case scenario the bottom dropping out of Tesla stock - which actually happened since he recorded this video? That means, maybe the first month he collected $5k, but as of today March 3rd, that $1000 strike on TESLA for March 18th is now worth only $800 ($8.00 x 100). So that means you would have spent $22,000 to buy the March 18th call, collected $5000. Then come December, you'd be in the money on your March 18th call, which according to him you would want to roll - which would cost you even more money. Then you'd collect another $5000. And then the bottom falls out on the TESLA price - which means selling calls above your strike collects next to nothing. So even if rolling the March 18th call was free (it's not), you would have spent $22000 - $10000 = meaning you actually spent $12,000 to be left with a March 18th call worth only $800. That's a $11,200 loss (assuming rolling your call in Dec 2021 was free - again it's not but since the premium you'd collect in Feb isn't good, we'll call that a wash).
Be careful folks. This isn't free money like he makes it sound.
well said. I did notice that as well. He might have been able to sell calls for Feb and march as well. But yeah, he def lost at least 6-8k
The PLTR example in this video is very educational. If any of you have actually tried to follow what Henry suggested on the same date, you would've been royally fucked. As PLTR crashed for the whole year afterwards and remained under $20. i.e. if you try to sell the leap, you lose money. if you sell covered calls and get assigned, you lose money too. $2,000 my ass.l
I think low IV blue chip stocks should help.
if you get assigned to short call what happen thank you ?
What happends if the covered call get called? it sells the Leap?
If you get assigned on the short call, you will have to manually exercise the long call early to cancel out the assignment. You will forfeit all remaining extrinsic value in the long option when you do this though...which is one of the main pitfalls of the PMCC.
What happens if the strike price is hit? Rebuy the covered call and roll it into another one?
I imagine your Initial leap in the money call option gets sold to balance out the more recent in the money sell call.
However I just started learning covered calls today so I'm still uncertain.
🚨 So at this point, with PLTR down 50% from when you bought the leaps call, what strike are you using for short calls?
😂
@@MegaLdawg yep, that PLTR leap is worth 49c now.
lol
Talking about stocks, Forex and cryptocurrency trading is the most profitable venture I ever invested in, I reached my goal of $120k monthly trade earnings. Wondering if viewers here are familiar with Rosemary trading strategy..?
All good investors are conversant with Expert Mrs Rosemary Lang, She's unique in the field just got to keep to her instructions and you Excel
@Kethlee Bum Exactly, the trick is to diversify your investment, don't panic when everyone else is and invest consistently.
My money stays right in my trading account, my account just mirrors her trades in real-time.that's the idea behind copy trading.
@@xiaoxueqin7342 Please how do i get in touch with Rosemary Lang, I would love to trade with her.
Are her service available outside of the US? as her broker is registered in the US.
Of course, you never mention what happens to your account if the stock goes down instead of up or sideways.
Can you only do this 1 call at a time or lets day if you buy 20 leap call can you also sell 20 covered calls as well?
I believe you can sell as many as you want as long as you have 1 leap for EACH call you sell. So you can buy 10 leaps and sell 10 calls because they are both representing because the leaps would represent 100 shares each or 1,000 total and the calls you are selling are the same representing 100 shares each and 1,000 shares in total.
Yes, you can sell one contract for every contract you bought and still be covered. That's the beauty of poor man covered calls as long as you set them up correctly.
Buying a LEAP OTM??? Shouldn't it be deep ITM?
Yes this is the correct way to trade this strategy. Anybody who tells you to buy OTM LEAP contracts is obviously lacking in experience.
You made an error on the PLTR option. Since you're an intelligent and very successful trader I won't embarrass you by pointing it out. But you may wish to edit or delete this video.
Just so I understand, when you are selling your near term short call you are picking a strike price that you expect the stock NOT to reach by the end of expiration so you can collect the premium right? Because around the 6:00 mark of the video it wasn't clear what this strategy is looking for. I suppose if you wanted to quickly selling the options you bought you would pick a strike you hope it can go up to but since we want to collect premium each month we want to avoid the strike price right?
