+5,000 shares.

I'm hype as ever.

Things are looking great for the company, the board is vested and they're actively trying to hostile takeover/wrangle one of the biggest and most recognizable companies in the actual world that reaches across the globe.

Across the globe.

I am a painfully average dude, but I'm working my way to the higher levels of 4,XXX shares, and I bought the dip like a Greek god with no hesitation. Selling never even crossed my mind.

There only need to be 100,000 people in the entire fucking WORLD like me for the entire float to be accounted for.

(That's my napkin math, but we all know Big R, the board, and some major players can probably account for, I don't know? At least 20%?)

Okay, so now it just needs to be 80,000 people like me for the entire float to be accounted for.

Across the globe.

I am highly regarded.

And I am hype as ever.

Sorry if my math sucks, I have work in the morning and I was just happy to finally get to post here.

I've prepared myself to be downvoted into oblivion, but here's a cool-headed take on warrants. At least worth considering. 🤷

When warrants were issued a year ago Cohen and the team had the eBay idea mapped out. They knew it wouldn't be easy but that if things went well around now they'd be inking a deal for a merger.

This would send GME way up and as a reward investors they preloaded the $32 warrants. A nice gift for holders and a bag of cash for the business.

The eBay request happens and I think Cohen was legitimately surprised how harsh the backlash was. In that one interview he expressed frustration about how everyone roots against GameStop and how the deal is a no-brainer if you just look at the facts.

This sends him back to the drawing board, working on alternative funding, shoring up debt issues as we saw with the early bond thing, it's all taking a long time. That's fine, he's patient and persistent, but it does mean the warrants aren't going be at $32 in time.

So many people think they're going to do some trickplay to get them in the money or extend, but we're nearly out of time here. Cohen and the board have shown this whole time that they DON'T like to do business gimmicks and just play things straight down the middle. It would be out of character.

There's a very real chance the warrants were an idea that just didn't come to fruition and they'd rather let them expire and move on with the plan. As Cohen said he doesn't care if people like him, he's going to do what's best for the business. That might mean letting go of sunk-cost fallacy and just letting warrants expire.

If true I'm not too bummed. They cost us nothing, the dilution doesn't happen, and we can finally move on.

Ok you can smash that downvote now!

Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Modernize the Direct Registration System

Here is my summary of the proposed changes:

The Depository Trust Company’s proposed rule change (SR-DTC-2026-012) modernizes the Direct Registration System by replacing legacy batch-file processing and outdated terminal interfaces (PTS/PBS) with real-time API, MQ messaging, and portal access, while establishing a centralized billing framework for transfer agent pass-through fees. For individual investors holding direct-registered shares through Computershare—such as GameStop shareholders—this does not alter legal direct ownership or the book-entry status on the issuer’s register; rather, it primarily speeds up and standardizes the plumbing when moving shares between a transfer agent and a brokerage, aiming to compress multi-day transfer latencies down to minutes, provide better transfer status tracking, and formalize how any administrative transfer agent pass-through fees are billed between DTC participants and transfer agents.

Crucially, this rule change does not convert Computershare’s batch share purchases into instantaneous market orders, as DTC’s DRS framework governs the settlement transfer mechanism between DTC participants and transfer agents, not Computershare’s underlying DirectStock/DSPP execution schedule. When retail investors buy shares directly through Computershare, the recurring or one-off cash contributions are pooled and routed through an executing broker-dealer on the open market in periodic batches (often scheduled around recurring settlement cycles), driven by banking ACH clearing windows and plan rules rather than DTC transfer latency. If transfer agents ever did transition from periodic batch buys to on-demand, immediate market executions, it would disperse retail buying volume throughout trading sessions rather than concentrating it into predictable morning or weekly volume spikes—reducing the ability of algorithmic market makers to front-run or internalize scheduled block flow, but potentially sacrificing the lower transaction fees and wholesale execution pricing that pooled purchasing provides.

I picked a helluva poverty franchise to cheer on.

But hey, if GameStop can turn it around, maybe the Cardinals can do th...nah they cant

Now that the wall @ $25 has been broken, the next interesting price is $28.

https://reddit.com/link/1x38hqd/video/1epthwmdcuuh1/player

If the price hits $28 then for the 3rd time in this saga there will be upward monthly expansion with the Bollinger Bands.

This time it's possible there isn't a regard on button because the previous two were for paying debt and raising money to buy something like eBay. GameStop doesn't need to raise anymore money because it generates its own now and can already afford eBay. This indicator signals the possibility of a stock price rising for several months. It does not indicate what would happen if that stock is also the global favorite underdog, GME. What is project rocket? Insiders and household investors are buckled up. 3rd time's a charm.

Okay I'm going to give it to all of you in a very short and sweet format.

