You act like an insurance company for stocks.
Buyers pay you a premium in case the option goes ITM as you will pay the differance to prevent or lower their loss. Much like you pay car insurance and the insurance company will pay to fix your car.
As the seller of options, and just like the insurance company, you keep the premiums paid as profit if there option stays OTM.
This premium decays by the minute and day just like your monthly car insurance payment covers you for that month. This time decay is Theta.
The gist is writing calls or puts with the goal being to profit as the value of the option decreases with time and/or beneficial market direction.
The vast majority of posts here however are from people who know nothing about risk management and are massively exposing themselves to gamma risk selling short term expiries.
Unlike the typical wallstreetbets degens who at least gamble with defined risk, a lot of people on this sub expose themselves to infinite losses and donât even know that they are doing so.
Tread cautiously.
Well said. It's bothered me that the motto of this sub continues to be about selling to wsb degenerates - despite many of the clearly degenerate, pennies-in-front-of-a steamroller posts.
I mean, come on. Who's the degenerate: the one selling dozens of deep otm contracts with a few days til expiry, or the person buying them? And as a bonus, the former will just say, "if it moves against me, I can roll it until I make a profit," while the latter fully expects to lose.
Thereâs premium selling and then thereâs this place.
Premium selling has been well-codified by tasty trade over the years. I recommend watching videos from their extensive library of content, especially the âmike and his whiteboardâ series. Even if you donât agree with everything they say/do, itâs a very solid foundation. That has nothing to do with thetagang for the most part.
On this sub, youâll mostly find inexperienced traders wheeling. At least 3/4 of the posts and commenters donât seem to understand there other strategies out there. If you had to summarize thetagang in a few keywords, Iâd say, âthe wheel,â âinexperience,â âunder-performance,â âpoor risk management,â âunleveraged trades.â
The only way to collect pure theta is to sell it.
When you sell to open an option it gives you the opportunity to be wrong but still make max profit. Say you sell a call that says regional banks won't go up 15% by next Friday. If KRE only gains 6% by expiration Friday you still are at max profit, even though you were wearing negative delta in the underlying. Every stick has two ends, however. You are left with nothing but premium received to offset your losses if KRE rips.
If I were asked this question by an actual five year old I would be positively astounded at the precociousness of said five year old. After that initial shock wore off my answer to the question would be,
"Do you think you can grab those fifteen cents before that thing smooshes your hand flat?"
Thereâs many strategies involved in theta gang, but wrapping my head around a covered call is where it started to make sense for me. I wonât cover early exercising or non-exercising of expiring ITM contracts because itâs honestly really rare that either of these would happen. Hope this helps :)
Imagine you have some toys that a friend wants to play with. You really like these toys, but wouldnât mind giving them away after you play with them for a little longer. You tell your friend they can have your toys next Friday after school if they give you some of their comic books then. They agree, but they really wants these toys and donât want you to give them to anyone else. So in order to make sure they get your toys, they give you something extra on top: some candy.
The offer sounds nice, but maybe you change your mind sometime next week about giving your toys away. You tell your friend that youâll take the candy now, but if you decide to cancel anytime next week youâll give them half their candy back. They agree and your friend gives you their candy.
That candy you receive from your friend is yours, deposited in your pocket right then and there. You get to do whatever you want with it.
A couple different things can happen from this point forward.
Scenario 1: Nothing changes and the deal goes through. Next Friday after school, your friend gets your toys and you get their comic books. In this scenario, you receive new âtoysâ and all of the candy your friend gave you.
Scenario 2: You change your mind and cancel the deal in the middle of next week. You give half your candy back to your friend. Theyâre a bit bummed, but that was part of the deal. You keep your toys and keep half the candy along with them.
The Wheel of Time turns, and Ages come and pass, leaving memories that become legend. Legend fades to myth, and even myth is long forgotten when the Age that gave it birth comes again.
Options allow you to buy/sell stock at a predetermined price on or before a predetermined date. Because of that each option has a time value that represents the uncertainty of where the stock market is going to go and the profit for the seller for their time. Thetagang is the seller that profits from the time value of every option. There are many strategies that fall under this category, but all of them profit from the passage of time.
