Beginner and Guide To Options: Everything You Need To Know To Stop Losing Money Like A Complete Tard
How to stop losing money like a complete tard. Beginner and Guide to options, everything you need to know. To Stop Losing Money.
Introduction on how to stop losing money online
For those of you that are living underneath a rock, options represent the contractual right to purchase or sell blocks of 100 shares in the underlying security. Because each option represents 100 shares, they often provide volatile leveraged like returns and are often used by either professional investors as part of a sophisticated investment strategy or by retail
gamblers investors as a way to potentially gain massive amounts of money while putting up a relatively small amount. stop losing money
In this post, I will walk you through the pricing fundamentals, the Greeks, and common option strategies. Hopefully, by the end of this post, you will stop losing all your money like a bunch of half-wits. Well, you probably still lose money, but at least you can act like a smartass about it.
This section is going to be focused on the fundamentals and theoretical aspects behind what gives an option value. Aka, that boomer shit. stop losing money
There are two types of options: American and European. American options give the holder the right to exercise the option at any given time prior to the expiration date (cause freedom, that’s why). These options are the ones you typically buy from your broker. European options on the other hand are fucking gay because they only let you exercise at the expiry date and since none of you cucks ever bought an option from a Europoor before, I will focus solely on American options for this DD post.
Every option, regardless if it’s a chad call or a gay put has two pricing components that justify it’s current market value: the intrinsic value and the speculative value. Let me explain via this equation:
- Value = Intrinsic + Speculative Value
Intrinsic value is how ITM an option is, and the speculative value is the chances of it becoming even more ITM by the time to expiry. For example, assume a call option has a strike of $10 and the current price of the stock is $12. That would mean the intrinsic value is $2. However, the option expires in let’s say 3 months, and is being traded at $3. That would mean the additional 1-dollar difference above the $2 is the speculative value of the option. That $1 represents investors speculating the option will become even more ITM within that three months time frame.
Taking that logic further we can derive the fundamental value for a call and put option as:
- Call = stock price – strike + speculative
- Put = strike – stock price + speculative
Now that you know that a single option grants you exposure to multiple shares and the returns are therefore leveraged, you might be thinking to yourself oh gosh, I hope there is a way for me to calculate exactly how leveraged this option will be. Don’t worry, there is. You can calculate exactly how leveraged an option is via this equation:
- (Option Delta x Share Price) / Option price
This is the big one. If the market is a casino, then this is the bookie playing around with the odds on the board. So if you want to leave the casino with money and not another man’s dick in your hand, you need to know volatility cold. For options trading, there are two kinds of volatility: realized and unrealized.
All you need to know is that realized volatility is the historic price movement of the stock. It is measured as the standard deviation (or deviation from average price) from the average price of a stock in a given time frame.
- Unrealized Or Implied Volatility
This is the most important of the two. To put it in simplest terms, IV is the expected magnitude of a stock’s future price changes expressed as an annual percentage.
This expected yearly price change can be expressed as the following:
1-Year Expected Range = stock price +/- (stock price x IV)
What is important with this formula is that it shows the riskier stocks usually have the higher IVs which will result in a larger annual expected range. Taking this a step further we can also visualize the expected stock price changes via standard deviations.
Assuming most of you passed high school, a fair amount of you must be somewhat familiar with the normal distribution graph. We can demonstrate this with a graph of a normal distribution that shows a 1 standard deviation of the price movement of a stock that is trading at $100 with an IV of 25%. This means that with a standard deviation of 1 there is a 68% the stock will trade within the range of $75 – $125.
We can also take it a step further and do a 2-standard deviation which will give us a representation of a stock’s fluctuation with a 95% confidence interval. In the chart below, still assuming a stock price of $100 and an IV of 25%, the range has doubled to $50 – $150. Remember, in statistics, we can go all the way to 3-standard deviations which is a confidence interval of 99.7% and that will mean a range of $25 – $175.