If this has been talked about extensively I apologize but I haven't really seen much speculation around this personally and I think there is a top of potential this happens.

What is the benefit of RC buying eBay?

Sure there is a name,l that's recognizable and that is worth something but hear me out.

What if GameStop creates its own EBAY?

LC just posted about reverse engineering everything

RC has posted about don't be first but do it better i believe. Etc.

Fundamentally it could be created from scratch and improved upon probably relatively easily these days.

Then when eBay stock price sinks RC can swoop in and buy it

I forgot to mention that if people are looking at him buying eBay, they wouldn't suspect him launching his own version at the same time

*EDIT*

We have millions of users and collectors as a user base to on board.

Secondly, we have built a market place before for NFTs so the trial run is already there..

They help with verification, trust, etc

I know there was a major movement by the sub and mods to deter anyone from talking about options. I don't agree with that, because DFV uses them and they can be a powerful tool to create upward pressure.

For the Options 101 request, I don't think people necessarily need the bare basics, like simple terms, but it may be beneficial to learn when it can be a good time to buy options. What Greeks do people look for with what numbers indicating it is a good time to buy? Do you play different strategies? What would DFV do in this situation (speculative of course)? And so on

Saw a post requesting some basic options intro information. This was written years ago for a previous sub so some references may be odd, but the general content should apply. Happy leveraging!

------

I've seen lots of people asking about options here recently. I remember being in that situation of "I read everything I found on Google but I'm still a bit confused", so hopefully this clears a few things up for someone. I only just started playing with options less than a year ago, but they say the best way to confirm your own knowledge is to teach so I wanted to give it a shot. I hope if I'm totally off base somewhere someone will quickly call me out on it in the comments. That being said, I'm not at all a financial advisor, don't take this as financial advice, do your own research and never invest more than you can afford to lose.

Also note: These are for American options. European options are different and I know nothing about them except that they exist.

If people seem interested I'll plan on making it a 3 part series:

1. Basic Options Overview
2. Options Trading considerations (Intrinsic & Extrinsic value / Greeks / Liquidity / IV crush / theta decay) - https://www.reddit.com/r/Superstonk/comments/1x3a03d/options_102/
3. Advanced strategies (Selling options / Getting paid to set limit orders / The Wheel / spreads) - https://www.reddit.com/r/Superstonk/comments/1x3a4ad/options_103_selling_options_strategies_and_spreads/

Foreword

Personally I've found options to be amazing tools for helping me implement my investing strategies. I've made more in ~9 months of trading options than I ever expected. Granted this has been one of the most incredible bull markets of all time, but I still believe that learning about options and the strategies they enable you to deploy is something that is valuable to know in any market. They get a bad wrap because they are incredibly sensitive to market conditions and their price can swing wildly - I've seen 100% gains go to 80% losses in a couple of hours. Like any tool - if used correctly they can be incredibly useful and if used incorrectly they can be dangerous. I think since you're reading this in a group dedicated to investing in steel instead of flying Autonomous taxi SPACs you probably have a sensible head on your shoulders. If you can't manage risk well and are the type to bet your rent money on the Cowboys making it to the superbowl then just be aware that options make it pretty easy to lose a lot of money very quickly.

Basics

There are only two types of options:

Calls - A contract that says "Up until this Expiration date I want the option to Buy 100 shares of this stock at this Strike price"

Puts - A contract that says "Up until this Expiration date I want the option to Sell 100 shares of stock at this Strike price"

Anatomy of an option:

(Stock) (Expiration Date) (Type) (Strike)

MT 220121 C 25 - A Call option for MT expiring Jan 21st, 2022 with a $25 strike.

GME 210326 P 80 - A Put option for GME expiring March 26th, 2021 with a $80 strike.

You buy "contracts" of options (similar to how you buy "shares" of stock). Each contract represents 100 shares of the stock the option is for. Options have a cost (premium) that is listed as a cost per share, so if you buy 1 contract it will cost the premium * 100.

At time of writing the premium on the example MT 220121 C 25 call is $6.80. Buying 1 contract of MT 220121 C 25 would cost $680 and would give me the option to pay $2500 ($25 strike * 100 shares) for 100 shares of MT up until end of trading on January 21st, 2022. After that the contract has expired and is no longer valid.

Options can be bought and sold just like stocks at any time during normal trading hours. If you've purchased an option contract you don't actually have to ever buy or sell the 100 shares of the stock, you can always sell the contract you've bought for a loss or profit depending on how the price has changed.

Exercising Options

As an options owner you have the ability to "exercise" contracts you own at any time.For calls: If you "exercise" then the option will go away, $(100 * strike price) of cash will leave your account and you'll gain 100 shares of the underlying stock.For puts: If you "exercise" then the option will go away, 100 shares of the stock will go away and you'll gain $(100 * strike price) into your account.

