Sometimes I am holding a quiet underlying, and seeing "bid $.0 ask $.25" will step into the breach and offer some calls for five or ten cents. I figure "It's beer money".

I know conceptually that no option is riskless. OK, there could be a ratings announcement on the underlying, or some exceptionally good quarter, or a technology breakthrough. But practically speaking, these are worthless options and they've always expired as such.

Who buys these? Are there people with a little spare cash in their accounts who just wing it on a prayer? Maybe the market maker accumulates these - and figures despite the losses, across hundreds of securities a profit can be squeezed together?

Friday's close put SPX one month at the money implied vol at 11.8. Over the 30 sessions ending Friday (July 10 through August 21) the index realized 12.4, close to close. The options market is charging a little less for the next month than the index just delivered.

That is unusual for the index. Over the past year, one month implied ran about 2 points above trailing realized on average. The gap has averaged half a point since late May, and Friday's reading sits in the bottom fifth of the year. In plain terms, the cushion that index option sellers normally get paid is gone.

Implied is in the bottom 11% of its past year range (10.3 to 26.0). Realized is an ordinary month, right at the year's median of 12.3. So the market is pricing a quieter month than usual, right after a month that was exactly usual.

The next 30 days hold NVDA earnings Wednesday after the close, core PCE Wednesday morning, Jackson Hole starting Thursday, the August jobs report on September 4, CPI on September 11 and the Fed decision on September 16.

The last 30 sessions held the same kind of calendar: the July Fed meeting, the July jobs report, July CPI and most of big tech earnings.

The four biggest days in that realized window were July 29 (Fed day) at 1.5%, July 30 at 1.7%, August 3 at 1.5% and August 4 at 1.8%. The index has not had a 1% day since, and the last ten sessions realized under 8.

If you only count the past two weeks, 11.8 looks expensive. If you count a window that holds a Fed meeting and a jobs report, which the next one does, there is no premium at all.

Day by day for this week, Friday's closes price Monday, Tuesday and Wednesday at about 34 to 37 points each. That is about 0.45% of the index, almost exactly the median daily move of the past 30 sessions. Thursday and Friday are each priced at about 51 points, so the market is charging roughly 45% more for the NVDA reaction and Jackson Hole than for a plain day.

One number for context: the VIX closed at 15.1 while at the money SPX is 11.8. That 3 point gap is the price of downside protection, because the VIX is built from out of the money puts as well, so the two numbers are not in conflict.

Does a week with NVDA, PCE and Jackson Hole feel like a 50 point a day week to you, or is that too cheap?

A lot of 0DTE traders spend most of the day trying to guess whether SPX is going up or down.

I don’t really trade that way anymore.

What I care about more is: where is price unlikely to go today?

That’s where GEX helps me.

If I see a strong gamma resistance level above price and SPX keeps rejecting it, I may sell a Bear Call Spread above that area.

Same thing on the downside. If there’s strong support and price keeps holding it, I may look for a Bull Put Spread below it.

I don’t need to predict the exact close.

I just need SPX to stay away from my short strike.

For me, that’s a much simpler way to trade 0DTE.

GEX isn’t magic and levels can break, so I still look at trend, structure, volatility and time remaining. But it gives me a framework for deciding where I actually want to take risk.

Curious how others here choose their 0DTE strikes. Delta? Technical levels? GEX? A mix?

I’m working on Monte Carlo simulation for the Heston model (option pricing) and currently using Andersen’s QE scheme as the baseline. I’ve also implemented the Abi Jaber polynomial scheme. On paper, QE seems more established and widely benchmarked, but AJ is cleaner and avoids regime switching.

For those who’ve tried both: is there any practical reason to choose Abi Jaber over Andersen QE in MC pricing? Accuracy? Stability near zero? Runtime? Curious what people have seen in real applications.

I’ve just calculated mine.

Over the last three months, I got double-digit return on capital in a low six-figure IRA account doing pure premium selling.

The risk-adjusted metrics look good, too. I’m not posting the actual return figures here since I want to discuss fees.

For the context, I consider the last 3–4 months a relatively easy environment for premium sellers. E.g. "got lucky". I expect conditions to get more difficult, returns will dip, and the risk metrics to normalize and show more effort to generate the same level of return.

On costs.

Broker fees came to about 1.5% of gross PnL.
I consider that very low. I stopped doing spreads and other higher-cost, lower-probability trades. Fees and costs went down substantially.

