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How much do you dabble with long term options?
Posted on 10/19/26 at 12:26 pm
Posted on 10/19/26 at 12:26 pm
Sold my car for some cash and went to go in at next dip. Buying shares doesn’t move the needle as much so considering long term calls. Anyone do this consistently? If so what term? Itm?
Posted on 10/19/26 at 5:04 pm to fareplay
I sell puts of stocks I would buy at the strike price.
Posted on 10/19/26 at 9:56 pm to fareplay
Raised kids that compounding interest is 8th wonder of the world. They get it! Live below means, invest regularly and for long term in the market. Make financial / control of time / financial independence magic for future self / families / generations.
Yet one of our kids enjoys a LEAP on crypto currency more than I would have hoped. We joke, he is our future potential white collar crime kid. More of a financial planning “maximizer” than halfway house dweller, but edgy enough to make us nervous. Kidding.
To answer for myself, zero. Old fashioned Boglehead here. Won the war. No further risk needed. Blessed!
Yet one of our kids enjoys a LEAP on crypto currency more than I would have hoped. We joke, he is our future potential white collar crime kid. More of a financial planning “maximizer” than halfway house dweller, but edgy enough to make us nervous. Kidding.
To answer for myself, zero. Old fashioned Boglehead here. Won the war. No further risk needed. Blessed!
This post was edited on 10/19/26 at 10:00 pm
Posted on 10/20/26 at 8:03 am to fareplay
Just my opinion. If you want to purchase long term options do it in the form of a spread.
This is called a "long diagonal" or a "poor man's covered call". They are basically the same thing. Research this.
This is called a "long diagonal" or a "poor man's covered call". They are basically the same thing. Research this.
Posted on 10/20/26 at 8:28 am to fareplay
Long term calls are too expensive IMO. I would only play around with those if I really liked a stock but had money tied up otherwise.
I sell puts on stocks I want to buy. Usually about 5-10% less than the spot price. If it doesn’t execute, rinse and repeat.
I sell puts on stocks I want to buy. Usually about 5-10% less than the spot price. If it doesn’t execute, rinse and repeat.
Posted on 10/20/26 at 8:32 am to jsquardjj
quote:how often do you get assigned above the market price? And if never, what do you attribute that to?
I sell puts on stocks I want to buy. Usually about 5-10% less than the spot price. If it doesn’t execute, rinse and repeat.
Posted on 10/20/26 at 9:23 am to cgrand
quote:
how often do you get assigned above the market price?
In my experience, about 1/4 to 1/3 (at most) depending on how out of the money they are.
This post was edited on 10/20/26 at 9:24 am
Posted on 10/20/26 at 9:36 am to makersmark1
so the risk/reward equation is managed by the strike price correct? Do you factor the premium into the buying (selling) decision or is it a “whatever the premium is, is fine” situation?
I’m trying to understand how yall are measuring risk (for my own learning) as the risk to a sold put is that the price falls well below the strike and you are assigned the shares significantly above the trading price on expiration. Do you find that the premium makes the risk worth it?
I’m trying to understand how yall are measuring risk (for my own learning) as the risk to a sold put is that the price falls well below the strike and you are assigned the shares significantly above the trading price on expiration. Do you find that the premium makes the risk worth it?
This post was edited on 10/20/26 at 9:37 am
Posted on 10/20/26 at 9:43 am to cgrand
For stocks that you believe represent an ownership stake in a great business, a put option makes you agree to be the buyer if the price is at or below the strike.
Let’s use Apple.
If you like the company, but would rather get in at 310 than 340, potentially you could sell a put option rather than a limit order.
A 310 put for September 2027 pays $16.
So you get about 5% premium. If it expires worthless you sort of had a bond. If exercised you entered at a price you wanted anyway.
Let’s use Apple.
If you like the company, but would rather get in at 310 than 340, potentially you could sell a put option rather than a limit order.
A 310 put for September 2027 pays $16.
So you get about 5% premium. If it expires worthless you sort of had a bond. If exercised you entered at a price you wanted anyway.
Posted on 10/20/26 at 9:52 am to makersmark1
That's a great, simple, plain-English description of put options. Thank you.
Posted on 10/20/26 at 10:02 am to makersmark1
I follow the same strategy. If I am assigned shares, I then consider selling calls on those calls
Posted on 10/20/26 at 10:02 am to minister of truth
correction - on those shares I'm assigned
Posted on 10/20/26 at 10:13 am to makersmark1
yes thank you
So you collect 1600 premium no matter what. But if the price falls below 310, you are on the hook for $100 for every dollar below 310. So 295 or so is your break even correct?
Just trying to understand the risk/reward calculus. We all know there’s no free lunch
So you collect 1600 premium no matter what. But if the price falls below 310, you are on the hook for $100 for every dollar below 310. So 295 or so is your break even correct?
quote:or it could be lower than 310 and you take a loss, plus you’ve got 30Gs tied up in the trade for a year.
If exercised you entered at a price you wanted anyway.
Just trying to understand the risk/reward calculus. We all know there’s no free lunch
Posted on 10/20/26 at 10:27 am to cgrand
It is true that if the price goes below the strike and exceeds the offsetting premium, you are losing.