Yes avoid the strike because then you face the risk of "ASSIGNMENT" and that pretty much blows up your whole set up. Because your Leap gets auto excercised in order to close out the position. In summary, yes put the strike on the "sell call" where you don't think the stock will reach to keep collecting premium. somewhere
Selling covered call options. If you don’t want to hold the security for very long and are happy with profit on both sides you can pick one that’s ITM. High premium and if it sells $2 more you keep $200 in profit on the security.
What platform are you using! I cannot find that handy profitable loss chart
once you let the short term call expire, how do you "add" or roll into another short term call for next week into the LEAP again?
Just sell another call. LEAP option is not linked.
what happens in it goes down ??
Does this work for new Robinhood accounts?
Hello anybody out there
I have GE Jan call option for strike price 80
I bought it before reverse split so I have strike 10
If I sell a call option for strike 80 and GE closes 85 on expiry day in Jan 2023
Now pltr is 9.50, leap is a lost
leap is worth 49c today 5/30/22
Thanks for your education
this is way to slo of a return on profits is there anything else you recommend. I am working like 10k and I currently am simply doing options and trading same week as I see trends in the market
HAHAHA I love these comments. Someone says you have the potential to make 20% a month. This GUY: "this is way to slo of a return on profits" LOLOLOLOL
the first example you did 2 buy calls and then you did a buy call and then sell call which one is it
Buy the leap call first, then the 2nd one you sell 30-60 days out with a .2-3 delta. I noticed I think he forgot to click the "Sell" instead of the "Buy" after buying first leap call in the first example.
@@Noejr5 thank you. This is why I was so confused. He said sell, but his visual said buy. i didn't know if the video was wrong or his speaking. Yikes!
You forgot to add that you don't do PMCC on highly volatile stocks. You would not make $2k/mth doing this, you would actually go broke. I hope you made some money on your TSLA. It looks like you put $200k in, ran it up to $460k, and now it is $63k.
Fascinating, thank you.
I liked this video before watching because of the shirt “STOOOOOOPID RICH” love it man
tesla? a $1000 stock? R U kidding? who the heck has $22,000....to place on a SINGLE TRADE??? and u call it "poor man's cc???" Pleeeeeaaaassssee!
Its just a nickname, don't get all bothered. 22,000 is a lot less than buying 100 shares at $1000, right? That's why the nickname.
You said you made about $40 a month, do you get those funds monthly like dividend or is that what you get when it expires?
When you sell a call, you get the cash in your account immediately. The liability (the call option) stays in your account as a negative. If it expires worthless, it will be unassigned.
Do you have any long term results from doing PMCC?
Love it. Paper trade this strategy next week
Yeah how's that working out?
Me too
Your videos are usually very clear to me, but this one confused me. With Palantir, after the Leap call option, I wasn't sure what you were saying needed to happen with the second part. You mentioned selling covered call, but the visual never changed from buying call so I wasn't for sure if the 23 strike price was to be a 'buy call' or a 'sell call." I was following along with you, but you didn't complete the trade and then you quickly moved on to Tesla. I wanted to see you complete Palantir first. Talk and show what you mean. I am a visual learner and I was watching your visuals. I think you were summing a lot up verbally, but not updating the visual. I'm not sure. I didn't care to hear about Tesla because I was still trying to understand Palantir. I got a bit frustrated with this video. I hope you can do another one on Poor Man's Covered Calls, but slowly complete all the steps with visuals that update as you are speaking. Please don't skip over steps or summarize. I wanted to see what the final trade would look like by the end. What's the maximum loss potential, profit. I usually share your videos with my investment friends. It's about 700 of us, but this one might be too confusing for me to present to them. I still don't know how to complete a poor man's covered call from watching this. The beginning was great and I was able to follow. After the Leap option part, you just start talking a lot without showing us. I got lost. Very lost. Please help!
You made that way more confusing than it needed to be.
Facts, this is just a calendar spread lol
LEAP or LEAPS??
Trading Tesla options have high risk, please exercise caution. We can see how this pans out.
True but in all fairness if you bought a leap you don't know how it panned out yet.