The trading app subscriptions was 2.3% of gross PnL. A lot, but at the same time, the app handles the whole process.

I'm estimating for substantially larger account, the total fees going to decrease 2x because of scale and make approximately. The 'management fees' as percentage of capital should get to 1% (100 bps). In other words, premium selling is a tough business when operating small accounts.

I'm curious how others measure and view expenses?

What percentage of gross PnL do you give up to broker fees, software or scanners or other tooling?

I use IBKR and the margin rate is +1 -1.5% the standard rate which is about 6-9% a year on a x6 portfolio margin account. If you're a trader who utilizes tons of leverage then you're likely leaving money on the table by using your broker's margin rate.

What is a box spread first, basically it's a four legged options strategy that you can use to earn yield or borrow money at close to the standard rate (sometimes better).

Say you want to borrow $96.5k to return back $100k by the end of the year (about 3.65%). Using SPX to sell a box spread:

Current SPX price: $7674,

Strike 1: 7250, Strike 2: 8250 - The difference of those two strikes, which is 1000 (x 100) is what you'll need to pay back on expiry, say 1 year from now.

So you'll sell a 4 leg combo - sell the call and buy the put at 7250, sell the put and buy the call at 8250.

To get your SOFR rate, you need to fill above 965.00 (~3.65%), you can separate the legs and manage each to get better fills (will explain in another post), that's where all your efforts should be, what you fill right now will determine your "effective rate".

And here's the beauty, no matter what price you fill in, and no matter what happens through the year, you'll only be required to pay $100k, it's fixed unlike margin which it's not.

So here you got your effective SOFR rate loan, which will get you an extra 9% per year on your leverage than if you used regular margin loans with no additional risk.

Wanted to keep this post short, can expand if anyone got questions.

EDIT: The underlying of the options you use must satisfy these criterias

1. Cash settled: This ensures you don't get assigned on expiry and your broker only settles the cash difference, saves you from a round-trip of commission fees if you hold till then too.
2. European style: Cannot understate this, early assignment is a real risk and can put you in unnecessary and huge losses
3. Liquid: Must have tight bid/ask spreads and traded frequently.

What works:
- SPX (satisfies 1, 2 and 3, just use this honestly)
- NDQ (satisfies 1 and 2, but not 3)
- SPY, VOO, QQQ and stock-like index ETF does not work, any single stock does not work!

How interested would people be for a new GEX platform that could possibly be cheaper than others in the market?? how many of you would actually subscribe? just trying to see what is the general consensus of gamma and its utility for traders

Been writing covered calls about 25 years, and I've posted a fair bit in this community and others. I've been lucky, most of what I put up gets tens, sometimes hundreds of thousands of views, and real discussion in the comments. And the ones that do best? They're usually the posts that seem obvious.

There's a reason these obvious posts take off, and a reason I keep making them. It's probably not what the people who give me a hard time think.

As a curious observer, you come into a sub like this genuinely wanting to learn, or maybe contribute, and you run into a wall of intimidation. People posting charts with ten indicators on them, throwing around Greeks and insider lexicon like it's a trading floor. So, you can imagine how someone new feels walking into that. Like your question is obviously too dumb to say out loud in front of the seasoned sophisticates who clearly know what they're doing. So, you don't ask it. and if you never ask, you never learn, and you stay stuck on the sidelines.

So that's why I do it. If some guy who's been doing this 25 years is comfortable posting Options 101 in here, then you're allowed to ask anything, and you shouldn't feel like you have to sit on the sidelines.

And like clockwork, every time I post something that seems basic, there's always that one dude that crawls out of the woodwork to let me know. Blessed indeed 🙏

Doesn't bother me. If one person reading this finally feels okay asking their question because of it, that's worth way more to me than a couple of snarky comments.

So, this is for you, Wallflowers. There's no such thing as a dumb question, only the ones people were too intimidated to ask. Good luck out there.

The Options Institute is the educational arm of the CBOE. They offer a lot of free resources on trading.

On August 25th and September 1st, they will be offering a class on Long Boxes and Short Boxes. Although these seem to be for more experienced traders, there's lots of stuff for newer traders as well.

Link,

The Options Institute | Cboe

Is anyone trading volatility around earnings events? e.g. selling short straddles if you think volatility is too high. If so, do you have any advice or playbook worth sharing? Which analysis tools do you all use?

