TSLA
Tesla
-- 379.280 NVDA
NVIDIA
-- 138.310 RGTI
Rigetti Computing
-- 20.0000 PLTR
Palantir
-- 75.190 AMD
Advanced Micro Devices
-- 120.630 
Understanding Options - Part 3
Back with part 3! This took a while to write, cause I was quite busy this week and will also be the last part of options sharing. Would like to add one more disclaimer due to certain people's comments/messages to me. PLEASE test out options on paper trading, or understand it more before diving into it or even trading it, and I'll address the most asked question:
I bought/sold some options, where are my shares???
IN GENERAL, you ONLY get your shares when it meets 2 criterias:
1) when the price is past your strike price (above strike for call, below strike for puts).
2) at expiry (after market close, might take a while as well, but usually should be in by the next trading day due to settlement cycles)
#1 is the more important factor, and it depends on your direction. If you're LONG the option, you CAN, exercise the option to get the shares early. This is what we call EARLY EXERCISE. Likewise, if you SOLD the option, you CAN get early assignment. But in general, most people wait till the options expiry date.
How should I improve my options knowledge?
I firmly believe that you should understand options fully first before jumping in. Please paper trade options, or even just add to your watchlist, to see how options price react to price action. A good one to watch today would be $Tesla (TSLA.US)$ , as post-earnings, you would expect an IV crush, so be prepared to see option prices drop. Why I say this is that, if you were to look at most TSLA options that expire end of this week, and look at their price history, you'll notice that yesterday, when TSLA was puking, call options rarely dropped in price and some of them even had their prices up, due to the fact that the increase in IV outweighed the loss in Delta. By looking at options just on the watchlist, it gives you a better idea before trading or investing in options.
This is why I advocate for beginners who are starting to learn options to fully understand options price action before engaging in any trades.
Okay, with all the serious talk out of the way, I would like to share one of the best ways to use options, and that's with Long-Term Equity Anticipation Securities (LEAPS).
So what are LEAPS?
They are essentially a LONG EXPIRY call options, usually at least 1 year in the future. Remember how call options for US stocks are representative of 1 lot or 100 shares? So, your call option with this far expiry will be as though you "bought" 100 shares of the underlying. So why LEAPS instead of shares? This is because if you firmly believe in the growth of said stock, and believe that price will go up in the long run, LEAPS will essentially make around the same amount of money with LESS capital.
In the period of April 2024, GME was trading at around $10 to $15, 100 shares would cost you around $1k to $1.5k, whereas options expiring on 20th June 2025, cost you about $400. When GME made its run to $64, the highest price of the same option for that day was sold at $45.
Comparing shares with options:
If you bought 100 shares of GME at lets say $1k ($10/share), your shares would be worth $6.4k, with your profit being $5.4k
If you bought 3 LEAPS, at lets say $400 each (total investment of $1.2k to be as close to the above 100 shares example), your options would be worth $13.5k (4.5k x 3), with your profit being $12.3k
Can you see that with LEAPS, for lesser capital, you can potentially make larger gains?
WAH IVAN, THEN LIKE THAT I JUST YOLO FULL PORT INTO LEAPS? CONFIRM MAKE $$
No. That's not what I'm saying. There is a risk of LEAPS expiring out of the money. And I have seen it before - a good example would be around end 2021, right before $SPDR S&P 500 ETF (SPY.US)$ entered its bearish downtrend for about 2 years. If you had entered a LEAP then, you would probably have seen a lot of red, assuming the contract you bought was for end 2023 (around 2 years of expiry). So while LEAPS sound enticing, please manage your risk appropriately.
That concludes the end of options sharing. There's way more to talk about options, but I feel like I can never fully cover the whole topic. I hope that this mini series has brought some better understanding on options and how you can potentially use it to your advantage in terms of trading.
My next post would probably be related to the topic of the week on Capital Gains vs High Dividends, of which its still in my drafts and I expect to post that. After that, I'll talk about how I personally manage risk when I trade, and this would probably resonate with many more of you.
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Just a dumb bull believing that stonks only go up... until there's a reason to cut and cosplay as a bear
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Gardenia Roti : so if I very confident Tesla will raise next year. can I put a leap for Tesla?
Gardenia Roti : and.. do I have to wait til the expired date to cash out? what if middle of the year Tesla already raise enough for profit. can I withdraw and profit?
dumb bull ivan OP Gardenia Roti : yes, exactly. If you firmly believe in TSLA price to go up, you can buy a LEAP call option. And yes, you can buy/sell your options anytime. If you feel like profits are enough, feel free to cut. And in the inverse, should price go against you, you can cut at a loss
Bear Bear Craig : Good sharing
Filomena Angeles : Very grateful I found your post.
This my first time to see your post and follow now, where can I see you previous post w the options topic 1st and 2nd part that I missed.
Thank you very much!
dumb bull ivan OP Filomena Angeles : https://www.moomoo.com/community/feed/113309496180742?share_code=01v91H
hello! here's part 1, let me link part 2 shortly (not sure if this will work)
but if it doesn't, you can click on my profile and see under original posts for all my posts!
dumb bull ivan OP Filomena Angeles : https://www.moomoo.com/community/feed/113315026960390?share_code=01v90S
10baggerbamm Gardenia Roti : you need to understand terminology what you just said is not correct.. can you put a leap. that means nothing you either are going to buy a put or you're going to sell a put because that determines your investment strategy. if you believe the stock is going to Crater fall precipitously to your strike price or below and you want to profit from what you believe to be that impending decline then you're going to buy a put. if you want to potentially take ownership of the company below the market rather than placing a limit order for the day or good till cancel and hoping that the stock falls so that your order is triggered and filled you can sell a put collect the premium up front it's cash money it's yours and now regardless if the stock falls or not you have profited from the premium that you received and if the stock falls and closes at your strike or below then the option is exercised and you are put the stock at your strike price. your cost basis would be the premium that you received minus the strike.
so it's important before you enter or begin trading options just like was mentioned you paper trade but you must also understand all of the terminologies correctly because they are used incorrectly every day on this and many other forums