@@therebellion6911 I'm not understanding you
@@kkvictorng2707 He just means sometimes you have to have patience and see how things play out over the long term of the long option.
@@therebellion6911 Ha BUT IN ALL FAIRNESS how's this trade working out?
@@uclajd I assume if its a leap we still dont know. I dont trade Tesla as Ive always thought it was overpriced but long term it would have panned out quite nicely I assume. Dont even know what the price is at the moment. But I remember seeing Tesla when it was 350.00 and then 600.00 and then 1,000.00
Stop joking about $500 for a year, plenty can go wrong with this complex stategy. BTW, PLTR just died
You don't really talk about the downside risks. What if the stocks tanks and the price of the stock goes past your long option? What if the stock rises significantly and goes past your short option?
Its basically a defined risk trade if the stock tanks, the most you can lose is the total cost of the leap minus the premium collected on the short call.
When attempting this strategy, will Robinhood indicate that the collateral is the LEAPS option?
No not explicitly. But you’ll know when you sell the call and your available balance doesn’t change
Henry, what worst can happen in this case in a bearish scenario? also, how much capital needed for this strategy? pls answer.
The capital needed is the price of your LEAPS contract. There are actually several things that could be considered "worst can happen" depending upon many factors, but the short answer that you need to understand is, The worst thing that can happen, will be something that results from you not paying good attention to the details (it's obvious from your questions that you might have missed some details already, please watch the video again). Trust me, I'm the voice of reason, cause I screw up a lot! :P
The worst case scenario is that you lose all of the money you paid for the leap option or the long call. This would happen if the stock went to zero. Otherwise you should be able to continue to sell calls against the leap and the loss will be very minimal. For example you may pay $1,000 for a 1 year leap option but you can make $100 a month selling calls with a 1 month expiration. If you do this all 12 months then you will make $1,200 so even if the leap expires worthless you still make $200. You would need to look at your own strategy to find a great example but in theory this is possible. Just make sure you are investing in stable and financially sound stocks.
HA, check out this trade right now to get an idea of the worst that can happen. NEVER LISTEN TO ANYONE WHO DOESN'T EVEN MENTION DOWNSIDE RISK!
This is literally so confusing, like lol wut
Hi Henry, would you mind sharing why u closed out your PMCC position on SBUX in one of your previous videos?
That's a private Discord resource I posted. It's impossible to write out the 10 minute video in the comments
u talk too fast,
👍
Henry. On pltr you do a 2 time buying call and on telsa you doing a 1 time long buy call and 1 time sell call. Is that a similar strategy?
He definitely screwed up on PLTR. The 2nd one should be a "sell". But the way he explains it is good... the thinking is the same...
Thank you nephew Henry, great video
Is PLTR a good stock to do the wheel on ? The premiums are just cheapppp
I don’t think it is. But I am down about $3k since my average is too high with PLTR.
I need an appointment to sit side by side to do this lol.
Email uncle@investwithhenry.com
Very 👍
TERRIBLE ADVICE. Yeah how has this trade done with PLTR dropping almost immediately after this video by more than 50%? You don't even discuss downside of this trade, and you make a TERRIBLE ERROR in conflating realized losses with unrealized losses. Realized options losses are forever. Unrealized stock losses are not necessarily forever if you just ride them out. This is exactly what is wrong with impatient young investors. Bag holding on a GOOD STOCK for 5 years still beats taking a huge loss, which is why you don't buy shitty money losing companies' stocks like PLTR. Never ONCE do you even discuss the fundamentals of PLTR or what the company even does! STOP ADVISING PEOPLE YOU DO NOT KNOW WHAT YOU ARE DOING!
PLTR fell to 6-7$ by Jan 2023, this example got slammed.
I have been trying your strategy and I feel I can make a go of it I have invested 440 so far and I am trying to grow any suggestions.
@@sophiawilliamsonns8282 bot ^ fyi
How is it going?
Hello from the future. I hope you don’t still own that $15 call
What's going on here? I Click on View Replies and none shows up??? weird why replies are not showing.
YOU TALK TO DAMN FAST.
Palantir and Tesla 😂 rip this guy. Why you normies only have two modes - long tech or panic sell and sit in cash?