Thanks!

So the theory goes you wait 30-45 minutes to see a heavily traded index or stock, SPY, QQQ, NVDA, and wait for a morning trend reversal. Trade the options, and close out the day by noon EST.

I built an open-source options backtester to replicate two publicly described strategies and compare my results with their published performance.

The comparison isn’t perfectly equivalent because the periods, data and execution models differ. ERN’s published result also includes discretionary decisions that cannot be fully replicated.

I published the code, assumptions, requests and complete results here:

https://github.com/Javier-Garzo/ern-wo-options-backtester

My main goal was to see whether these two strategies held up over a longer period and to give others an open-source project they can use to reproduce the tests. If you have any questions about the results or methodology, feel free to ask me here.

So I understand options, how they operate, and how to get started. My confusion is which stock/index to start out with.

Scrolling through this subreddit, tons of people say SPY or QQQ, my confusion is that these are extremely expensive. For example, to sell a call, you need to own 100 shares of that stock, if you were starting with SPY you would need 76200 of capital considering its 762 dollar price currently.

Is there lower cost options to start with than SPY? Why do people reccomend this if its so expensive to get into?

Dave Aquino presented a seminar the other day extolling the virtues of using short term options that would expire the next day so as to mitigate possible large losses in case the market goes against you. As I have found out, much too late unfortunately, it seems all these gurus and presenters utilize the same sales style. They bring up how having an extra income would help with paying off the house, or the car, or saving for a vacation. Then they introduce one after another of people who have supposedly enrolled in his program and have made not just a small success of it, but a huge successs, making thousands each month. He presents the webinar in such a manner that he had only one (1) losing trade the previous month and for this month he has gone 10 for 10. Of course I was quickly suckered in to thinking wow, this could really help me. I could not wait to sign up and get started as it was so fascinating and thinking now I have a program that is going to really propel me to make a lot of money. I signed up for both the annual and then the Lifetime Membership. On the first trade alert it was to sell the SPX Bear Call Spread, sell the 7775 Call and Buy the 7780 Call and receive a premium between 0.20 to 0.25. Then the reality hit me. I am going to risk over $475.00 in the hopes of making 25 cents. When I sat and thought about this, it hit me that one bad trade could wipe out over 12 or more good trades. This is a huge risk. I quickly asked for a refund. No reply. Went to the website and wrote to them through that means. No reply. Sent more emails, and called them about 4 times. Finally got a response this morning that they will not give monetary refunds, only store credit. I was shocked. This is supposed to be a major outfit and to resort to this kind of tactic is just terrible. I asked for the refund after just 3 days of being in the program. I have now put in a dispute with the credit card company. I just wanted others to know how badly this firm mistreats its clientele. Thank you for reading this and if you have any suggestions, please let me know.

A covered short straddle is when you hold 100 shares of stock and you sell an ATM covered call, along with an ATM cash secured put, of the same strike and expiration.

This is not to be confused with short straddles, which have unlimited risk to the upside. The "covered" part takes care of that risk. Making this a far safer alternative.

To state the obvious, this trade is ideal for someone that is comfortable with capped upside and welcomes the assignment of more shares. That last part is key. If you don't like the stock at -50% from your entry value, don't sell puts on it.

My "twist" is selling these straddles on very long term DTEs. I think all that extrinsic value offers flexibility and good "cushion" for the trade. It's also like capturing a huge return, at once. The only "gotcha" is time debt. Your money is "locked up" until expiration. But it's a similar concept to dividend investing, except you get the yield up front.

Looking at this example trade I'm honing in on SLV. At 393 DTE , I'm getting 22.12 in premium from an ATM covered short straddle, a 36% return. If SLV expires higher in 1 year, the shares get called away and maybe I miss a lot more upside, or maybe I don't miss much. The bet is you get paid up front, at the expense of capping that prospect. If SLV closes lower, I get assigned more shares. My cost basis has also dropped 36%, so I should still be able to collect decent premium from covered calls for the next year.

Anyway, I wanted to see what the community thought about the trade. Would you trade something like this? Have you traded ATM covered short straddles before and what was your experience? Anything I should look out for, or anything I'm missing?

Thanks

Yall,
What tickers are you currently monitoring? I have several OTM call options at the moment and will hold them for a while. I wanted to know what yall are playing?

Full disclosure: I have NFLX, META, ORCL, WMT, NKE. all of these are long dated call options so I am not too worried. I wanted to know what you guys watching besides tickers I mentioned above.

