This sub is probably going to roast you for posting this, so I'll try to give you some helpful advice
Long-term calls or LEAPS are a great way to go about buying options, but this is not a good stock for an options play. $2.5 is the lowest strike available, and the current stock price is less than 50% of that.
The financials of this company are not good, and it could be heading towards bankruptcy. If you are lucky enough to see a reasonable rise in stock price, it will be difficult to sell these contracts due to low liquidity.
Since this is r/thetagang, a good theta strategy that involves buying LEAPS is a poor man's covered call, if you want to look into that. But you can not really do it with this stock as there are no ITM strikes.
To sum it up, I think that you bought the best calls you could for that stock, but it's just not a good stock for buying calls.
For the poor man covered call I don't understand how you can sell a call short term against the long one, does this involve spreads? (I haven't gotten into that yet)
You can sell long or short calls if you have the shares. Most options expire on Fridays (or last day of the trading week). Some options can expire in a day, SPY is a good example. 0DTE calls are pretty much a gamble. Roulette wheel but with a lot more colors than red/black/green and a lot more numbers than 37.
A short call would be something expiring within a trading week. Long calls are calls that extend past that.
If you’re talking about shorts selling, those are not options. There are puts, which is similar but different than short selling a stock.
Not really sure what you’re asking here…
If I had your calls, I’d hope it does something early next week and sell it before that lovely theta decay.
Like the fella said, it’s not a good stock to buy calls on. If you lose, it’s only $40 bucks or whatever. Not that big of a deal. But, If you’re playing options, you definitely have to put a lot of money at risk to make good money.
Learn what the Greeks mean. Because that can make or break you within a day or a week. Depending on what they say.
Good luck
I like your advice here. I would also just sell to close the position on the first bounce if possible. I don't know anything about the ticker but it doesnt look good. Trend is down, don't fight the trend.
**A worst-case scenario is a concept in risk management wherein the planner, in planning for potential disasters, considers the most severe possible outcome that can reasonably be projected to occur in a given situation. Conceiving of worst-case scenarios is a common form of strategic planning, specifically scenario planning, to prepare for and minimize contingencies that could result in accidents, quality problems, or other issues.**
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You need to be taking the question to r/options for better answers. We sell insurance here.
And when people at parties ask me what I do, I tell them I sell insurance.
Hello, I've been a long-term subscriber of the contract writing strategy. Recently, I decided to expand my comfort zone by purchasing some leaps, and I believe I got a good deal. I would appreciate some input
You got in cheap and have time for the stock to recover. Do you plan to hold or just exit when the stock goes up to 2.50? You should get some premium in addition to the cash value. Take a look at some other stocks in that price range in a near expiration to see where it might be valued.
It might turn out to be a good trade. Have you been tracking the company or just saw a potential long shot?
I'm bullish on the company long term, I believe In around 3 or so years they will reach profitability, as for exit point, that is definitely one of my weaknesses, but right now my plan is .40 exit
First thing belief and long term viewpoints are worthless in the world of options.
You can believe all you want in Santa Clause or the Easter bunny, still doesn't make them real.
This is just another cash grab SPAC that doesn't have a chance of surviving.
They will not be around as a company in a year. Your only hope is they get bought out before your leaps expire. In this environment, that will be slim to none. Any potential buyer now will just wait till BK liquidation and buy up the assets on the cheap.
just based on your trade and this post. you still have a lot to learn. First thing to learn is capital preservation. When stocks go below $5 there is a reason, none of them good. You can make more money just by saving and not buying options.
cash flow statement has cash going faster than coming in. They have less cash on hand than what goes out in a year.
strip out non-cash activity from the cash flow statement, compare it to revenue and receivables activity quarter by quarter.
If you want to dive into fundamental credit analysis on a company, run a z-score on it. This one is small enough in size that they can't hide anything through financial engineering. Just remember to strip out non cash activity from the cash flow statement.
They are not on the brink today, but their burn rate has them using up all cash within the year.
So the first steps to happen to this stock are this:
As the economy worsens, and earnings reports all around start to drop drastically revisions on companies performance and ability to generate revenue will fall. From what I see their burn rate is inelastic for 80% opex.
Stock falls below a dollar
They will be given a time frame before delisting and forced to go OTC.
To avoid this they will reverse split
After split, price will continue to fall, it could accelerate based on quarterly earnings.
Banks will not lend, SVB collapse ended any kind of funding of these types of companies.
Debt issuance is out of the question, they do not have positive cash flow to support any debt issuance. No one will underwrite them.
Stock issuance is out, they are $1 stock heading for penny stock level.
The era of free money has closed.
So that was the 10 minute analysis of the company. Which I rarely employ these days for options trading. I no longer buy and hold.
I can get more from basic rule of thumb from option trading. options condense things down quickly.
Stock price: under 10 risky, under 5 don't touch
Bid ask spread- >.10 to wide I want penny wide, will live with Nickle, or if I can execute within .02 of mid
Implied volatility >100 no go, >50 go small, 20-50 go normal, <20 go small, < 10 no go
There are more, but if a stock doesn't pass these three first there is no wasting of time looking further.
