NKLA

[Patriam1066]

Sounds Jewish, I don’t get it

[Gwaihir]

Now, on flipside of selling a 30$ put which suggests you dont believe the price will fall below 30$ by expiration suppose you arent so optimistic about a stock.... suppose you think it may go up to 35 in 16 monyhs but it wont go higher than that...what do you do?

You can buy 100 shares of a stock, and sell at 35$call for 16 months out and the broker will collateralize your 100 shares, while the buyer of the call whoch thinks it WILL be over 35 (or it may just part of an options spread bet) pays you the premium for guaranteeing you will walk away at 35$/share.

Currently, this option for january 2022 is valued at approximately 1400$...
So if the price doesnt go over 35 you get to keep the 1400 now...and the 100 shares in 16 months get returned

If the price DOES finish at, lets say 36$, you get to keep the 1400 BUT you have to sell your shares at 35$each for 3500+1400 on your 3,125 investment. So youve limited your gain to a maximum of 4,900$on your investment.

Lets so, however, that the price drops to 20$ in this event you would keep the 1400 but your 3125 stock value would drop to 2000 meaning you 275.

If the stock drops to 15 you get 1500$in shares back and 1400 i. Premium =225$ loss etc

[Gwaihir]

next lesson.

Suppose you're excited about NKLA and you don't think it will go down in value, but you don't think it will go over 45$ in the next 16 months....

you can buy 100 shares for 3125, and sell a 45$ jan 2022 call collateralizing the 100 shares for $1300

and

you can collateralize 3000$ to sell a 30$ jan 2022 put for $1600

This would return 2900$ in premiums on a 3125+3000 investment, and if the price closes at 50$ in January 2022 you will get 4500 for the sale of your stock, the 1300$ premium for the sale of the call option, the $3000 collateralized against the 30$ put option, and the 1600$ for the sale of the expired-worthless put option, against a total investment of 6125 (4500+1300+3000+1600 = 10400 max gain

or suppose the price of NKLA plummets to 20$, you would get the 1300$ for the sold call that expired-worthless, 1600$ for the sold put that expired $10 in the hole, 2000$ worth of your 100 newly bought shares that you paid 3000 for, and 2000 for the stock value of your 100 shares that are returned to you on an investment of 6125 (2000+1600+1300+2000 = 6900)

suppose the price plummet all the way to bankruptcy (0$)
you would gain 1600$ on the put option premium, 1300$ on the call option premium, and 200 shares in bankrupted and worthless stock. 6125 invested (1600+1300 returned = 2900



The only event in which you would come out "ahead" of said spread would be if 6125$ worth of stock now (196 shares at 31.25) grew more than 69.8% (price over $53.05) over the next 16 months because your maximum return on the spread is capped at 10400 with everywhere between a +33% gain and +69.8% netting you more profit on the spread than on the loss, plus you dont actually begin losing money on the spread until the stock falls below 16.13, because the intercept-point of the spread is (2x+1600+1300)-6125

aka
0=2x-6125+2900
2x = 3225
x=16.13 where X is the stock price on January 21, 2022.

[Gwaihir]

so, in closing, I'll reiterate, what's the point in committing to owning Nikola when optioning it long-term provides a -51% to +70% window with a mitigated loss of -55% in the event of bankruptcy and owning it requires a +70% gain with 100% downside risk to outpace the gains youll get from optioning it both ways and optioning it both ways also affords zero losses until price closes below 16.13 on Jan 21,2022 with irrefutable gains anywhere above that 16.13 y-intercept?


BTW, how I can understand this and you're left scratching your head wondering what I'm talking about speaks volumes about the intellectual disparity going on here on these forums.

[Gwaihir]

BTW the natural logarithm of 1.7/16months indicates that betting on NKLA directly over optioning means you are enthusiastic that NKLA will outpace an exponential growth rate of 3.31% per month for the next 16 months during a manufactured public health/economic crisis.

[Mario 7]

That guy created a scam to short the stock with his cronies

[Gwaihir]

Likewise, if you believe NKLA will remain between 20 and 45$ in the next 16months, you can option both ways for 3125 on 100 shares, sell a 45$ call, collateralize 2000$ and net 905$ in premiums on a 20$put, and rake in a max return of 4500+1300+905+2000 = 8705$on 5125 invested with a y-intercept of
2x =5125-2205
X =14.60 bottom limit for a breakeven with a max loss of 2,920$ in the event of bankruptcy for setting the upper limit at an investment growth at that same +70% for a profitability window of -53.3% to +70%

[Gwaihir]

Likewise, if you believe NKLA will remain between 20 and 45$ in the next 16months, you can option both ways for 3125 on 100 shares, sell a 45$ call, collateralize 2000$ and net 905$ in premiums on a 20$put, and rake in a max return of 4500+1300+905+2000 = 8705$on 5125 invested with a y-intercept of
2x =5125-2205
X =14.60 bottom limit for a breakeven with a max loss of 2,920$ in the event of bankruptcy for setting the upper limit at an investment growth at that same +70% for a profitability window of -53.3% to +70%

Be mindful, that in both scenarios the profitability of the trade = premium 1+ premium 2 + 1x where x is the delta of the increase above the current stock price x 100 for the 100 shares you do have to "own" in order to meet collateral requirements for selling the call option in the first place.

Example: suppose you move on the 31.25 stock x 100, and the 20$put, 45$call..

You pay 31.25 x 100

You collateralize 2000 for the put option

You collect 905+1300 premiums at 20 to 45

Price ends at 42.00

You have 100 shares =4200
Put option expires worthless =-0$
Call option expires worthless =-0$

You have:
4200 in stock
2000 in put option collateral returned
905 in put premiums
1300 in call premiums

Total return on 5125 is 8405 if you immediately sell those 100 shares to the market when they return uncollateralized

Example 2: price remains flat

You have:
3125 stock
2000 collateral
905 premium for sold put
1300 premium for sold call

Return 7330 on 5125 invested

Example 3: price drops to 25
2500 stock
2000 col
905 P1
1300 P2

Returned 6705 on 5125 invested despite losses on the parent stock.

Example 4: price plummets badly to 10.00 a nearly 70%drop
1000 stock
1000 of your 2000 in collateral is left because you have to buy 100 shares at 2000 from someone that just bought them for 1000 on the market.
905 in put premiums
1300 in call premiums

Returned 4205 an 18%loss on 5125 invested.




Had you invested 5125 in stock directly today, you would be down by 196 shares at 31.25/ea x 10$ to 1960 in stock which is 61.75% loss, comparitively

[Gwaihir]

Last example: nikola triples in value in 16months;
4500 in stock since youre forced to sell those sweet, sweet 300% gainers for 45 instead of 93.75
2000 put collateral
905 put premiums
1300 call premiums.
8705 returned on 5125 invested =+70%

Had you bought 196 shares for 5125 directly you would now have 18,375 for +200% gains.

So, investing directly in NKLA indicates you believe it has lots of upward potential past the +70% gain limit/and profitting on a stockloss of up to -53% is not applicable since its +70% in 16-months rangebound.

196x = 4205+100x
96x = 4205
X = 43.80 is the price at which buying 5125 in stock now exceeds the return you get on a 20/45 put/call spread that profits on losses, flat pricing and respectable gains.

[zodium]

Originally Posted by Patriam1066 [You must be logged in to view images. Log in or Register.]

I just buy stocks because I have enough money not to care about risk and because I’m actually decent at it, but yeah, I never figured out the options game

this is the correct position, you already know as much about options as you need to.