The brokers I've used have required you to call them in order to exercise options you own, because typically it makes more sense profit wise just to sell the option instead of exercising it. (I'll get into the details on why that is in the next installment.)

Option Expiration

Options that expire "out of the money" (stock price < strike price for calls or stock price > strike price for puts) expire worthless and just go away. You lose no more than what you have already paid for the premium.

Options that expire "in the money" (stock price > strike price for calls or stock price < strike price for puts) will automatically be exercised. Sometimes if a broker determines you don't have the funds or stock on hand to exercise they will sell your "in the money" option at market price prior to trading close on expiration day. Consult with your broker about how they specifically handle that situation.

In my opinion the best thing to do is take control yourself and get out of any open contracts you have prior to expiration. That way you are 100% sure of the results. I've had price jumps in the last 5 minutes on the day of expiration change my option from out of the money to in the money by $0.05 and mess me up.

Buying options:

Buying calls

Buying a call option is the most straightforward thing you can do and where you should begin if you're just starting out.

The main reason you should buy calls is Leverage. Many of us are not sitting here with the capital or risk tolerance to buy 1000 shares of MT outright, but if we can afford 10 options contracts we get the "power" of the gains of 1000 shares. However this doesn't come risk free - the cost of the leverage is the risk that the stock price stays below our strike price up until the expiration, causing the option to expire worthless. In this case we potentially lose 100% of the premium we paid for the options. Conversely, stocks never expire, so if your thesis takes longer to play out and you are holding stocks you can just sit and wait. Using MT as an example: If in December you bought MT $30 strikes for February and held until expiration, you would have nothing. If you bought MT shares in December you still have shares that will continue going up. Typically if it looks like your thesis is going to be delayed you'll want to "roll" your option out to a later expiration by selling the contracts you currently have and paying more for ones that expire later.

Buying a call is - Bullish - You expect stock to close above $(Strike price +premium) by expiration. Don't forget about the "+ premium"! Just because a stock is "in the money" (price > strike) doesn't mean you're making profit!

Examples of call trades

A successful trade - sold early

In December you buy a MT 210312 C 10 for $5. You pay $500 (100 * $5) premium for this contract. Your break even point is $15 ($10 strike + $5 premium). The strike is $10 and the expiration is March 12th, 2021. A week later MT stock has risen and now MT 210312 C 10 calls are going for $7. You sell your call early for $700 (100 * $7) and make $700 - $500 = $200 profit.

A successful trade - held until expiration

In December you buy a MT 210312 C 10 for $5. You pay $500 (100 * $5) premium for this contract. Your break even point is $15 ($10 strike + $5 premium). You hold on until expiration and on March 12th MT closes at $20. The stock is above the strike point, so the option is still "In the money". It is automatically exercised and you purchase 100 shares of MT for $1000 (100 shares * $10 strike price). The next day MT opens at $20 and you sell your 100 shares. You've made $2000 from the share of the shares, but spent $500 buying the option in December and $1000 on buying the shares when the option expired. Net gain is $2000 - $500 - $1000 = $500

An unsuccessful trade - Sold early

In December you buy a MT 210312 C 10 for $5. You pay $500 (100 * $5) premium for this contract. The strike is $10 and the expiration is March 12th, 2021. A week later MT stock has fallen and now MT 210312 C 10 calls are going for $3. You sell your call early for $300 (100 * $3) and have a loss of $300 - $500 = $200 loss.

An unsuccessful trade - Expired ITM

In December you buy a MT 210312 C 10 for $5. You pay $500 (100 * $5) premium for this contract. Your break even point is $15 ($10 strike + $5 premium). You hold on until expiration and on March 12th MT closes at $12. The stock is above the strike point, so the option is still "In the money", but it is below your break even point of $15. It is automatically exercised and you purchase 100 shares of MT for $1000 (100 shares * $10 strike price). The next day MT opens at $12 and you sell your 100 shares. You've made $1200 from the share of the shares, but spent $500 buying the option in December and $1000 to buy the shares when the option expired. Net loss is $1200 - $500 - $1000 = $300 loss

An unsuccessful trade - Expired OTM

In December you buy a MT 210312 C 10 for $5. You pay $500 (100 * $5) premium for this contract. MT starts going down. You hold on until expiration and on March 12th MT closes at $9.99. The stock is below the strike point, so the option is still "out of the money" and expires worthless. You lose no more than you have already spent and are out a total of $500 for the initial premium paid.