Because the normies don't have any real trading experience or a legitimate strategy to navigate all market environments lol.
there are so many things that you are omitting to say just for the sake of the viewership lol...I'll say them for you:
-> 13 months x $40 = $520 IF YOU ARE ALWAYS RIGHT with your covered call options lol. Show me a man who was right about his options 100% of the time in a year lol.
-> If PLTR drops in price the premiums for the options also drops along with your call option :) if the stock never goes back up to your call option strike price guess what..you just lost $800.
What trading platform is this?
Robinhood
@@ricksmith7232 Thanks!
On PLTR, you did a LEAP CALL buy and a week out CALL buy?
I thought its buying LEAP CALL and a week/month out sell covered CALL
How does it play out if you Sell a Call and you get assigned?
I dont understand.. the itm call can be exersised no ??? (still no exp)
So am I rolling the sell call until the expiration of the buy call?
Yes and no. Basically towards expiration of the shorter duration option you sold, you can close it out early or wait for it to expire worthless. Then open up a new one. He was saying that in his case if price breaches (touches it) that he then rolls it out to the next month option series. That's called rolling out. But if the price has changed you probably want to roll "out and up" to a higher strike that matches the original delta you sold the original one at, so he was saying between 20-25 delta I believe (or whatever he said was the delta in his example for TSLA). 👍
I have smoke coming from my ears! Good smoke!
wait til the stock tank. lol
Yep, he never discusses downside, and PLTR did in fact tank. So did TSLA. 💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸💸
What platform are you using to do this????
Hi I’m struggling to understand how to EXIT these or do you HAVE to let them expire. I can’t seem to close and take the profits on Robinhood or get them filled I’d say. Do I close the entire position or try and sell the purchased call? Help lol
I’m wondering the same thing
I had the same problem and it was causing me money because my positions wouldn't fill. I called Robinhood. They said to close the short position first and separately and then close the long position, also separately. He said the problem with trying to close the whole position at one time is that an investor may like one part of the option, but not the other. So closing them separately gives you a much better change of getting your orders executed/filled.
Close separately as the two options are not linked.
Wouldn’t your poor man’s covered call be a “sell call”? During the video you were showing deltas and thetas for buy calls and not sell calls. Just making sure we have to do a sell call for clarification
A strike price only has one theta and one delta, there isn't a different value for buy vs sell, the only difference is the bid vs ask price, keep learning.
@@macman231 didnt know that. Good insight
😳 PLTR is $7.88! 😬🦧🤦♂️🤷🏽🤑🥳
Dead on PLTR and dead on TSLA. This did not age well
Finally, I'm starting to understand this.
I’m thinking of trading a PMCC with NVDA. Buying a $200 1/23/22 call with a delta of .80 and then selling a $330 1/21/22 call with a .25 delta. I’m using Vanguard at the moment and they only have the option on the trading screen to “sell to open” a call if you already have the 100 shares in your account. Any suggestions?
lie on your option app to get lv 3
@@benshiotsu8553 I just lied on my option app for level 4!
@@benshiotsu8553 what do you think of that strategy on the PMCC?
@@eamonterey2429 Seems solid except that I think your long call should expire late 22 or early 23. Right now your calls look like they expire two days apart.
Whoops. The long call is a 1/23/23 expiration. Ha
Talk Faster! Faster! Faster!!!
This way it makes no sense
In the last comment I expect GE to go higher. Then should I sell put option against my 80 call options
How did this trade turn out considering the stock split ??
"A small portfolio of 20 thousand dollars" rich people are so out of the loop it's amazing.
Unfortunately it takes money to make money. Trading options with only a few thousand dollars...or even a few hundred dollars...is nearly impossible.
Sorry you never got included in anything but 1-50k portfolios are small lol
20k has always been considered a small portfolio. Don’t let beginners apps like robinhood or webull fool you into thinking that successful trading doesn’t cost a lot of money.
@@Massivelifeincexactly they won’t even let u day trade before ur account value exceeds 25k
Get ur money up bud
Can you do this in Webull?