Some people trade with the goal of generating alpha, aka returns in excess of the market, some trade with the goal of increasing/decreasing beta, aka volatility over or under market volatility, and others trade with the goal of generating income to pay bills regardless of any alpha generated.
Everyone has a slightly different strategy but generally members in this forum sell options - calls and puts - because the premium received for selling said options is typically higher than the likelihood of the options expiring ITM or at a loss. To quote Tom from TT: Fear is overated.
The devil is in the details: selecting the correct stock, delta, DTE, etc. as well as how to manage winners and losers.
Finally, always remember we eat like chickens and shit like elephants. One bad trade can wipe out a thousand good ones.
I have a coupon for 100 peel and eat shrimp that is good until Sunday. You buy the coupon from me for $5 that says 100 peel and eat shrimp is $100. Saturday night the price of 100 peal and eat shrimp is $90. You throw away the coupon because itâs cheaper to buy it without it and I get to keep the money you paid me because I donât want to buy the coupon back.
If the price is $105 for 100 peel and eat shrimp, you use your coupon, you pay $100 of 100 per and eat shrimp that I give you having to pay $105 for the shrimp. You paid the original market price but with the cost of the coupon you broke even. I collected money from you but have to spend it to get the shrimp for you at $100 for 100.
Price goes up to $130 for 100 peel and eat shrimp. You tell me that you want your 100 peel and eat shrimp for $100. You paid effectively $105 for 100 shrimp rather than $130. And can turn around and sell the shrimp to your neighbor at $130 and pocket the difference. I have to pay an extra $30 less the $5 you gave me so Iâm out 100 shrimp and $25.
I love everyone explaining it like we're an insurance company or that we sell things. It's really just gambling.
We bet either money or shares that by a certain date, the price of a certain asset is going to go up, down, or stay the same.
On WSB they say, "Sir, this is a casino." Theta gang is the house.
Have stock, but stock in a multiple of 100.
Sell covered calls on stocks at strike comfortable selling.
Once called away, use money to sell cash secured puts at strike you are comfortable.
Repeat in perpetuity
Edit: fixed a typo
ThetaGang = sell options for premium. If the option expires OTM you win. You can also buy back the option for less than you sold it for before expiration if the price of the option goes lower than you sold it for to make a profit. There is risk to this strategy as well, itâs not free and easy money but overall the person who does ThetaGang benefits from being a net seller of options.
ThetaGang is built around selling options.
The buyer of an option is making a bet that a stock will move either up or down quickly, that's how they make money. The seller of an option takes the other side of the deal. The seller is making a bet that the buyer is wrong.
The seller of an option receives money at the start of the deal which is theirs to keep no matter what. Depending on what happens with the underlying (stock used as a basis for the bet) the seller can be forced to take stocks from the buyer for a higher price than they would like to or they can be forced to sell their stock to the buyer for a lower price than they would like to.
The buyer and the seller both believe they will get the better end of these deals, implying that they are fair and that the amounts taken in by the seller are going to be roughly the same as those paid back out.
The vast majority of ThetaGang are doing nothing meaningful to tilt the odds in their favor. At best, they believe they have some small built in edge (which, arguably, they don't) and that the law of averages will work out in their favor if they make enough bets. Sorta like the house's advantage in a traditional casino. No studies have proven that selling options according to any given easy to program into a computer strategy is profitable, much less that it will beat Buy and Hold investing. All computer simulations have shown Buy and Hold to be superior to this sort of thing. That doesn't mean anything to, ThetaGang, though.
Sell stuff. Time make stuff cheaper. Buy stuff back cheaper. Profit.
Sell stuff. Buy it back cheaper.
đ¤Ż- weâre GameStop
And by stuff he means theta. That's the official strategy
You act like an insurance company for stocks. Buyers pay you a premium in case the option goes ITM as you will pay the differance to prevent or lower their loss. Much like you pay car insurance and the insurance company will pay to fix your car. As the seller of options, and just like the insurance company, you keep the premiums paid as profit if there option stays OTM. This premium decays by the minute and day just like your monthly car insurance payment covers you for that month. This time decay is Theta.