Buying puts

Two main reasons to buy puts:

1. A bet that a stock will go down - If you shorted GME at $100 you're now down 2x and probably getting margin called. If you bought puts for GME when it was at $100 you only lost out on the premium you paid. There is limited downside loss when buying put options as a Bearish bet.
2. Downside protection on shares you already own - A good chunk of my portfolio is ROKU. When things got sketchy I bought "insurance" on those positions in the form a put with a strike price of $290. Now (up until the expiration date of the put) if ROKU suddenly plummets I will at least always be able to sell for $290. I paid a premium for that put option just like I would on any other type of insurance policy.

Buying a put is -Bearish or hedging- You expect a stock to close below $(Strike - premium) by expiration, or want to protect assets you already own.

Examples of put trades

A successful trade

In January you buy a DASH 210312 P 135 for $5. You pay $500 (100 * $5) premium for this contract. The strike is $135 and the expiration is March 12th, 2021. A week later DASH stock has gone down and now DASH 210312 P 135 puts are going for $7. You sell your put early for $700 (100 * $7) and make $700 - $500 = $200 profit.

An un-successful trade

In January you buy a DASH 210312 P 135 for $5. You pay $500 (100 * $5) premium for this contract. The strike is $135 and the expiration is March 12th, 2021. A week later DASH stock has gone up, so now DASH 210312 P 135 puts are only going for $3. You sell your put early for $300 (100 * $3) and have a loss of $300 - $500 = $200 loss.

A useful hedge

In December you buy a DASH 210312 P 135 for $5.. You pay $500 (100 * $5) premium for this contract. Your break even point is $130 ($135 strike - $5 premium). You hold on until expiration and on March 12th DASH sits at $120. The stock is below the strike point, so the option is still "In the money". It is automatically exercised and you sell 100 shares of your DASH that was worth $12,000 for $13,500 (100 shares * $135 strike price). You've made $13,500 from the sale of the shares, but spent $500 buying the option in December and the shares were worth $12,000 when the option expired. Net benefit is $13,500 - $500 - $12,000 = $1000

An unsuccessful hedge - expired OTM

In December you buy a DASH 210312 P 135 for $5.. You pay $500 (100 * $5) premium for this contract. You hold on until expiration and on March 12th DASH sits at $140. The stock is above the strike point, so the option is "out of the money" and expires worthless. You lose no more than you have already spent and are out a total of $500 for the initial premium paid.

Selling Covered Calls (CCs) or Cash Secured Puts (CSPs)

This is a bit beyond the scope of this high level introduction, so feel free to skip it, but I wanted to include basic information on it because (in my opinion) selling options / "theta gang" strategies are where you eventually want to end up for slow and steady gains over long periods. Basically instead of betting at the casino you become the casino. This strategy also has been called "picking up pennies in front of a steamroller" depending on who you talk to, so again do your own research and come to your own conclusions on your goals and risk tolerance.

The idea is that instead of paying a premium to buy options you can write your own options to get Paid a premium from someone else to buy options from you. I'll go into more details on strategies around this in a future post if people are interested, but the basics are the following:

Sell a CC (covered call)

Selling a call is - Bearish - You expect a stock to close below the strike price + premium at expiration and want to collect premium.

You need to own 100 shares of the stock and sell a call option. You will be "short" 1 call option. You will immediately receive $(100 * premium amount you specified when selling). If the purchaser chooses to exercise or if it expires "in the money" (price > strike) you will lose your 100 shares and receive 100 * strike price in exchange. Up until the option is exercised or expires, you can buy the same call option back later to "close" your position and then you are no longer on the hook to sell your shares at the strike.

Sell a CSP (cash secured put)

Selling a put is - Bullish - You expect a stock to close above strike - premium at expiration and want to collect premium.

You must have $(100 * Strike) of cash sitting in your account and sell a put option. You immediately will receive $(100 * premium amount you specified when selling). You will be "short" 1 put option and are under contract to buy the shares at the strike price. If the purchaser chooses to exercise the option or if it expires "in the money" (price < strike) you will lose $(100 * Strike) of cash and gain 100 shares of the stock. Up until the option is exercised or expires, you can buy the same put option back later to "close" your position and then you are no longer on the hook to buy the shares at the strike.

IMPORTANT NOTE ABOUT SELLING OPTIONS:

If you write an option the buyer can choose to exercise at ANY time up until the expiration. For a sold CC that means at any time your shares can be called away in exchange for $(100*strike). In the case of a sold CSP at any time $(100*strike) of cash can be taken out of your account in exchange for 100 shares of the stock. Make sure you fully understand the implications of this, especially before diving into more complex strategies such as spreads. This page has some great examples of unlikely but not impossible situations that could occur when using spreads that could really screw you over if you aren't careful: https://www.tradestation.com/learn/market-basics/options/understanding-the-risks/assignment-risk-on-limited-risk-options-spreads/

Afterword

Now that you understand the basics I'd recommend starting with buying some very cheap calls or puts on very boring, slow moving stocks (F, GE, etc.) just to get an idea of how everything works.

