***Official*** 2019 Stock Market Thread

[FelixDeCat]

come on dow 19.9k!
I saved up 6figures to invest for when the market crashes under Trump.

still cant believe it hasn't happened yet?!

Pullbacks are healthy. But if you are looking for sub 20K on the DOW prepare to be disappointed. If it goes too low the political pressure for the Fed to to act is too great these days. Heck I think we could have had at least ONE more rate increase to 5.75% prime rate, but its already been ruled out.

Sometimes you have to take away the punch bowl and save the lowest rates for REAL hard times like 08-12. Those were bad days and you need Fed firepower to help recover.

During the good times however I think we need to prune the garden and let the weak perish.

 

[s0me0nesmind1]

Pullbacks are healthy. But if you are looking for sub 20K on the DOW prepare to be disappointed. If it goes too low the political pressure for the Fed to to act is too great these days. Heck I think we could have had at least ONE more rate increase to 5.75% prime rate, but its already been ruled out.

Sometimes you have to take away the punch bowl and save the lowest rates for REAL hard times like 08-12. Those were bad days and you need Fed firepower to help recover.

During the good times however I think we need to prune the garden and let the weak perish.

Do you think were in for a recession in the next year ? Or do you think we had a "mini recession" in late last year and we are headed for more overall growth in the next 2 years?

 

[ImpulsE69]

Pullbacks are healthy. But if you are looking for sub 20K on the DOW prepare to be disappointed. If it goes too low the political pressure for the Fed to to act is too great these days. Heck I think we could have had at least ONE more rate increase to 5.75% prime rate, but its already been ruled out.

Sometimes you have to take away the punch bowl and save the lowest rates for REAL hard times like 08-12. Those were bad days and you need Fed firepower to help recover.

During the good times however I think we need to prune the garden and let the weak perish.

The whole 08-12 thing, is crazy, I didn't feel a thing and didn't even notice it. I consider myself lucky.

 

[Ken g6]

Pullbacks are healthy. But if you are looking for sub 20K on the DOW prepare to be disappointed. If it goes too low the political pressure for the Fed to to act is too great these days. Heck I think we could have had at least ONE more rate increase to 5.75% prime rate, but its already been ruled out.

Which means the Fed only has 250 basis points to work with. I think a lot of their chips are already down.

 

[dasherHampton]

Had a couple of winners so far today in Tegna and Goldcorp but they've been canceled out by a bad bet on BAC.

I thought for sure the Mueller news would help bank stocks, and I've never lost money on BAC buying it under 28. Oh well - the day ain't over and if it doesn't come back at least I can sell Friday options.

 

[dasherHampton]

Where's AMD going to be Friday?

I'm thinking about selling some Friday puts. The 26 puts are sitting at $35 a contract. AMD looks to be over 26.50 pre market.

Any sages out there?

 

[DietDrThunder]

Where's AMD going to be Friday?

I'm thinking about selling some Friday puts. The 26 puts are sitting at $35 a contract. AMD looks to be over 26.50 pre market.

Any sages out there?

So I never really spent much time thinking about puts and calls.

Basically, what you are saying is your AMD stock put option with a strike price of $26 means that you (the put option buyer) can use this option to sell that stock at $26 before the option expires, and it will cost you $35 (total for 100 shares?) to sell the put?

Please help me understand.

 

[dasherHampton]

A contract is 100 shares. A put is a contract to buy shares at a certain price.

So if, for example, If I sell 10 contracts at 26 it gives the buyer an option to sell the stock to me at $26 a share. If AMD stays above $26 a share by Friday the put expires and I pocket $350.

If it drops to $25 I have to buy 1000 shares at $26 for a $1000 loss.

I never buy options, only sell.

 

[dasherHampton]

If I go another week out (4/12) the contacts are worth $62 a share. More risk, more reward.

If I do get put the stock I can turn around and sell calls on it.

