But when you get assigned at $20, the price of the underlying could be at $18 or even lower at $16 or $14. Yes you earned about 50 cents to $1+ on premiums but you just lost $2, $4 even $6 on the underlying which is what you are ultimately aiming to profit from. I might not get filled at $20 but when I do, I know I got filled at the best price at the time. I didn't lose anything. If I don't get filled I don't get filled but when I do get filled, I get the best price available so I am better positioned when I tp or even when I make a loss. Same thing when I tp, I tp at the best price available if I get filled. If I don't get filled, I just wait. But when you tp, you tp at your strike that again could several dollars or even 10's of 20 dollars away while earning several tens of cents to $1+ in premiums. The ultimate goal of the wheel strategy is not really to profit from option selling; it is really to still profit from the underlying, is it not? I mean if you are into profiting from option selling then there are lot more profitable, lot more price efficient option strategies out there than the wheel. But if you were going to profit from the stock, then why not just invest in the underlying so you get the full profit or with call options if you want to save on cost. Looking at this real example of NIO. On Jan. 15, you got assigned for the 58 strike put. The price of NIO closed at $56. 27 with low on that day of $55.67. You could've got in at least as low as $56.27 if not as low as $55.67 but you had to buy the stock at $58, a difference of (56.27-58) = $1.73 at close and up to $2.33 if you were lucky to get it at absolutely the lowest, all higher than what you got compensated for with the premium. And while you were holding the underlying covering for the short call, you exposed even bigger opportunity cost with the wheel strategy that some of the other posters might have mentioned in that you had to forgo the opportunity to sell it at profit and instead held it until it was making a loss. After having the stock, the price of the stock actually reached as high as $64.52 on Jan. 25, 2021 or at least at $61.95 at close of Jan. 22, 2021 so even with the price assigned to you at $58, and taking the closing price on Jan. 22, you could've made a profit of (61.95-58) = $3.95 and if you had bought the stock outright at assuming $56.27 the previous closing price, you would've made an even higher profit of (61.95-56.27) = $5.68. Instead you just made (0.88+0.58) = $1.46 even including the premium on Jan. 25, 2021 while forgoing a profit of at least $3.95, with a price from option assignment for a difference of (3.95-1.46) = $2.49 If it was from buying the stock outright, the opportunity cost or the profit difference would've been even bigger at (5.68-1.46) = $4.22. And even if you didn't want to wait out until Jan. 22 or Jan. 25, there were plenty of chances when the price was higher than even the assignment price of $58 allowing you to make +ve profit before Jan. 22 but you had to forgo them all just to hold the stock to cover the short call that provided you the income. And then finally the stock went into a loss. So now you not only forwent actual profit, you are incurring real losses on your underlying. The price after Jan. 25 dropped to as low as $54.37 or $56.67 which would've allowed you to make a tiny profit if you had bought the stock outright at $56.27 but since you bought the stock at $58, via option assignment, now you are making a loss of $1.33 using the closing price on Feb. 25, barely being covered by the option premiums of (1.46+0.59) = $2.05. If we had taken the lowest price during the week ending Feb. 5 and if the week really ended on that price of $54.37, the loss of (54.37 - 58) = $3.63 wouldn't be covered at all by the option premiums. And then the price went up higher again to $62+ the week after but the same story repeats itself again, you had to forgo the profit potential for the sake of protecting the short call that generated you income. And then the price of the stock went into even bigger loss in the weeks after until now, the price of the stock is at $50.68. So with the stock that is still in your possession bought at $58.00 (that you could've bought at $56.27 or as low as $55.67), you are currently incurring a loss of (50.68-58.00) of $7.32, with income of $7.77 from options, a net income of $0.45 while incurring an opportunity cost of $1.73 when buying the stock outright and at least $3+ profit that you could've earned along the way while covering for the "income generating" calls. So yes on the surface, you are generating income from option selling but only at the expense of the underlying stock that is actually capable of making lot higher income via profit even after being eclipsed by the assignment from option selling while at the same time still have to endure the losses that will eventually overtake the income generated by the option selling but could've actually be mitigated by hedging with options. Another way to look at the wheel strategy is that it's forcing both the underlying and the option to forgo its strongest mechanism to generate income in the most inefficient way. The strongest part of the underlying is its delta of 1 that could've generated income via profit dollar for dollar and yet it's forced to stay in the background to cover for the option that only has a delta of <1 to generate only partial income. The strongest part of an option is actually its leveraged cost because of its <1 delta so it's forced to only provide limited protection to the underlying when it's suffering dollar for dollar losses.