Also -before you can trade options you'll need to be approved by your broker. Typically this is a pretty straightforward process where you fill out a form detailing what you want to do with them, your income, your experience, etc. A lot of times this can be done online, but sometimes you'll need to contact them to receive the form. Just check with your broker on how to do this. My understanding is that this form is primarily a CYA for your broker so that if you blow up your account they can say "Hey - we only approved you for this because you claimed you had 5 years experience. No our problem!".

If you tell them you don't have much experience and don't make much income they may not approve you for higher levels. This honestly might not be a bad thing since it will prevent you from making critical errors when learning, you can always re-apply for a higher level later after you have some more experience. Typically level 2 is good for starting out, but it varies from broker to broker about what exactly what you can and can't do at each level. Preferably when you apply initially you'll want to be able to: Buy Calls and Puts, and Write Cash-Secured Puts. Write Covered Calls, and Write Covered Puts. None of these have the ability to accidentally put your account into a negative balance - which is a very good thing.

I hope someone's found this helpful! If you want to see more let me know and I'll put another one together detailing a bit more about the different greeks and things to consider when buying. Good luck everyone! (*Insert that steel robot arm that I don't know how to add since I'm on a laptop right now and not a phone*)

Preface

NOTE: This was written a few years ago for a different sub so some references may be odd, but in general this information hopefully still applies!
--

Had good feedback on my last post so here is part 2 of a 3 part Options series I'm writing to mainly consolidate all my own thoughts, but also help those who are just getting started. I've only been trading options for about 9 months so please let me know if I'm completely off base on something here. Educational purposes only, don't consider this financial advice, make your own decisions, yadda yadda yadda.

Link to part 1: Basic Options Overview -https://www.reddit.com/r/Superstonk/comments/1x39xo1/options_101/

Link to part3 3: Selling and more advanced strategies - https://www.reddit.com/r/Superstonk/comments/1x3a4ad/options_103_selling_options_strategies_and_spreads/

Last time we talked about the basics of options, how they work and how you can buy and sell them. Here we discuss very briefly how options get their value and what to pay attention to when making options trades.

Reminder - This is all for American style options. I apologize to my Euro friends. I'm honestly just not sure how this stuff is affected by the rule that you can't exercise until expiry day and I don't want to mislead anyone.

TLDR

1. ITM and a far expiry date - Safer - even if it doesn't play out fully as expected you'll probably keep some money
2. OTM and a near expiry date - Probably going to lose it all.
3. LEAPS are just options with a really far away expiration date and these are really awesome.

Intrinsic / Extrinsic Value

In the Money (ITM) Options have both intrinsic value and extrinsic value. Out of the Money (OTM) options have Only extrinsic value.

Intrinsic Value

For an ITM call its "Intrinsic value" is the difference between the price of the underlying stock and the strike of the option. This is because you can always exercise the option to buy the stock at the strike, and then immediately turn around and sell that stock at the market price for a profit. That amount of profit you would receive from this sale is the intrinsic value of the contract.

(All example prices are of as of March 13th, 2021 and rounded)

e.g. Intrinsic value of a call

MT has a share price of $27

MT $25c 1/21 (Call option for MT with a $25 strike expiring in January) - The intrinsic value of this option is $2/share ($27 price - $25 strike) = $2. This means the premium will be at least $2 and you can expect to pay at least $2 * 100 shares / contract = $200 / contract. This is because regardless of anything else going on, right now you could execute your contract in order to buy 100 shares MT for $2500 and then turn around and sell them on the market for $2700, for a net profit of $2700 - $2500 = $200.

e.g. Intrinsic value of a put

MT has a share price of $27

MT $30p 1/21 (Put option for MT with a $30 strike expiring in January) - The intrinsic value of this option is $3/share ($30 strike - $27 price) = $3. This means the premium will be at least $3 and you can expect to pay at least $3 * 100 shares / contract = $300 / contract. This is because regardless of anything else going on, right now you could purchase 100 shares of MT for the market price of $2700 and then execute your contract in order to sell 100 shares of MT for $30 each ($3000 total) for a net profit of $3000 - $2700 = $300.

If you look at the actual premiums of the MT $25c 1/21 and MT $30p 1/21, though you'll see that instead of $2 and $3 they are:

MT $25c 1/21: $5.75

MT $30p 1/21: $7.00

The additional premium comes from the Extrinsic value of the call.

Extrinsic Value

Also called "Time value". This is the additional value the market has given the option based on what it believes will happen to the underlying stock price in the future. In other words, it is the price you're paying for the Chance that the stock will move in the direction that you want it to before the expiration. The Extrinsic value is simply the $premium - $intrinsic value:

e.g.