Now that your high school nostalgia is out of the way, there is one more useful tidbit of knowledge I will show you.
We can also calculate the stock’s expected move over any period via this equation:
**19.1 is the square root of 365 or the days in a year. For Simplicity’s sake, I simplified the denominator.
This way whenever you buy an option that doesn’t expire in one year exactly, you can still map out the expected price range as stated by option traders. That way, you know what you are getting into and be all surprised when a dick is shoved up your ass (unless you’re in to that, then call me).
What you all need to know is that within the premiums of every option that you buy there are certain assumptions that are priced in, much like there are certain assumptions that are priced into a stock price. These assumptions are often represented by certain Greek letters and by understanding what they are and how they influence the option’s value, you can better understand what you are betting on and whether or not the risks are tilted in your favor.
In this part, I am going to talk about the four Greeks every last one of you degenerates must know by heart: Vega, Delta, Gamma, and Theta. And no, they aren’t the name of the fraternity your girlfriend goes to so that she can blow half the chads on campus. These guys are the ones that will determine whether you make actual life-changing money or move back to your mother’s basement while your new stepdad subtly judges you.
- Vega (V): This represents the change in option price per change in the option’s implied volatility. Vega is highest when the stock price is at the strike price and when the option is farther out from the expiration date.
Ex: Let’s assume the premium of an option is 7.5, IV is at 20% and vega at 0.12. If the IV moves up from 20 to 21.5, that is a 1.5 increase. The option price will increase by 1.5 x 0.12 = 0.18. 0.18 + 7.5 = 7.68
- Delta (Δ): Delta is a change in the option’s price due to a change in underlying stock price. Assuming we have a delta of 0.5, that means per every dollar the stock price goes up by, the option premium will go up by 50% of that change. Delta is often highest the farther ITM the option is and will often be the most volatile the closer the strike price is to the stock price. Call options have a delta of 0-1 while Puts have a negative delta of 0 – (-1). The absolute delta of an option also tells you the probability that the option will finish in the money.
- Gamma (T): Gamma is the rate of change in an option’s delta per 1-point move in the underlying’s share price. It is essentially the first derivative of delta and is used to gauge the price movement of an option relative to how far OTM or ITM it is. Taking this further, gamma is also the second derivative of an option’s price with respect to the underlying share’s price. This is because the delta is the first derivative of share price and since gamma is the first derivative of the delta, it is, therefore, the second derivative of the share price.
Whenever you long an option, you have positive gamma exposure and when you short, you have negative gamma exposure.
It is also important to note that gamma approaches 0 the farther an option becomes OTM or ITM. Gamma is also at its highest when the strike is ATM.
- Theta (O): This Greek is probably the easiest to understand. Theta is the time decay of an option as it approaches its expiration date. This means that theta measures the constant and steady decrease in an intrinsic value for an option on a daily basis.
For those of you that don’t know, the delta of an option is not stagnant, and its rate of change in accordance with share price changes is represented by the option’s gamma. You can actually map out the expected change in an option’s delta in accordance with the underlying share price via the delta curve.
Let me show you the delta curve for a call option:
Note that the delta becomes more volatile as the option becomes ATM as the stock price rises before slowing that rate of change as the delta approaches 1 the deeper the option goes ITM. The delta will approach 1 because the absolute value of a delta represents the market’s expectation that the option will expire ITM so it makes sense that the more ITM an option becomes, the higher that percentage will be as it approaches 100%.
When you look at the delta curve for a put option, you will find a lot of similarities with the call option delta:
Just like with call options, the delta becomes more volatile as the option becomes ATM; however, remember that put options have a negative delta and because it becomes more ITM the lower the stock price is, a rising stock price will result in a delta approaching 0.
I got these equations from my CFA textbooks so the nomenclature for these option strategies might be different than what you are seeing on your brokerage page. Either way, you can just look at the descriptions I have made and figure out which strategies I am talking about.