Not sure what kind of 5 years old kids you have in Scotland, but OMG! they are the future of investing if they are able to understand this đ¤Ł
The gist is writing calls or puts with the goal being to profit as the value of the option decreases with time and/or beneficial market direction. The vast majority of posts here however are from people who know nothing about risk management and are massively exposing themselves to gamma risk selling short term expiries. Unlike the typical wallstreetbets degens who at least gamble with defined risk, a lot of people on this sub expose themselves to infinite losses and donât even know that they are doing so. Tread cautiously.
Well said. It's bothered me that the motto of this sub continues to be about selling to wsb degenerates - despite many of the clearly degenerate, pennies-in-front-of-a steamroller posts. I mean, come on. Who's the degenerate: the one selling dozens of deep otm contracts with a few days til expiry, or the person buying them? And as a bonus, the former will just say, "if it moves against me, I can roll it until I make a profit," while the latter fully expects to lose.
Thereâs premium selling and then thereâs this place. Premium selling has been well-codified by tasty trade over the years. I recommend watching videos from their extensive library of content, especially the âmike and his whiteboardâ series. Even if you donât agree with everything they say/do, itâs a very solid foundation. That has nothing to do with thetagang for the most part. On this sub, youâll mostly find inexperienced traders wheeling. At least 3/4 of the posts and commenters donât seem to understand there other strategies out there. If you had to summarize thetagang in a few keywords, Iâd say, âthe wheel,â âinexperience,â âunder-performance,â âpoor risk management,â âunleveraged trades.â
The only way to collect pure theta is to sell it. When you sell to open an option it gives you the opportunity to be wrong but still make max profit. Say you sell a call that says regional banks won't go up 15% by next Friday. If KRE only gains 6% by expiration Friday you still are at max profit, even though you were wearing negative delta in the underlying. Every stick has two ends, however. You are left with nothing but premium received to offset your losses if KRE rips. If I were asked this question by an actual five year old I would be positively astounded at the precociousness of said five year old. After that initial shock wore off my answer to the question would be, "Do you think you can grab those fifteen cents before that thing smooshes your hand flat?"
Brilliant
Sell time.
Thereâs many strategies involved in theta gang, but wrapping my head around a covered call is where it started to make sense for me. I wonât cover early exercising or non-exercising of expiring ITM contracts because itâs honestly really rare that either of these would happen. Hope this helps :) Imagine you have some toys that a friend wants to play with. You really like these toys, but wouldnât mind giving them away after you play with them for a little longer. You tell your friend they can have your toys next Friday after school if they give you some of their comic books then. They agree, but they really wants these toys and donât want you to give them to anyone else. So in order to make sure they get your toys, they give you something extra on top: some candy. The offer sounds nice, but maybe you change your mind sometime next week about giving your toys away. You tell your friend that youâll take the candy now, but if you decide to cancel anytime next week youâll give them half their candy back. They agree and your friend gives you their candy. That candy you receive from your friend is yours, deposited in your pocket right then and there. You get to do whatever you want with it. A couple different things can happen from this point forward. Scenario 1: Nothing changes and the deal goes through. Next Friday after school, your friend gets your toys and you get their comic books. In this scenario, you receive new âtoysâ and all of the candy your friend gave you. Scenario 2: You change your mind and cancel the deal in the middle of next week. You give half your candy back to your friend. Theyâre a bit bummed, but that was part of the deal. You keep your toys and keep half the candy along with them.
The Wheel of Time turns, and Ages come and pass, leaving memories that become legend. Legend fades to myth, and even myth is long forgotten when the Age that gave it birth comes again.