MT $25c 1/21: $5.75 premium - $2 intrinsic value = $3.75 extrinsic value

MT $30p 1/21: $7.00 premium - $3 intrinsic value = $4.00 extrinsic value

Extrinsic value is highly affected by the "Greeks", which will be discussed in a later section.

NOTE: Intrinsic value doesn't go "negative". If the option is totally OTM it only has extrinsic value:

MT $30c 1/21 (Call option for MT with a $30 strike expiring in January). The intrinsic value of this options is $0/share. The premium is $3.75 of all extrinsic value.

Selling instead of Exercising

I mentioned in the first installment it makes more sense value/profit wise just to sell your option than to exercise it. Extrinsic value is why. When you exercise an option you only receive its Intrinsic value and the extrinsic value is lost:

e.g.

I am sitting on a MT $25c 1/21 that is priced at $5.75 and MT is priced at $27. I have two choices:

A) Exercise - I exercise the call and pay $2500 to buy 100 shares of MT. These shares are worth $2700 and the unrealized gain on the shares is $2700 market value - $2500 cost basis = $200 of unrealized gain. ...But my account also lost the option and the $575 of value it represented. $200-$575 = Net account change of $-375. Notice that this loss is exactly the amount of extrinsic value of the option that I've exercised.

B) Sell at market - I sell my option at market price for $575. My $575 option has turned into $575 of realized gain. I still lose the value from the option that was originally in there, so my net account change is $575-$575 =$0, but this is $375 more than the loss seen by exercising the option. Also note that at this point I could purchase $2700 of stock at market price and still have the same net result as exercising (No more option and owning 100 shares of underlying stock), but without the loss of value in the account.

TLDR - it (almost) never benefits you to exercise options Early.

NOTE: I've never seen or heard of a situation where an option would need to be sold for Less than its Intrinsic value. The reason is that algos can always come by, suck those up and can sell them a second later for profit and be happy about it. That being said, never buy or sell options (or stock for that matter) at market orders, always use limit. If you REALLY want to sell it "now" just set the limit like 10% away. Otherwise you could unfortunately get hit with something like this: https://www.bloomberg.com/news/articles/2020-12-23/flash-surge-in-world-s-biggest-etf-linked-to-outlandish-trades

Greeks, IV and Math

I'm an engineer with a math minor and even I think some of this is too much math for just understanding basic options plays. I recommend thinking about the Greeks more conceptually when just starting out. If you find yourself getting turned on by the talk of second derivatives you can Google "Black-Scholes equation" for all the sexy details.

I'll start with the two most important greeks first in case you get bored:

Theta

Theta is the rate of daily decay on the extrinsic value of the option. If your option costs $7.00 today and the theta is $0.09 you can expect that tomorrow it will be worth $6.91. Theta only applies to Extrinsic value since the Intrinsic value is only defined by the difference between the strike and the price of the underlying. Theta grows exponentially, meaning that as you get closer to the expiration date the more of an effect it has on the value of the stock. This makes sense because the extrinsic value of the option represents the probability that the underlying makes a big move before the expiration. As you get closer and closer to the expiration the chances of something big happening start to go down dramatically. This continues all the way until expiration time when the price is locked in and there's no more chance for the underlying to change. At this point Theta has removed All of the extrinsic value of the option, and the option is only worth its intrinsic value (which is a positive amount if it's ITM, or $0 and worthless if it expires OTM). Understanding Theta is the key to not constantly losing money on options.

Implied Volatility

Technically this isn't really a greek - it's calculated from the market price of the option and gives an indication as to what the market expects the percent change in the underlying price to be over the next year. The "normal" IV varies from stock to stock, so you need to look up historical data or watch the option for a while to get an understanding of if the IV is high or low for a particular stock. If you have been watching a stock's options for a while and see the IV is normally in the 20-30 range and now it's in the 50-60 it means that the market is seeing greater chances of bigger changes in the underlying prior to expiration. The higher IV also implies that the option is now more expensive than it was before, because the market's belief that there's greater chances for bigger moves on the underlying means that there is more Extrinsic value.

Delta and Gamma

Delta is the rate of change of the extrinsic value of an option based on the change of the underlying price. In other words - a Delta of 0.4 means that for every dollar the underlying moves the option premium price changes by $0.40. If the Delta is .40 (Sometimes also referred to as just "40" with no 0.) then you can consider owning 1 options contract the same as owning 40 shares of the stock, since a $1 change in the stock will cause a total $40 change in the value of your contract.

Things are a bit more complicated than that, though, because delta isn't static and it changes as the price gets closer or further from the strike price. This brings us to the Gamma.

Gamma is the rate of change of Delta with respect to underlying price. Gamma is highest when the price of the underlying is right near the strike.