To wrap this up I am going to go through some popular options strategies that are often mentioned in investing subreddits. These descriptions will include what the option strategies entail, what will be their value at expiration, how much profit you can make, your maximum possible gain, how much money you can lose, and what price you need to be at in order to break even.
First here is a list of the variables I will be using and what they represent:
- S0 : stock price at open
- ST : stock price at close
- X : strike price
- Co : call premium
- Po : put premium
- XH : higher strike
- CL / PL: premium on call/put with a lower strike
- CH / PH: premium on call/put with a higher strike
This is longing for a stock and selling an OTM call option on it. People often do this in order to increase the “yield” on investment, meaning they get to haul in some additional cash flow on their stock holdings. Benefits to this strategy include the cash flow you receive from selling calls and its ability to reduce the overall volatility in your portfolio. The downside is that because you sold calls, you limit your upside potential because if the stock price goes over the strike price, it would be assumed that the option you sold will be exercised; therefore, there is a ceiling on how much money you can earn.
- Expiration value: ST – Max[(ST – X), 0]
- Profit at expiration ST – Max[(ST – X), 0] – So + Co
- Max Gain (X – So) + Co
- Max Loss So – Co
- Breakeven Price: So – Co
This is longing a stock and a put option on the stock that is usually OTM. The idea here is that the put option serves as a kind of insurance on your stock holdings. By purchasing puts, you limit yourself on how much money you can possibly lose which will serve you well whenever the market decides to hit the shitter and enters a correction. Another benefit to this strategy is that, unlike covered calls, you still have unlimited upside potential on your stock holdings. The downside is the money you have to spend in order to ensure your position.
- Expiration value ST + Max[( X – ST), 0]
- Profit at expiration ST + Max[( X – ST), 0] – So – Po
- Max Gain ST – So – Po
- Max Loss: So – X + Po
- B.E price So + Po
Bull Call Spread
This is a directional play with options. Meaning in this case you are betting that the stock will go up. Bull Calls is longing for a call option with a lower strike and at the same time selling a call option on the same stock with the same expiry date at a higher strike. Here you are trying to profit off the deltas in which the positive delta for the option with the lower strike will be greater than the delta for the option with the higher strike and as the stock price goes up, you can profit from the delta difference. A benefit to this strategy is that because you are selling an option as well as buying one, you can limit your cash outflow. A downside is that you also limit the amount of money you can gain with this strategy. You can also do this strategy with put options in which you sell puts with the higher strike and buy puts with the lower strikes. For simplicity’s sake, I will just list the equations for the strategy with call options.
- Profit at expiration Max( 0, ST – XL ) – Max(0, ST – XH) – CL + CH
- Max Profit XH – XL – CL + CH
- Max Loss CL – CH
- BE XL + CL – CH
Bear Put Spread
Similar direction play just like Bull Calls but in this case you are betting the stock is going down. Here you are longing to put options with the higher strike and selling puts with a lower strike. The expiration date must be the same for both options. The rationale of profiting off the Greeks and the pros and cons remain similar to Bull Calls.
- Profit at expiration Max(0, XH – ST) – Max(0, XL – ST) – PH + PL
- Max Profit XH – XL – PH + PL
- Max loss PH – PL
- Breakeven XH + PL – PH
This strategy is used when you think a stock is going to trade in a certain range. Here you are longing the stock, longing an ITM protective put, and selling an OTM call. The idea is that the put will provide downside protection while the call provides a ceiling on how much money you can earn. The main benefit is that it allows you to buy protection while limiting your cash outflow since you sold a call. The downside is that upside is limited just like a covered call strategy.