What where to happen if the covered call you sell gets assigned
you have to purchase the 100 shares for each
U have a long call against it. Not important
@@A_D624 It is very important, if you don't correctly select your strikes and the stock makes a large move to the upside you could actually have a position that is a loss to exit out of instead of a profit. You have to correctly calculate the cost of the leap vs the two strike selections and the premium you collect. When you buy a .80 delta leap you really only control about 80 shares and the same 70 shares for a .70 delta so there is room in there that will cause you a loss, its not the same as stock.
How do you do this on webull?
Good video
These are very difficult to trade in incredibly volatile markets FYI.... This past week is a perfect example of this....be careful people.
Hey Invest with Henry; but what about if that Covered Call get's in the money and the new price of that call your selling is 8-9 grand, How do you buy that back and not get assigned for 100 shares. Lets say it's a a 23 thousand dollar account and you bought that leap for 22,830, so your all in, you sell the call agaisnt it for 4,945 and it exps 12/23 just like the video. What happens if come Monday Morning (11/29) and TSLA moves up 85 dollars, the account does not have the buying power to buy back that covered call and Long Call is the collateral for the short call. Then lets say TSLA keeps trending upwards and on 12/23 its at 1,270; it's in the money on the short leg so it will get assigned and you have to sell 100 Shares to some Hedge Fund at 1,200 per share for a total of 120,000. How does some kid prevent this from happening to them. The long Leg will not increase in value so much that it will cover the assignment.
Yeah, he doesn't cover the downsides of the trade or the correct way to select strikes so that you make sure you have no upside loss, you have to learn that...
The struggle I’ve had for 2 weeks is Robinhood doesn’t actually execute my calls. So they cancel everyday. What am I doing wrong
Robinhood is so annoying. They often will only allow you to buy or sell your option in .5 cent increments so although they accept the order, it doesnt always execute. Try increasing the bid and wait to confirm that it was accepted.
I hate robinhood I’m thinking about switching to think or swim
Don't use Robin Hood
I have a leap option on nio. Maybe I missed a part of the vid as I was mentally juggling this strategy. Does the leap option have to be already in the money? Because when I try to sell a call against the leap option, it says I have insufficient underlying asset or something like that lol
This video is stupidly misleading. Think who you are listening to. This guy explained what would be the outcome in the best case scenario, but failed to mention any of 50 ways you can lose money using this strategy.
To your question:
The reason you can’t write the option is probably because your leap’s strike price is higher than the option you trying to sell. Or maybe your brocker doesn’t allow you to trade this strategy. Remember: if the call you wrote goes into the money you risk getting assigned, and losing your leap which is much more expensive
@@uriniumintestor7302 He can always roll before assignment
@@shanedavey6993 even if you are lucky enough to be able to roll it, you’re probably already realizing big loss. And by “rolling” you are just entering an another risky bet.
But yeah, there is also always a possibility of early assignment…
@@uriniumintestor7302 Yeah early assignment isn't gonna happen 99.999% of the time. Just don't sell them on dividend weeks. Why are you so ass blasted against covered calls? And on Christmas Day of all days? Study more.
@@shanedavey6993 I just don’t like the assumption of it being some sort of risk free investment, when it’s really a risky investment. Btw I wrote the initial comment 7 days ago :)
Everything is well until it crashes like it happened this week. You will be in a hole where you can't seem to escape.
You were correct pltr did crash to 18
Isn't this more about the right stock pic and not the strategy? If you own the stock and it crashes your in the same hole. You will be in a smaller hole this way as long as you don't invest everything you got into it.
@@therebellion6911 NO YOU ARE NOT. THIS LOSES MORE MONEY! Covered calls (which this too-cute-by-a-half trade was supposed to replace) would have paid on the PLTR dive. This loses the value of the long call and the unrealized loss of PLTR tanking. Good lord you people!
@@uclajd If you have a stock you buy at say 150.00 and it loses 50.00 you lost 50.00 dollars per share. If you buy a long call say at 110.00 for 47.00 and you have collected at least 7.00 in premium then the most you can lose is 40.00 per share. That was my point about a smaller hole. I was also suggesting it was better to try on more stable stocks like apple that shouldn't crash 30% and stay down.