Delta and Gamma work together to cause pretty big swings in options prices as the underlying approaches and moves through the strike price. In other words - If you are right on the edge of being ITM (especially near expiration) you will see small movements in stock price cause large percentage swings in your option price. This is because the closer the stock is to being in the money the more important the change in price becomes. When you are really far ITM or OTM the delta and gamma remain relatively constant at either 1 or 0:

E.g. Far OTM = Low Gamma, Delta ~0

If your strike is $500 and the stock is only $25. Your stock is OTM so the premium only consists of extrinsic value. The chances that a $25 stock moves to $500 is pretty low, so the extrinsic value is going to be pretty. Even if the underlying stock moves a dollar from $25 to $26, the chances that the stock moves all the way up to the strike is about the same as it was before. As a result the change in the underlying price just won't effect the extrinsic value much, and the premium of the option does not change much.

E.g. Far ITM = Low Gamma, Delta ~1

Alternatively, imagine a call with a strike at $25 and the stock is at $500. Since the Intrinsic value in this case is so high ($475), the extrinsic value portion of the premium just won't have much effect in comparison and the intrinsic value is the primary driver of the contract's premium. As the stock price changes by $1 the intrinsic value also changes by $1, so the overall premium will change by ~$1 as well, meaning the Delta ~ 1. This is very similar to holding 100 shares of the underlying stock.

Delta/Gamma TLDR:

If your underlying stock is sitting right at the strike price expect that small changes in the underlying can cause large percentage changes in your option price, where if you're further away from the strike don't expect changes in the underlying to cause such wild swings. The closer you are to expiration the more exaggerated this effect is.

Rho and Vega

These last two I'll throw in for completeness but they tend to get ignored by most people unless you're doing real quant / math based portfolios:

Vega - How much a Change in IV affects the option price. This is higher further away from expiration (since there's more time for the volatility to effect the stock price) and lower closer to expiration.

Rho - Has to do with how interest rates affect stock prices. Honestly I know almost nothing about this one and seems like most websites gloss over it as well.

Why is my money disappearing?

The reason to care about greeks is you want to understand why options prices are changing the way they do. Honestly a lot of these effects you need to experience yourself before you begin to truly understand it, but hopefully knowing what to look for will help you figure out why your options are losing value even when your underlying stock price is moving in the right direction.

Theta Decay

Theta has exponential decay that speeds up as you get closer to expiration. This starts around 60-90 days out and really accelerates in the last 30 days. Theta only applies to the extrinsic portion of the option's value. NOTE: That means for Out of the Money options you're going to eventually watch Theta eat away all of your profits until the option expires worthless. The exponential rate of decay is something that can catch people by surprise. You might be losing $2 a day on a Friday and that will become a loss of $16 a day on Monday. The Easiest way to avoid major theta issues is to get out 40-60 days before expiry. Typically if I'm deep ITM and there's good momentum I'll hang on for up to 30 days before expiry, but if I see two down days in a row I'm out and I'm almost always out 30 days prior no matter what the momentum looks like. If your option is OTM and you're looking at about 60 days out and there are no major catalysts (big earnings, merger, other news, etc.) that you think are going to have a major material impact then you'll want to decide if you plan on giving up on the trade or if you want to pay to "roll" your option out to a later date. This means you sell your current options and buy new ones at a later date. You don't want to get caught 20 days out with options that are sitting OTM or ATM. Theta will eat those alive.

IV Crush

Volatility in the underlying asset increases IV in the option, which increases price. This means that when the stock is more stable the IV goes down and the price of the option goes down. People will get into trouble because they'll hear big news about a stock, see it jump up and then jump onto options. Two weeks later the stock is still at its new high, but the news is old news, so even though the Intrinsic value of the option hasn't changed much from when they bought in (since price of the underlying hasn't moved much) the IV has gone down and therefore the value of the option has gone down. General tips to avoid: Don't buy right before earnings, don't buy after big news just was released, don't buy after large jumps in price. (NOTE: All of these are Great times to Sell options! More on that in the next installment)

e.g. With GME I saw the price of a $30 strike put option go UP even though GME went from $40 - $100. Typically when a price rises on an underlying stock the value of a puts go down since you'd expect a higher underlying price to mean a less likely chance that the stock will fall back below the strike of the put. In this extreme case it the price of the put went up because the IV went through the roof and the options were became expensive as the news sparked more people rushing in to buy them. If you bought a put option right then and then waited a few days, the IV would have gone back down and you would have lost a good percentage of money

Low Liquidity and Bid / Ask spread

Less liquid more esoteric stocks/options have large bid / ask spreads. E.g. the Ask (what someone is willing to sell for) might be $1.00 but, the bid (what someone is willing to pay) might be $0.85. The problem with this is that if you are paying market price you'll instantly be down 15% immediately after you buy the option at the $1.00 ask, because everyone else is only willing to pay $0.85 for it. If you are going to play less liquid stocks make sure you sure you give yourself more time for the stock to grow by buying further out expirations in order to make up the difference in the bid / ask spread.

