NKLA

[Mario 7]

I dont believe anything you say but ok

[Patriam1066]

I’m gonna buy more GM, trying to decide when. Seems like the marker still has some tanking to do

[Gwaihir]

Nikola opens today with a 25-30% pullback

[Patriam1066]

Hey Gwaihar when do I buy GM. This is a long term holding put into a trust for my grandchildren, not thinking short term profits. Nonetheless, I still like to buy low. I understand that time in the market > timing the market, but my Middle East haggle Brain doesn’t think that way

[Gwaihir]

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

Hey Gwaihar when do I buy GM. This is a long term holding put into a trust for my grandchildren, not thinking short term profits. Nonetheless, I still like to buy low. I understand that time in the market > timing the market, but my Middle East haggle Brain doesn’t think that way

You can open a trading account with TDAmeritrade, within the "trust", yeah?

GM currently trading for 30$. Surely, you'd prefer to pay less than that, but how much less is your current target? -10% from today's price? -20%? How long are you willing to wait for the trust to take possession of the actual shares and start reciprocating their paltry dividend?

When you SELL a PUT, you're promising to buy a stock at a specific price, just like when you set a "Limit Buy" on the actual security, except you're doing it in increments of 100 shares at a time.

So, lets say you want 100 shares in the trust, and you'd like to have them in March 2021, if possible, and only if you can get them for 20% off today's 30$ price.

Currently, SELLing a March 21 2021 GM PUT contract at the guaranteed price of 24$/share (for 100 shares)will pay you $1.64/share (so, 164$)



The only difference between a limit buy and selling a put option contract is:

The point at which the transaction occurs is not
"whenever the price drops to 24$ or below from now till the time i set for the buy order to expire/cancel" (LIMIT BUY on the GM security directly)

instead

At the closing bell on a pre-specified day, the trading price is checked. If it is at or below your put contract's price, you buy them for the put contract's price. If it finishes even 0.01 more than your strike price on a "Put" contract you SOLD expires worthless (to the person who bought it from you), and your collateral is returned.
AND
THEY PAY YOU to buy your contract


(be careful not to BUY a put instead of SELLING one) Buying a put option from someone is saying that you think the price is going to drop further below the strike price than the premium you're paying, so on that expiration day, you're going to buy 100shares from the market at the closing price, and force the PUT SELLer to buy those shares from you at the (Higher) strike price to turn a profit on the difference.

The PUT BUYER is buying "hope", whereas the PUT Seller is collecting a premium on that buyer's "hope".

[Gwaihir]

IF you do not actually get the shares, and all you get/got was the premium when you sold the contract...

the collateral gets returned to you, where you can just sell another -20% off contract 6 months out for a similar premium gets dispensed to you while you wait again.

In the above example a -20% option from todays price returns 166$ in premiums on 2400$. That's about 6.9% for a 6-month hold-and-see on your 2400$.

Likewise, if you're setting a more aggressive offer (27$; a -10% discount) with the same expiration date. The premium is $260 on a 2700$ investment because ur ponying up 27/share for 100 shares. In this scenario, you are getting paid a 9.6% premium on the 2700$ hold-n-see.

You can also do shorter term contracts (5-day/10-day/20-day) basis but the premium goes down as well. For example October 23rd at 27$/share is a $2700 investment with a $60 premium for a 4-week hold-n-see if you can get it at -10% off; a 2.2% premium.

[Gwaihir]

Remember, in either scenario, whether you're setting a limit buy, or selling a put to hopefully obtain shares at a discount from today's price later, you're collateralizing that money to the broker until the buy of the stock is triggered or the option contract's parameters are met and is triggered, the only difference is you're not getting paid to set limit buys while you're waiting to see if you get the stock at your preferred price or not.

you can also sell puts set AT the stock's current price if you think 30$ is a good price, but they aren't paying a dividend for another 9 weeks, so you sell a put contract 8 weeks out, so you preferably take possession just before it pays it's dividend. Currently, a 30$ strike for a PUT sold for November 20th pays you $249 for the 3000$ invested in 100 shares (8.3% premium) but if the price goes up to 30.01 or higher by then you'll only get the $249premium, and your $3000 back in November. That's the "risk" you're taking aside from the risk you'd be taking anyway if you had no plans to sell the stock (even if it pulls back) with a buy-and-hold-long-term perspective.

[Gwaihir]

Other difference:

Scenario: GM has a really bad announcement, get's sued for a sizable amount, files for partial bankruptcy, etc (basically: Bad News that is really going to effect the stock's value over the short-term/mid-term etc)

If you set a 24$ limit buy, you cancel your buy while the price is diving quickly, before the 24$ threshhold is crossed, and reconsider if you want to invest, or what an even more conservative entry price looks live given the recent revelations. This is free because the buy hasn't happened yet and you're a sharp guy that pays attention to the market, alert for news from his prospects.

If you sold a 24$ put contract, as the price falls down at a faster logarithmic decline than is what is necessary to expect a sub-24$ price by expiration, the contract becomes increasingly more valued to where "changing your mind" requires you paying more in premiums for buying an offsetting contract than you originally collected in premiums when you sold it.

either way, you can "rescind, and reconsider" your investment offer, but that costs you money to do with a put contract that looks like its going to cross the rubicon into profitability for the person that bought your original contract, whereas cancelling a limit buy is as free as setting a limit buy was.

[Googi]

Dont buy GM

Buy NKLA its cheap right now and its the future of rigs

[Googi]

Also gwaihir has no money at all