- Profit at expiration (ST – So) + (XL – ST) – (ST – XH) – (Po – Co)
- Max profit XH – So – (Po – Co)
- Max loss So – XL + (Po – Co)
- Breakeven So + (Po / Co)
This is a directional play except over here you have no idea what the direction is. This strategy is ideal when betting on the general volatility of the stock without any idea on where the direction of the stock will go. Here you are longing both a call and a put on the same stock at the same expiration and at the same strike. The idea is that as the stock goes up or down, the delta of one option will slowly go to 1 while the other goes to 0 and you can profit off the gamma. The benefit to this is that you don’t need to bet as much in a certain direction, the downside however is that you are longing volatility and if the volatility does not reach high enough to what is priced into the premium, then you will lose money on both the call and the put as they both expire to 0.
- Profit Max(0, ST – X)
- Max profit = Co + Po
- Max loss Co + Po
- Breakeven X – (Co + Po) and X + (Co + Po)
Beginner and Guide on how to stop losing money online
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Is Day Trading Worth It? How to Get Started in 2023
Is Day Trading Worth It? in 2023? What is Day Trading why it matters? For the few that figure it out, it’s a great career. Is Day Trading Profitable? The short answer is Yes
Is Day Trading Worth It?
For 99% of people who try to make it a career, the answer is NO. For the few that figure it out, it’s a great career.
What is Day Trading? Is Day Trading Worth It?
Day Trading is where you buy and sell over a single day’s trading with the intention of profiting from small price movements.
These traders like picking a side at the beginning of the day, acting on their bias, and finishing the day with either a profit or a loss.
They don’t like holding their trades overnight.
Is suited for forex traders that have enough time throughout the day to analyze, execute and monitor a trade.
Is Day Trading Worth It?
I have been at this a long time, have walked through the valley of death, and know what it takes to be successful, and I can tell you who is full of shit and who isn’t by what people post on these forums.
Most of what you read is from day traders who are not making money. At best they are breaking even, but more than likely their account is slowly dwindling away month after month.
They stay in the game because they win about as much as they lose, but are not profitable. The commissions are slowly eating away at their account, and they are frustrated because they believe they are good at this, but their P&L does not reflect this. They have convinced themselves they are really close to turning a profit, but it never happens.
When they finally throw in the towel, they will post things like… day trading does not work, nobody is making money, if you day trade you will lose money, the system is rigged against you, etc. Those that don’t throw in the towel should post things about how simple it is, you buy here and sell here, and you do this and do that, and here is how I am making money. When they tell you how they are making money, that is when your BS meter should go up. Nobody ever wants to talk about losing money or losing trades, just the winners. The guy in the chat is always talking about the winners, but never the losers. When I talk to people about trading, we never talk about winners, just the losers. Is Day Trading Worth It?
Is Day Trading Worth It?
There are a whole bunch of reasons why people are unsuccessful in day trading, and can’t make this a career, but the biggest hurdle is you. Trading comes down to you making decisions. The way you make decisions, your thought process, and how your mind works under stress, all influence how you trade. As humans we are all hardwired the same way, have been taught the same things, and react to certain things the same way. If you were in a shopping mall and heard gunshots, what would most people do? They would run. They would run away from the gunshot sound. Others would take cover. How many would do nothing? Almost nobody would do nothing, because we equate gunfire with being shot and possibly killed, so doing nothing is crazy.
Psychological Part of Day Trading
When you are trading, and the price goes against you, you are going to react like the 99%. Just like those that ran or took cover when they heard gunshots. You are going to react and make decisions, predictable decisions, just like the 99%. The market understands this human behavior and trades against the expected behavior. You will never be successful, and being able to think about day trading as a career, until you change behaviors, is very hard to change.
I go into every trade expecting to lose. You go into every trade expecting to win and have already calculated how much you expect to profit, and what you are going to buy with your profits. Different mindset.
Emotions in Trading
I am okay with losing 50% of my trades if I am trading according to my plan. You are not okay with a single loss and the idea of losing is painful. Again different mindset.
