Buying Naked Calls

Discussion in 'Options' started by Bushwacked9, Nov 9, 2019.

  1. Real Money

    Real Money

    Wouldn't synthetic long stock using ATM options be similar for the OP goal?
    #31     Nov 10, 2019
  2. destriero


    The GOOGL Jun20 1290C is 114 mid. The 1290P is 80 mid. The Mar20 1260C is 103 mid.

    OK, so let's stress the hold of an 8mo call for 100 days.

    Shares rally 30 points over three months (held) and vol (and skew) are unch.

    On FebEx the Jun20 1290 call will be trading at 103 mid (unch vol/skew) using current curves.

    Buy the calls, six to eight months in the future, with strikes three to four deep ITM. That way, if I'm right? Then hopefully the falling IV will help me enough to overcome some of the other math, and my delta's will thus improve with the passing of time (though time is working against me). BUT IF I'm right, then that might be the best way to go. Mathematically speaking. Six to Eight Months in the future ... 4 or 5 strikes deep in the money.

    In no way does a falling IV benefit the position. Period. The increase in the gamma position is artifact of a falling IV and the passage of time. Delta is delimited(bounded) to a hundo--hence your gamma drops on price and rallies on time. You're only benefitting from delta and a rise in the vol-line from strips or skew, or both.

    A drop in IV is bad. An increase in gamma means you're losing on vol, wrong on price or you've held it for an extended period. If shares rally your gamma will decrease. Duh. IV good. Gamma (increasing), for you, bad.

    VOL-RISK: Think of time as synthetic vol. As time passes the position loses to theta or the vol-line must increase. I cannot predict what will happen to the vol-line other than to say it would be advantageous to sell the call a week or two before an earnings release.

    @raVar, you don't know anything about vol. Worse, you f*cked it sideways. Up is down for you.
    Last edited: Nov 10, 2019
    #32     Nov 10, 2019
  3. destriero


    What would that add? Run the synthetic for what purpose?
    #33     Nov 10, 2019
  4. Real Money

    Real Money

    He said he is bullish. He said he expects upside 5-10% in the next 100 days. Seems like should just long the stock or synth long stock than buy deep ITM call.. no?
    #34     Nov 10, 2019
  5. destriero


    Why synthetic long shares in lieu of natural shares? He needs the reduction in req.
    #35     Nov 10, 2019
  6. Real Money

    Real Money

    Hey des, I'm just confused about the advantages of long ITM call few months out.

    Any comment on any of this?

    raVar said:

    I'd buy calls on the SPY, out six to eight months in the future ... with strikes three or four deep ITM....that's probably the best way to approach it on the put side too.

    Now if you're WRONG?

    You didn't have as much tied up in going farther in the money.

    But you can't hold them for the full six to seven months, or the theta is going to bleed out, and drain the worth of your option. You may want to look at options that are a year or two away, if your periodicity is six months.
    #36     Nov 10, 2019
  7. destriero


    He's arguing for options as a proxy. That's fine. He's arguing for a massive bet on vol without knowing it. Buy a 2Y call. Shares rally 10 and the vol-line drops from 23 to 22. He's just lost $400.

    There is nothing worse (in forums) than these Dunning Kruger types. Borderline sociopath. Nobody can have a deeper understanding than a hick that read a blog post on options.
    #37     Nov 10, 2019
  8. destriero


    There are four basic contributor profiles on here:

    1. railbird: just wants to watch the shit show.
    2. ego case/flexer: self-explanatory.
    3. spitballer: genuine interest in discussing topics for angles, etc.
    4. stealth vendor: net loser over the years. Just looking for the one managed account.
    4a. Dunning Kruger stealth vendor: dangerous subset. @raVar
    4b. NA.
    #38     Nov 10, 2019
  9. Retief


    There's a 5th basic contributor profile: Mean people, aka assholes.
    #39     Nov 10, 2019
    Pkay and Bushwacked9 like this.
  10. taowave


    Before you get involved in the more advanced nuances of options,you need to answer a couple of questions or should I say have the answers:)

    Is 5-10 percent your target and you are out?

    If its up 5 -10% are you going to trade with a trailing stop?

    Are you punting,i.e. you place the trade and walk away,or will you stop yourself out ?

    If you are trading with a stop,will it be based on the stock price or option price?

    You are getting a bit ahead of yourself with the other stuff,and its really not complicated..

    #40     Nov 10, 2019
    BlueWaterSailor likes this.