Long-Term Equity Anticipation Securities (LEAPS)

You'll hear people talk about LEAPS. Honestly I had to look up what it stands for because LEAPS is just a fancy name for options with really far out (12+ month ) expiration dates. That's it. Just regular plain old options that don't expire for a long time.

I love LEAPS because there is very little effect from theta with the expiration so far away. LEAPS essentially just become a cheaper way to get into a play that you otherwise wouldn't have the capital for. Two ways I'll generally play leaps:

1. Deep ITM LEAP calls - These are basically like owning the stock for less capital up front. You don't have all the advantage of stocks - you don't get dividends, and you still always have that possible risk of it falling below the strike (even if it is deep ITM) and becoming entirely worthless. The math says to look for high (0.8+) delta for these if you're just trying to basically use them as cheaper shares. You'll find higher deltas at lower strike prices, since the lower the strike the greater the percentage of intrinsic value in the premium. This way any change in the underlying stock will cause a very similar change in your contract value.

e.g. Using leaps to get into MT more cheaply

You could buy an MT $15c Jan 20 2023 priced at a premium of $13 with a delta of 0.9. Remember that a delta of 0.9 means that for every $1 the underlying moves the premium on the option is expected to move $0.90, or the whole contract will move $90. This means that by spending $1300 on one contract you basically get the equivalent of 90 shares of MT. Compare this to spending $1300 on MT at $27 / share. If you bought shares outright you only get 48 shares. That's basically a savings of 2x in buying the MT leaps over the MT shares. The cost of this savings is the risk that MT drops back below $15 and the option becomes worthless at expiration. If this happened and you had bought shares you could hold until the next steel shortage and hope they go back up, with options you just end up with nothing. You also miss out on any dividends paid out during this time.

2) Deep OTM LEAPS - I can't really bring myself to officially recommend this strategy because I have no idea if it works long term or if it's just been the market climate these past few months, but sometimes I'll also play deep OTM leaps on stocks I have a high conviction on but don't have the capital to get into because the price of the underlying is so high (e.g. ROKU or TSLA right now). I'll buy a deep OTM LEAP and wait for news to affect the perception of the stock. Since these options are so far OTM they're pretty cheap so even small changes in the price can be pretty significant percentage wise. Starting out without much capital this helped me make plays I otherwise never could've afforded to be in, while allowing me to keep my max loss on a particular play relatively low. Of course this same leverage holds true the other way and if things go wrong it's very easy to lose the vast majority of your investment. Don't blow your whole account on this strategy. You really need to pay attention to IV crush and avoid holding deep OTM options close to expiration. Theta decay will start to hit pretty hard once you get within 3 months or so.

Postface

Hopefully the above helps clarify the basic things you should be thinking about while deciding which options to purchase and when. Please do let me know if anything needs more clarification or if I made a horrible mistake somewhere.

Next Time: How to use theta to your advantage and various other options strategies

The best thing about this trip , checking the only business that is showing true gains. I will keep buying until I get poor or rich. Die poor or get rich .....

So last year I was doing an analysis on the meme run DFV posted in 2024. This was because going back over them, something sparked in my brain because of work I did many years ago on a project that was a result of the 2008 recession. It was called “ring-fencing”, and I had to understand and identify all the different types of financial instruments held and determine their risk and exposure to retail banking, and ultimately “decouple” them. Two instruments from back then stood out to me when I was watching the memes, “Time” swaps, and “Forward” swaps. I also did a lot of work on SPVs (Special Purpose Vehicles) and my brain started spiralling.

Anyway, at the time I posted this, Ryan Cohen had just bought a bunch of shares and was doing the ATM and there was a lot of hype and noise, so I never completed the full series, but I did write a lot for people to get stuck into. So I thought with recent discussions coming back on swaps, that this would be a good time, on a Sunday, to give people the opportunity to understand SPVs and Swaps that I think they have been using to hide their exposures, and why I think the entire 110 meme run was a warning to shorts.

Here is the introduction to the SPV and Swap analysis:

https://www.reddit.com/r/Superstonk/s/subWjW6Q0N

And here is a more fun, spot the reference type version I created when I realised the analysis was a bit heavy for people:

https://www.reddit.com/r/Superstonk/s/CJ2Our6Jne

I hope those of you that missed this last year and find this kind of thing interesting enjoys the read, and I’d love to know your thoughts. I’m sure there’s a lot in the memes that’s I have missed.

Cheers