If I am winning too much, I see it as a bad thing. You see it as you are an incredible trader, and you are the shit!. I see it as me getting out of winning trades too early. You are focused on your win/loss ratio. I don’t care about the win/loss ratio, because it does not mean anything to me. Different mindset
I only know how much I am willing to lose on a given trade. You only know how much you plan to win on a given trade. Different mindset.
I have outlined a few characteristics of how a successful trader thinks vs an unsuccessful trader. Be honest and ask yourself which one are you.
Is Day Trading Worth It?
Day trading can be an incredible career but you have to know what you are doing, and have to be humble and respect the market…and most of all protect your capital at all costs.
UNXD NFT Announces $4M in Funding to bring luxury fashion in Metaverse
UNXD NFT, What is UNXD? an exclusive NFT marketplace for digital luxury and culture. UNXD raises $4M in Funding. UNXD token. UNXD coin. UNXD fashion week. UNXD NFT marketplace.
What is UNXD NFT?
UNXD, an exclusive NFT marketplace for digital luxury and culture, has successfully raised $4M in its latest funding session backed by the crypto-native investors Animoca Brands, Polygon Studios, Red Dao, Arcanum Capital Bitscale Capital, Future Morningstar Ventures, Perfect Ventures, and many others.
UNXD NFT raises $4M in Funding
The UNXD has already initiated an essential partnership with the luxury brand Dolce & Gabbana, resulting in a dedicated NFT collection called “Collezione Genesi” – revealed in August 2021 and fetched just under $6M at the final sale – and the upcoming launch of the NFT community “DGFamily.”
UNXD is one of the first projects fully dedicated to Web3 fashion. The funds raised will help UNXD grow its team and ecosystem, including launching the “Astronomia Metaverso,” a bespoke collection featuring high-end physical and digital watches.
Read the announcement: Coindesk
Learn more about: UNXD
How to Diversify Portfolio
How to diversify portfolio. What is diversity portfolio? Top 10 tips for diversifying portfolio. Diversify Portfolio. Ways to diversify portfolio.
how to Diversify Portfolio
Right now, it’s hard to know what to invest in. Recession may be looming. War in the Middle East is likely. Trump’s trade war with China is disrupting the economy.
There are other advisers better equipped to answer for you than I am. Also, to properly advise you, a financial planner needs to know your income, net worth, age, family and defendants, risk aversion etc.
What is Diversify Portfolio?
Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. This practice is designed to help reduce the volatility of your portfolio over time.
One of the keys to successful investing is learning how to balance your comfort level with risk against your time horizon. Invest want you are ready to risk not life-saving.
One way to balance risk and reward in your investment portfolio is to diversify your assets. Diversification can help mitigate the risk and volatility in your portfolio, potentially reducing the number and severity of stomach-churning ups and downs. Remember, diversification does not ensure a profit or guarantee against loss.
How to Diversify Portfolio
have a few suggestions in general which may or may not be suitable for you
Top 10 Tips and Ways to Diversify Portfolio
- Invest in silver. Physical bullion coins, at just above the spot price. Also, maybe a leveraged silver ETF. So if silver goes up to $1, you gain $3 per oz.
- Mid-cap oil stocks are selling at 70% of their value if liquidated. Also, some are paying very high dividends. This is a classical Benjamin Graham buy situation.
- Interest rates are so low, that it makes sense to borrow on a mortgage. Income properties in select smaller cities could give you cap rates well above the cost of borrowing. You might buy at say, a 6% cap rate. Then you’re borrowing at say 3%. You have an immediate spread. But then you raise rents, cut costs, and now you’re at an 8%, 9%, or even 10% cap rate with money cost at say 3%, you’re making good money. Income property could include student housing, renting rooms to college students; renting units short term via Airbnb or other similar platforms.
- Keep cash on hand for liquidity, bargains, unexpected problems.
- Cheap rural vacant land preferably with trees and a creek. It will acquire more value for someone looking to live off the grid. Meanwhile it-s a haven for you in the event of civil unrest. Plunk a cheap used trailer on it. Rent it out on Airbnb and other sites.