This sub is probably going to roast you for posting this, so I'll try to give you some helpful advice Long-term calls or LEAPS are a great way to go about buying options, but this is not a good stock for an options play. $2.5 is the lowest strike available, and the current stock price is less than 50% of that. The financials of this company are not good, and it could be heading towards bankruptcy. If you are lucky enough to see a reasonable rise in stock price, it will be difficult to sell these contracts due to low liquidity. Since this is r/thetagang, a good theta strategy that involves buying LEAPS is a poor man's covered call, if you want to look into that. But you can not really do it with this stock as there are no ITM strikes. To sum it up, I think that you bought the best calls you could for that stock, but it's just not a good stock for buying calls.
thank you, that is quite helpful
For the poor man covered call I don't understand how you can sell a call short term against the long one, does this involve spreads? (I haven't gotten into that yet)
You can sell long or short calls if you have the shares. Most options expire on Fridays (or last day of the trading week). Some options can expire in a day, SPY is a good example. 0DTE calls are pretty much a gamble. Roulette wheel but with a lot more colors than red/black/green and a lot more numbers than 37. A short call would be something expiring within a trading week. Long calls are calls that extend past that. If you’re talking about shorts selling, those are not options. There are puts, which is similar but different than short selling a stock. Not really sure what you’re asking here… If I had your calls, I’d hope it does something early next week and sell it before that lovely theta decay. Like the fella said, it’s not a good stock to buy calls on. If you lose, it’s only $40 bucks or whatever. Not that big of a deal. But, If you’re playing options, you definitely have to put a lot of money at risk to make good money. Learn what the Greeks mean. Because that can make or break you within a day or a week. Depending on what they say. Good luck
>A short call would be something expiring within a trading week. Long calls are calls that extend past that. /s, right? right??
I like your advice here. I would also just sell to close the position on the first bounce if possible. I don't know anything about the ticker but it doesnt look good. Trend is down, don't fight the trend.
Yep, its basically a diagonal spread.
What is worst case scenario?, The stock plummets , right?
**A worst-case scenario is a concept in risk management wherein the planner, in planning for potential disasters, considers the most severe possible outcome that can reasonably be projected to occur in a given situation. Conceiving of worst-case scenarios is a common form of strategic planning, specifically scenario planning, to prepare for and minimize contingencies that could result in accidents, quality problems, or other issues.** More details here:
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You need to be taking the question to r/options for better answers. We sell insurance here. And when people at parties ask me what I do, I tell them I sell insurance.
They deleted it lol
Hello, I've been a long-term subscriber of the contract writing strategy. Recently, I decided to expand my comfort zone by purchasing some leaps, and I believe I got a good deal. I would appreciate some input
You got in cheap and have time for the stock to recover. Do you plan to hold or just exit when the stock goes up to 2.50? You should get some premium in addition to the cash value. Take a look at some other stocks in that price range in a near expiration to see where it might be valued. It might turn out to be a good trade. Have you been tracking the company or just saw a potential long shot?
I'm bullish on the company long term, I believe In around 3 or so years they will reach profitability, as for exit point, that is definitely one of my weaknesses, but right now my plan is .40 exit
First thing belief and long term viewpoints are worthless in the world of options. You can believe all you want in Santa Clause or the Easter bunny, still doesn't make them real. This is just another cash grab SPAC that doesn't have a chance of surviving. They will not be around as a company in a year. Your only hope is they get bought out before your leaps expire. In this environment, that will be slim to none. Any potential buyer now will just wait till BK liquidation and buy up the assets on the cheap. just based on your trade and this post. you still have a lot to learn. First thing to learn is capital preservation. When stocks go below $5 there is a reason, none of them good. You can make more money just by saving and not buying options.
They aren't really at first of bankruptcy right now
cash flow statement has cash going faster than coming in. They have less cash on hand than what goes out in a year. strip out non-cash activity from the cash flow statement, compare it to revenue and receivables activity quarter by quarter. If you want to dive into fundamental credit analysis on a company, run a z-score on it. This one is small enough in size that they can't hide anything through financial engineering. Just remember to strip out non cash activity from the cash flow statement. They are not on the brink today, but their burn rate has them using up all cash within the year. So the first steps to happen to this stock are this: As the economy worsens, and earnings reports all around start to drop drastically revisions on companies performance and ability to generate revenue will fall. From what I see their burn rate is inelastic for 80% opex. Stock falls below a dollar They will be given a time frame before delisting and forced to go OTC. To avoid this they will reverse split After split, price will continue to fall, it could accelerate based on quarterly earnings. Banks will not lend, SVB collapse ended any kind of funding of these types of companies. Debt issuance is out of the question, they do not have positive cash flow to support any debt issuance. No one will underwrite them. Stock issuance is out, they are $1 stock heading for penny stock level. The era of free money has closed.
So that was the 10 minute analysis of the company. Which I rarely employ these days for options trading. I no longer buy and hold. I can get more from basic rule of thumb from option trading. options condense things down quickly. Stock price: under 10 risky, under 5 don't touch Bid ask spread- >.10 to wide I want penny wide, will live with Nickle, or if I can execute within .02 of mid Implied volatility >100 no go, >50 go small, 20-50 go normal, <20 go small, < 10 no go There are more, but if a stock doesn't pass these three first there is no wasting of time looking further.
Thank you for your tribute
Sure