@@therebellion6911 That's an UNrealized loss. You only really lost 50 per share if you sell it at that price. When the call goes to zero at expiration that's a permanent loss. The shares can come back. But you are right about Apple. Even if it goes down, you know it will be back up eventually. Unlike these weird no profit meme stocks everyone is trading these days.
I'm confused. Isn't it like buying two separate options?
How is selling short term call against the leap option?
How are they tied together?
Buying a call that expires many months or over a year away that is deep in the money is very similar to actually owning the underlying 100 shares. The reason is because the market has priced in the likelihood of that call that has a strike price that's maybe 15% lower than the current stock price being in the money as super high and thus any movement in the underlying price has a very strong influence on the price of the option (delta). That's because a very high proportion of the (fairly expensive) in the money call is intrinsic value. That's also why theta is so low as extrinsic value makes up a very small portion of a call that's deep in the money. So this lets you sell out of the money calls without the risk of suffering astronomical losses if the price rockets past your short call because your deep in the money call will have risen by about the same amount as your short call did and thus limit your loss.
The advantage of this technique over owning the actual shares is that you can get away with maybe only staking 30% to half the up front cost of those 100 shares. The pros of actually owning the shares is you don't have to lose the value of the fairly small theta and you get any dividends. So if you have the capital and don't really need it to invest in a bunch of other options then owning the 100 shares will make you more than buying the deep in the money call in absolute terms. However because it requires so much more capital your return on asset is going to be a lower percentage (although if the stock moved against you over that extended period your percentage loss would similarly be less).
The long term call is the substitute for holding the stock.
Because you still have control over the underlying asset, it is OK.
@@tysonclarke0127th
Well, PLTR ain't looking too good rn unfortunately
YEAH FUNNY HOW HE NEVER DISCUSSES THE DOWNSIDE RISKS OF THIS TRADE! A regular covered call would be killing rn.
What is worst case scenario? Is it possible to lose entire amount of option purchased? Ironically I am watching on 3/14/2021 and the TSLA stock price is down to $763.97 (vs. Strikes shown in the $1000 range). How would this play have turned out? Is it possible to lose more than investment (leverage required?). It was a bit difficult to follow the general principles so I will be watching more videos to understand better.
So if he had held the March 18th 2022 $1000 call, it would have expired worth zero. So he would have lost $22k. Plus as the stock dropped, the premiums he would get would also have dropped. Given the amount that tesla dropped, I think a savvy options trader could have rolled, but in the end I suspect he would have lost $6-7k.
With the poor man's covered call, you can only lose what you paid to enter the position. So worst case if the stock plummets (as it did with pretty much all of this guy's trades), then you will lose the entire debit paid.
Heck man, tesla dropped below 800 in late January. What if Tesla still below the strike price on 22k dollar option that expires in March? You could lose all 22k if you let it expire out of the money. What would you do?
Yeah funny he never mentions downside risk. NEVER INVEST ON SOMEONE'S ADVICE IF THEY ONLY TALK THE UPSIDE!
Hi Henry, Do you have an app or a broker where I can do options. Most of the websites are form US and they requiere a social security number and I as a Colombian citizen we don’t have it.
How about Interactive Brokers?
@@davidt7290Yeah that should work, they said this on Google about IB - if not US citizen; Your employer name, address and phone number; Bank or 3rd party broker account numbers for funding purposes, plus routing number for check deposits. - so you might be able to trade options on IB. I have heard though that there is a fee they charge non US residents. So you might want to look that up.
TastyWorks accepts applications from Colombia.
What do you do if the stock drops? Taking tsla for example this week with what you have executed in your example.
@HENRY it sounds a bot reply to be honest. i expected a better reply from uncle henry who’s been trading options longer than i’ve been investing than asking me to join telegram and telling me investors are getting richer.
@HENRY you are not answering his questions.
God damn that’s poor man’s call Jesus I feel even more poorer after watching this 🥺
You would be a lot poorer if you made this trade.
i feel like something is miss in this video. i feel like you could explain a bit more . i wish you clicked the sell side of the option. i feel like there is discount between the PLTR and TSLA example.