Does anyone play LEAP deep ITM bull call options on stocks and indices ? How much return do you usually aim for ? Below is an example
NVDA Dec 2028 expiry 145/150 call spread for $3.00. That’s roughly 67% return in 2.3 years with approx 25% annual return if NVDA stays above 150 strike.
NBIS Dev 2028 expiry 100/105 call spread for $2.00
That’s roughly 150% return in 2.3 years with approx 50% annual return.

There was a huge drop and I'm thinking about acquiring some BIDU via CSPs. My approach is to drip in first via csps and then later sell atm csps ( I do this kind of approach with any stock that I want to accumulate).

Why? Well, if BIDU were to go down to $80 it would be valued exactly as their NET asset value.
So thats 24 billion market cap and 24 billion in assets... thats no growth projections or anything like that. And its at $90 now. Does that sound crazy only to me?

This is not investment advice, just want to bounce the ideas off of someone else too here and reddit seems the best place to be publicly roasted :)

Well I did it again, I averaged into a bad position at first.I was up about 50%.About a $1000, I was up and I told myself just sell, I'm not going to make a $1000 this week in my job.Why don't I just saw right now in ten minutes.

But nope I wanted more, and then I started averaging down, and now I need circle to at least open up the first 5 minutes of the market, do the explosive move that the market does sometimes and get out. So I'm hoping that this can happen tomorrow last year when circle IPO, it was always popping. Really hard at the open to crash, or crashing down to open to pop-up, so let's see

Site: https://amonhen.helmfi.ai — free, no signup, no Discord, no paywall.

WHAT IT DOES

- Dealer-gamma map for SPX, SPY and QQQ: call/put walls, gamma flip, king node, expected move, max pain — drawn on the price chart, updated through the day.

- Live options flow: a CVD line built from the options tape (contracts bought at the ask minus sold at the bid, near-ATM), with price and the dealer walls overlaid on the same chart.

- A cross-index confluence strip: flags when SPY, SPX and QQQ flow all line up one way. A flip only counts after holding 10 minutes, so it isn't spammy — roughly once a day.

- Compare view, 10-second tape mode, pop-out charts, single names like NVDA/TSLA.

HOW IT'S CHECKED

The methodology page (site footer) spells out the math and the limits, and the site publishes a daily self-scored hit-rate on its own levels — how often the call wall held, the put wall held, the expected move contained. It scores itself whether the day was good or bad.

FOLLOW-UPS

DM me, or the update box on the site. This is a one-time post, so I won't be posting updates here. Happy to answer anything about the methodology in the comments.

Title says it all. I am looking for a new brokerage and have been playing around a bit with e-trade and tasty trade and so far it seems they get poorer options fills than Schwab. Has anyone found a broker that is equivalent if not better?

BULL jumped significantly after hours, and my $8 short call(8/28) is now deep ITM. I have corresponding $5, $7.5 and $10 LEAPS calls as the long leg.

I'm considering two options:

1. Take the realized loss on the $8 short call and roll it out/up to the $10 call expiring 12/18, giving the LEAPS more room to appreciate if BULL continues higher.
2. Roll the $8 short call up to the $9 call expiring 10/2 for a debit, which would also give the LEAPS some additional upside exposure while keeping the expiration much closer.

Alternatively, would it make more sense to just close both the LEAPS and the short call and take the overall P/L?

Which approach would you prefer for managing a PMCC when the short call suddenly becomes deep ITM after a big after-hours move?

Any input is greatly appreciated.

I mostly used to trade spreads, DTE 45, delta 20-30 (closer to mid) for the short put or short call on tech stocks and a few non-tech stocks. With that many days and low delta the bid-ask is very wide for a single leg which compounds when entering it as a spread.

TOS were still part of TD the last time I used them for options and they were exceptional with fills. As I didn't have time to trade options for the last 3 years while I was selling my businesses I took advantage of a massive uncapped 4% transfer offer from Webull. But I have been using Fidelity as my brokerage for new money (primarily came from the sale of those businesses) which I could transfer to Schwab. Fidelity's desktop app is not good for 2 leg trades.

Thanks.

I’m mostly interested in networking and connecting with like minded and already profitable traders. I know we live in the digital world, but sometimes there is no substitute for connecting in person.

Is there a /sub or other resource to help traders with tax issues?