Great companies stocks can move 30-50% up or down in a given year.
Buy stock in companies that you believe will make money in their sphere for a long time.
Any stock could go to zero.
Great companies stocks can move 30-50% up or down in a given year.
Buy stock in companies that you believe will make money in their sphere for a long time.
Any stock could go to zero.
Posted on 10/20/26 at 10:39 am to makersmark1
quote:thus the premium to partially offset the risk. It is interesting to me that volume in options for lower priced stocks tends to be higher than in stocks that are “expensive” per share. The cost of entry is lower but the risk is not
Great companies stocks can move 30-50% up or down in a given year.
Posted on 10/20/26 at 11:32 am to fareplay
No comment on LEAP equities as a long term hold.
I do use LEAPS for what I consider to be large price movements that I need time on. The latest example being that I am, and have been short WTI (LEAP puts) for quite some time. I have traded around this short term, but my long term LEAP puts are a bet that oil decreases, as it should since analysts are predicting near record surpluses of oil. That keeps getting delayed, but the supply/demand fundamentals remain intact. The delays are why I used as far out LEAPS as I could.
Above posters are correct. LEAPS are expensive. That needs factored in. Less of a concern for since I'm trading a long term large macro movements in underlying prices with some fundamental basis.
Also agree about selling puts to lower one's cost of entry. Warren Buffet, who is critical of derivatives, actually has sold puts to do exactly this.
I'd also suggest what I do I understand and I'm comfortable with. Anytime I've ever made an investment I didn't understand, I almost always lost. Leaving aside everything posted the rule I'd pay attention to is invest in what you know and are comfortable with. Leave the rest alone.
I do use LEAPS for what I consider to be large price movements that I need time on. The latest example being that I am, and have been short WTI (LEAP puts) for quite some time. I have traded around this short term, but my long term LEAP puts are a bet that oil decreases, as it should since analysts are predicting near record surpluses of oil. That keeps getting delayed, but the supply/demand fundamentals remain intact. The delays are why I used as far out LEAPS as I could.
Above posters are correct. LEAPS are expensive. That needs factored in. Less of a concern for since I'm trading a long term large macro movements in underlying prices with some fundamental basis.
Also agree about selling puts to lower one's cost of entry. Warren Buffet, who is critical of derivatives, actually has sold puts to do exactly this.
I'd also suggest what I do I understand and I'm comfortable with. Anytime I've ever made an investment I didn't understand, I almost always lost. Leaving aside everything posted the rule I'd pay attention to is invest in what you know and are comfortable with. Leave the rest alone.
This post was edited on 10/20/26 at 11:38 am
Posted on 10/20/26 at 6:33 pm to cgrand
or in many cases you can also roll your puts to a lower strike price with a later expiration date if done before the underlying issue is assigned and collect another premium.
as makersmark1 stated it's generally a good idea to sell puts on issues you're confident in owning and have a set entry price.
as makersmark1 stated it's generally a good idea to sell puts on issues you're confident in owning and have a set entry price.
Posted on 10/20/26 at 6:40 pm to minister of truth
quote:ok so here’s what I don’t understand. The sold put is a binding contract, you have to buy the shares at the strike if the put buyer wants to sell them to you, and he will if the strike price is above the market price (the stock has declined past the strike)
or in many cases you can also roll your puts to a lower strike price with a later expiration date
So why would the buyer agree to this? He already paid you the premium. If before expiry how does rolling that option work? Does the buyer get his premium back?
Edit I guess I could have looked that up LOL. But I did learn something today so thanks
This post was edited on 10/20/26 at 6:58 pm
Posted on 10/20/26 at 7:04 pm to cgrand
the time value of the contract decreases as you get closer to the expiration date (very rapidly shortly before the expiration date). So you buy the original puts at a decreased $ value because of this. At the same time you sell the new puts at a later expiration date (a higher premium largely in part due to the added time value) resulting in a profit. there comes a point however when you decide that you don't want to extend the expiration date any further and then the roll option is not enticing
Posted on 10/20/26 at 7:18 pm to cgrand
I'm definitely not an expert on options but from my understanding a contract has an intrinsic value (what the shares of stock are actually worth) + an extrinsic value (an added value based of the length of the contract). The time value is what you're taking advantage of when you roll it.
as far as the contract holder goes, you're likely not buying the same contract you sold but instead one identical to it.
sometimes buyers don't actually hold the stock but instead buy a cheaper contract at a much lower strike price anticipating the underlying derivative will move closer to the strike price that they bought it at (hoping for a downward price). in their situation they're hoping the intrinsic value growth will outweigh the time value decay and therefore sell for a profit before the expiration
as far as the contract holder goes, you're likely not buying the same contract you sold but instead one identical to it.
sometimes buyers don't actually hold the stock but instead buy a cheaper contract at a much lower strike price anticipating the underlying derivative will move closer to the strike price that they bought it at (hoping for a downward price). in their situation they're hoping the intrinsic value growth will outweigh the time value decay and therefore sell for a profit before the expiration
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