I missed something too. He never finish setting up the trade to show us what it looks like
There's a lot of youtube videos about the PMCC, even I made one. It is a great strategy, totally worth looking into more.
Yeah, he missed the part about PLTR going down over 50% almost immediately after this video was published. 💸💸💸💸💸💸💸
So it's July of 2022. That 1000 strike march 18 2022 option would've been down bad, because chances are it was in the negative before that march 16 fed meeting that rallied the market short term, and got tesla above 1000. But the cost of that option would've put the break even at 1222, so while that option would be in the money and be able to be executed, it would be down. Any thoughts?
A lot of these options videos on RUclips sound like they'd make money in principle but from what I have seen, premium values accurately reflect the risk and are fairly priced, so I don't think you will make any money trading options on a regular basis. If you could, then the pros would do nothing but trade options and then the premiums would drop thereby ending the profit opportunity. If anyone thinks I am wrong, post a video with your real trade records and 6 months or a year of real trades and not hypothetical results. I'd be glad to be proven wrong, but don't think I am.
palantir is at $11. good luck being in the poor house with your call strategery
Very simple question, in case of TSLA stock in your video, if the stock goes above the strike price and if the buyer exercises the option, suppose if I don't have the TSLA shares technically other than the leap option, what happens here ?
you cant let the stock go above your strike price.
@@Onlyextrinsic that's not an answer
A good question for anyone newer to LEAPS and the PMCC (Poor Man's Covered Call)
In short: you need to make sure that the amount of money you pay for your LEAPS, or long call, is less than the difference between your LEAPS strike price and the strike price of the call that you sell against it(your short call), multiplied by 100. The amount of premium you collect from the short call will reduce your cost basis, or how much you spent on the LEAPS, allowing you to sell future calls at a lower strike if necessary or desired.
@@MultiPurpledude Thank you very much
@@teaisgoodforme4919 The basis behind this is, if my LEAPS I purchased has a strike price of $50 per share, while the call I sell against it has a strike price of $100, if the short call I sold becomes ITM at expiration and is exercised, I can exercise my LEAPS to buy 100 shares at $50, then sell them to cover my call at $100 per share (hence the difference between each strike multiplied by 100; each contract controls 100 shares.) This transaction would net $50 * 100 shares, or $5,000.
If the amount of premium you paid for your leap was $6,000, you would ultimately sell out of your position at a loss ($5,000 - $6,000 = -$1,000). So the goal then is for the difference in strikes between the LEAPS and PMCC *100 to be equal to or greater than how much we paid for the LEAPS. This way, if the stock skyrockets, we aren't being pushed out of the position with less than we started with.
As far as implied volatility goes, high IVx will drastically increase the price of a LEAPS, because with higher IVx, the higher the perceived risk to the seller of the LEAPS since the underlying will have a long time and more potential to move to a very high market price by the time of expiration. It's good to purchase a LEAPS when IVx is low to reduce your cost basis on the position; this is often why people prefer utilizing the PMCC on blue chip stocks that trade mostly sideways like Coke, Pepsi, PG, JPM, etc. You can also find companies that usually have higher IVx, which have temporary or abnormally low IVx at the time you purchase a LEAPS to get it at a lower price overall. IVx typically reverts to a mean for a given company, similar to stock price itself.
Back to assignment, it's usually advised to avoid this happening by rolling out your PMCC if it ends up in the money, and to close your calls before expiration to avoid something called "pinch" risk.
The PMCC can also be riskier if the underlying goes into freefall to the point your LEAPS comes close to being ATM, because, you may no longer be able to sell calls against it without subjecting yourself to risk of assignment at a loss. But, your losses will be capped to a lower amount than owning the underlying wholesale should the company in question go to $0. LEAPS also can only exist for a little over two years. While this is a lot of time to recover from short to moderate term pullbacks, two years may not be long enough to recover from a true bear market and your LEAPS could become worthless; while, if you had owned the underlying, you could hold it indefinitely to ride up a recovery over several years.
