I’m really not doing complex options strategies. There are only 4 basic positions. Buy or sell puts or calls. I’ve never opened a position by buying a put, although it can be used to in effect buy insurance against a downside move in a stock that you own. At some point I might consider buying puts against my biggest stock positions.
Selling a naked call is selling a call option contract when you don’t own the underlying stock. It’s extremely risky and I’ve never done that. It’s pretty much high speculation trading. Those that do it well can make a lot of money in a short period of time. However the profit has a cap and the losses are unlimited.
I now sell puts INSTEAD of just entering a limit order to buy shares of stock. If the stock price goes up I won’t own the stock, but the options then fall in value and I pocket the selling price of the option contract. If the stock price falls far enough, I am contractually obligated to buy the shares - but it’s at a discount after subtracting the cash that I collected when initially selling the options. Had I instead just entered a limit order to buy shares I’d also have bought the shares - but without the discount from selling the put contract.
Selling covered calls are similar, but with opposite variables, to selling the puts as just described. Instead of just entering a limit order to sell shares owned, selling the covered call gives me the selling price of the contract if the shares aren’t called away instead of getting nothing when a limit order to sell shares doesn’t execute. If the shares are called, I collect the selling price of the contract in addiction to the strike price for the shares as selected per the contract.
There are hours and hours of YouTube videos on these 4 basic options strategies. I haven’t touched saddles, spreads, rolling contracts, condors, etc. I’m using options contracts to enhance returns rather than as trading vehicles.
Palantir. I just can’t figure out what move to make next. The price-earnings ratio is crazy high. They need to grow considerably to justify 200x forward earnings. But doubling earnings 3 or 4 times makes the stock price much more palatable. I haven’t read an analyst’s report recently and don’t know for sure if there’s a deep moat with those shares. But I do think that they are kind of peerless. And what they sell makes their clients more efficient. Could cutting defense spending actually help PLTR since they create efficiency? Or do they get hit with across the board cuts to the defense budget? I’d hate to sell covered calls to peel off 1, 2, or 3% and watch the shares run up 50%. I suppose I’ll hang on to at least 25% of my position no matter what. But I’m totally undecided about letting go of 25% or 50% or some other percentage of shares right now. Sometimes some companies’ shares go up 5,000%, 10,000%, 50,000%, etc and it isn’t as uncommon or improbable as it might seem.