- An ETF of Israeli startup tech and biotech companies.
- Short selling or buying options that pay off when GE makes a massive decline or goes into bankruptcy protection. Harry Markopolos, the whistleblower who uncovered Bernie Madoff’s Ponzi, 9 years before anyone would believe him, recently released a 170-page forensic accounting report that says GE has covered up over $30 billion in losses. GE stock is down, but it will go down to much much more.
- A part of your portfolio should be invested in private lending for high cash flow yields. But only in loans with collateral. Hard money mortgage lending to renovators and flippers, using a reputable mortgage broker, is good. With points and high-interest rates and prepayment bonuses, you should yield 15% per annum.
- REITS, but not commercial real estate ones. Amazon is killing retailers. Apt REIT.
- Realty tax liens. You either get paid your discount or end up owning the property for back taxes. Should yield you 15% — 20% per annum.
How to Diversify Portfolio
Buying a franchise and hiring someone to run it for you. Check cashing/ payday loans or car title loans could be profitable. Net approx 25% — 30% annually.
The diversity of your portfolio is a personal choice. At a minimum, it usually takes into account your age, goals and risk tolerance. If you are married, it may also consider your spouse’s age, goals and risk tolerance.
Assuming that your portfolio was already diversified in 2020, you may need to make adjustments as bonds mature or are called, CDs reach maturity, stock prices fall, or your risk tolerance increases or decreases. Most people review their portfolios at least annually. How to Diversify Portfolio
If you have all of your assets in one area, the way to diversify in 2021 is to balance that area with other areas. Areas could include bank deposits, mutual funds, real estate, stocks, bonds, private businesses, and Treasury notes. There are many more investment opportunities, but these are the most common.
Like, share, and comment if you agree with the above statement
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Disclaimer: Please, don’t invest what you can’t lose and please, don’t invest into anything without proper research. The following is a guideline but I’m not a financial advisor.
How to Diversify Portfolio
VIAC Stock Price is Setting Up for the Mother Breakouts, Viac Stock Forecast, Quote, and News
VIAC Stock Price. VIAC is an attractive target for big whales, and any day soon we may hear M&A news. VIAC Stock Price Today. Viac Stock Forecast. viac stock analysis
VIAC Stock Price
With the recent rumours of Comcast M&A and the breakout that happened on Friday plus the options activity, I really think it’s good time to get in the train of $VIAC, from Fundamental point of view the stock is perfect, and technically also it looks perfect right now.
My favourite fact in the whole market right now is that VIAC is in the same business as NFLX, has a comparable Library of content and has roughly the same annual revenue and profitability, but trade at 1/7 of the Price/Earnings ratio and 1/8 of the Price/Sales ratio of NFLX.
The book value per share of VIAC right now is 29.69$ so in the worst case scenario we can assume that the price won’t go below 30$ which I think will not happen unless we have a financial crisis. In my opinion the price won’t drop below 40$ again this year and if it drops to this price I will definitely YOLO all my portfolio into VIAC.
Growth is coming for VIAC, and what makes the things more interesting, VIAC is an attractive target for big whales, and any day soon we may here M&A news.
viac stock price forecast
Finally I really believe that VIAC is undervalued in an overvalued market, and it has more room for growth with Paramount+ than its competitors, IMO in a normal market the price have to be 70$ but in this overvalued market it should be at least 100$
In the comments also I will add a link to a small comparison between VIAC streaming revenue and ROKU total revenue.
- VIAC 28$B
- ROKU 57$B
- NFLX 223$B
TL;DR VIAC has just started to move and it is setting up for the mother of all breakouts, options volume confirms this, to the moon sooner or later
Remember this not a financial advice always make your own research before any decision.
viac stock price forecast READ MORE ON CRYPTO CLICK HERE
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July 26, 2021 at 9:13 pm
Keep on working, great job!