There is an enormous list of pros and cons to PMCC vs. a traditional covered call that would take a lot to get into here. Suffice to say, it's a good strategy when paired with adequate due diligence on market conditions and the underlying company you're interested in making a move on.
Hope this helps.
Really loving these new videos you are making for smaller portfolios. Thank you!!
i dont know man... don't like it.. i can make at least $600-$900 a week selling puts with $25K portfolio. doing for 2 .5 months and im up a little over 100% this year on my portfolio. .. most were buying low and selling high.. but i'll keep selling puts for the rest of this year..
@@josephsaeteurn9158 can u share which stocks are you doing?
Hi what stocks do you put Sell... tsla??? Soxl ?? Thx
LOL how'd this trade work out for everyone?
Since Buying a Call for in the future, couldn't I Sell and close several calls a week, up until my Buy contract expires? Obviously, you'd be restricted to Selling only one contract at a time, unless you Buy additional Calls. With how volitile the markets have been, I've bought a Put & Call do that I'm covered in either direction of the market. When I'm making money going one way, I'll close the Put and collect my winnings, then when the stock rebounds the other way long enough, I'll close the call and collect my winnings. Having a Leap Buy can help keep it simple. However, I can't always use that strategy. I have a preference of covered calls, but don't want to be left holding a bag of stock I don't want.
Yes, you can sell multiple calls against your long call you bought in the future. Just be sure you set up your PMCC correctly, and potentially you can sell a new short covered call every week!
@@FinancialOptionsWithThumper Hey when I try this Robinhood says I don’t have enough shares? Confused
@@cgreen9686 Hi C Green. Check to be sure you have the right permissions enabled on Robinhood. I'm not the most familiar with Robinhood but you may need to look for something to enable spreads, or ask to increase your options level so that you can run the poor man's covered call strategy.
Uncle Henry, I sold a covered call on Microsoft 305 strike price and expiration January 22, 2022. The problem I have right now is the price of the stock is about 330. I received a credit of 9.75 on October 13th but the option price at this time is 31.50. How can I exit this trade without paying 3150 to close it? Thanks s lot.
You cant. Just take the 25 dollar gain=2500+ your 975 = 3475 total return.
Start selling puts thereafter. Wheel strategy essentially. This is the problem of selling so far out calls.
If you buy to close 3450-3150= you now only profited 300 dollars but keep your 100 shares of msft and you start selling calls again. Right now the way the market is volatile I would go with the first option.
At a certain point it's just not smart and you have to let it go.
I'm doing this with nvidia. I set a price and if I lose it so be it.
@@acardona50 , thanks a lot. Is the only option to wait until expiration dar?
@@argentinarodriguez4170 no. You can buy to close. Pay the 3150 and then sell another call option a month or 2 out at a higher price and collect premium again.
Up to you
I have been badly bitten by msft calls. Lost quite a bit by buying them back (my tax hit would have been astronomical). It will hurt to buy them back, but it’s all part of the learning lesson.
Problem here is you will be rich in about 60 years...... Your better off trying to find yolo stocks and buying calls if you only have a $100k account and under your kinda broke anyway might as well go for gold...... This is a dwindle your money away strategy.......
Says the dude who’s probably on welfare
No the problem here is he never discusses downside risk. You'll be poor in about a month.
Uncle Henry! Did you send out an email regarding your options academy with a Black Friday discount? Just want to make sure it is legit. I am very interested in signing up.
Yes!
Say the short call is exercised and I get assigned. Does robinhood automatically exercise the long call to cover the short one?
if you dont have the capital in the account to cover it then yes
I’m a bit confused as you do not explain the mechanics of the trade as it approaches the short term call. Are you buying back call you sold or closing the position and reopening it. I’ve never tried a poor man’s covered call. I like to keep it simple credit spreads and selling calls and puts.
thats what i do, the credit spread videos are on point have generated returns for me. i however want to learn more about this topic in this video.
Which stock is #1 Reddit. That would be BNGO. Gamma, and short squeezes being organized…
I FINALLY understand the PCC. You do a great job of clearly explaining things. It’s great that you go through 1 example in detail and then a 2nd example a little quicker for us to follow along after learning the theory. Thank you!