I did NOT cherry pick. I compared everything apple with apple. If you don't bother to read people's posts or able to understand them, you shouldn't try to troll. Seriously, just fuck off!! I have had enough. Putting you piece of shit on "Ignore".
Several people? So far it's only the bluewater idiot who doesn't even bother to read what I wrote. And at the end, he didn't even understand what the wheel strategy is. He's using ATM options and thinking that's part of wheel strategy and wasting everybody's time until @qlai called him out.
I think this is a bad choice. There seems to be a rift between you, BWS and Qlai. I have enjoyed all the details and explanations of your option position scenarios thus far. But @JSOP the ONE thing I know about BWS is that he is NOT a troll. How do I know this? Because I have spoken with him many times on the Skype. He's smart, and adapts quickly. And he told me that he is new at the whole trading thing. He only started really diving into it deeply a couple years ago. He has learned more about options in that short amount of time than I ever could. He's a sponge. The way I knew he was telling the truth? By LISTENING to him, on the PHONE. You guys need to remember that the voice communication still exists. So @JSOP and @BlueWaterSailor why don't you guys just meet up on the Skype, or Zoom, or just a plain-old phone call? What is there to lose? NOTHING! You guys are already at each other's throats and are threatening with ignores...What the hell harm can a phone call do at this point? Sheesh! P.S. Airline flights. Oy!
I second that! I always look forward to his comments. But I think he got a bit too defensive about “his” way of trading. I had to re-read @JSOP post to see what it was he said and could not really find anything that offensive. One positive I find about people getting into a fight is that they take extra effort to make their points. Which benefits everyone
If you look through what I've posted here since the beginning, I always make an effort to do that anyway: I value clarity and good communication. But it's also the reason I ignore assholes like JSOP: I am quite "defensive" about the quality of my time. Productive conversations are always welcome - but I have no time to waste on, and zero interest in arguing with fanatics about their religious beliefs.
You are really taking the extreme low and high and comparing with my actual trade. I wont be able to buy at the low and sell right at the high at the exact high. Dont think anyone could. Let look at nio yesterday close at 50.04. So is it good to buy if not at what is your propose level? If buy where is the propse tp? If you look at it 1 month later it is easy to pinpoint when to buy and sell but at this exact date today 23rd feb on nio. What is the propose level to buy and sell? Opportunity cost is wasted if you are not filled for a long time I could say buy nio at $1 but it is never going to get filled and opportunity cost is wasted here
Never more than 10% on a single stock and work that way it is easier. If you have 50k then open 10 position and each position has a max of 5k risk
Yes the strategy make money for me. I can never trade outright buying and selling with macd trendline and candlestick but it is just me. But once i switch to options i never look back and my account is growing more consistent The title of buy low and sell high is not misleading with stock at current value how do you buy it at a cheaper price? You can wait for market to come down which may never happen or sell a cash secured put. If assign you are buying at below today value for sure and if not assign you get paid for waiting. Since i posted my nio trade with nio at 50.04 again i would ask so what is the best price to buy and sell without the next 2 week of data. Once we have the next 2 week it is easy to say buy at 47.22 sell at 59.34
Good for him. Best of luck to him. Seriously this is not the first time that I have seen him talking about things that he knows not much about. And I don't mind that but I do mind ppl not reading what I write (I know I write long) and just accusing me of something without even understanding what I wrote. If he didn't understand what I wrote, he could've just asked me and I would've been happy to explain. Anyway some other time then. Moving on!