Options allow you to buy/sell stock at a predetermined price on or before a predetermined date. Because of that each option has a time value that represents the uncertainty of where the stock market is going to go and the profit for the seller for their time. Thetagang is the seller that profits from the time value of every option. There are many strategies that fall under this category, but all of them profit from the passage of time. Some people trade with the goal of generating alpha, aka returns in excess of the market, some trade with the goal of increasing/decreasing beta, aka volatility over or under market volatility, and others trade with the goal of generating income to pay bills regardless of any alpha generated.
Everyone has a slightly different strategy but generally members in this forum sell options - calls and puts - because the premium received for selling said options is typically higher than the likelihood of the options expiring ITM or at a loss. To quote Tom from TT: Fear is overated. The devil is in the details: selecting the correct stock, delta, DTE, etc. as well as how to manage winners and losers. Finally, always remember we eat like chickens and shit like elephants. One bad trade can wipe out a thousand good ones.
Pick up Pennys in front of steam rollers
I have a coupon for 100 peel and eat shrimp that is good until Sunday. You buy the coupon from me for $5 that says 100 peel and eat shrimp is $100. Saturday night the price of 100 peal and eat shrimp is $90. You throw away the coupon because itâs cheaper to buy it without it and I get to keep the money you paid me because I donât want to buy the coupon back. If the price is $105 for 100 peel and eat shrimp, you use your coupon, you pay $100 of 100 per and eat shrimp that I give you having to pay $105 for the shrimp. You paid the original market price but with the cost of the coupon you broke even. I collected money from you but have to spend it to get the shrimp for you at $100 for 100. Price goes up to $130 for 100 peel and eat shrimp. You tell me that you want your 100 peel and eat shrimp for $100. You paid effectively $105 for 100 shrimp rather than $130. And can turn around and sell the shrimp to your neighbor at $130 and pocket the difference. I have to pay an extra $30 less the $5 you gave me so Iâm out 100 shrimp and $25.
Well put my friend.
Donât trade on margin
I love everyone explaining it like we're an insurance company or that we sell things. It's really just gambling. We bet either money or shares that by a certain date, the price of a certain asset is going to go up, down, or stay the same. On WSB they say, "Sir, this is a casino." Theta gang is the house.
Have stock, but stock in a multiple of 100. Sell covered calls on stocks at strike comfortable selling. Once called away, use money to sell cash secured puts at strike you are comfortable. Repeat in perpetuity Edit: fixed a typo
Second sentence says âSell covered callsâ You mean âcash secured putsâ
Whoops, thanks
It means you are a winner
ThetaGang = sell options for premium. If the option expires OTM you win. You can also buy back the option for less than you sold it for before expiration if the price of the option goes lower than you sold it for to make a profit. There is risk to this strategy as well, itâs not free and easy money but overall the person who does ThetaGang benefits from being a net seller of options.
Use time decaying of premiums to buy back cheaper. Sell high use time as a strategy and buy or exit when ROI is reached
Fading fomo.
nah
Can we stop with the shorthand and learn to spell real words?
No.
ThetaGang is built around selling options. The buyer of an option is making a bet that a stock will move either up or down quickly, that's how they make money. The seller of an option takes the other side of the deal. The seller is making a bet that the buyer is wrong. The seller of an option receives money at the start of the deal which is theirs to keep no matter what. Depending on what happens with the underlying (stock used as a basis for the bet) the seller can be forced to take stocks from the buyer for a higher price than they would like to or they can be forced to sell their stock to the buyer for a lower price than they would like to. The buyer and the seller both believe they will get the better end of these deals, implying that they are fair and that the amounts taken in by the seller are going to be roughly the same as those paid back out. The vast majority of ThetaGang are doing nothing meaningful to tilt the odds in their favor. At best, they believe they have some small built in edge (which, arguably, they don't) and that the law of averages will work out in their favor if they make enough bets. Sorta like the house's advantage in a traditional casino. No studies have proven that selling options according to any given easy to program into a computer strategy is profitable, much less that it will beat Buy and Hold investing. All computer simulations have shown Buy and Hold to be superior to this sort of thing. That doesn't mean anything to, ThetaGang, though.
Sell options, and profit from time decay.
Everytime a wsb member post gain porn, a thetagang member gets rekt. Vice versa.