 

[DietDrThunder]

A contract is 100 shares. A put is a contract to buy shares at a certain price.

So if, for example, If I sell 10 contracts at 26 it gives the buyer an option to sell the stock to me at $26 a share. If AMD stays above $26 a share by Friday the put expires and I pocket $350.

If it drops to $25 I have to buy 1000 shares at $26 for a $1000 loss.

I never buy options, only sell.

I thought a contract to buy was a "call"? Ehh, seems too complicated.

 

[dasherHampton]

No, a covered call is a contact to sell shares you own at a certain price.

edit - if you're option level 3 you can sell naked calls (calls on stock you don't own) but that involves unlimited risk.

 

[DietDrThunder]

So, as the seller of a put, you collect the purchase price of the option from the buyer of the put (the $35 per 100 shares). Then as the seller you have the obligation to buy 100 shares at the strike price regardless of the market value of the underlying stock until the contract expires. So if the put buyer decides to exercise the put contract, you as the seller of the put has to buy the 100 shares at the strike price no matter the current market value of the stock.

So the way you make money is if the buyer doesn't exercise his option, or the stock price goes above the strike price?

 

[dasherHampton]

Selling. Buying options is much more expensive. That's what Hedge funds and the like do. People with much more inside information.

We'll see how it turns out. Call it "As the AMD turns".

I sold 10 puts at 26 and collected $355.

 

[dasherHampton]

The thing is - you can't look at it as a one step transaction. You have to look ahead to what the stock will bring if it gets put to you.

For example - AMD 27 calls for 4/12 are sitting at $55 a contract. That will change, of course, but it gives me confidence that if the stock gets put to me I can make money off of it.

 

[dasherHampton]

So, as the seller of a put, you collect the purchase price of the option from the buyer of the put. Then as the seller you have the obligation to buy 100 shares at the strike price regardless of the market value of the underlying stock. So if the put buyer decides to exercise the put contract, you as the seller of the put has to buy the 100 shares at the strike price no matter the current market value of the stock.

So the way you make money is if the buyer doesn't exercise his option, or the stock price goes above the strike price?

You're correct about the puts now.

 

[DietDrThunder]

We'll just hope AMD stays above $26 then, otherwise you will have to buy 1,000 shares at $26.

 

[dasherHampton]

I'm ok with taking on some AMD. I had a big flush last Friday.

I would rarely recommend selling puts on a stock you're not comfortable taking on.

 

[DietDrThunder]

So, in what instance would you buy a put? Would it be that if you had stock in AMD and thought maybe the bottom might drop out of the stock price? Then if someone bought your put at a strike price of $26, and the price dropped to $13, then they would get $1,300 from exercising the put minus the $35?

 

[dasherHampton]

lol no

If AMD drops to $13 I have to buy it at $26. I'd lose $13,000.

But that's not going to happen.

 

[dasherHampton]

Let me be clear about something -

You CAN buy back options you've sold. That's different than buying options outright.

I would never allow AMD to fall below, say, $20, without buying back the puts. I'd lose big but not $13,000 big.

 

[DietDrThunder]

I'm just trying to understand. It sounds like me buying 500 shares of AMD at $17 a share back in December, and holding it until I feel like I should sell is the strategy that I will stick with. I'll probably see if it goes above $27 before I sell.

 

[dasherHampton]

Sure, that sounds good if you played it that way.

But I can't go back in time. I can only look at what's available right now.

 

[dasherHampton]

I just checked the AMD calls.

The 5/3 28 calls are at $133 a contact. If you have 500 shares of AMD why not use them to make $665?

Thats a dollar a share above what you're looking for.

 

[DietDrThunder]

I just checked the AMD calls.

The 5/3 28 calls are at $133 a contact. If you have 500 shares of AMD why not use them to make $665?

Thats a dollar a share above what you're looking for.

Why, because I have to fully understand WTF I'm doing, and at this point I'm still a bit confused. I'll have to do a bit more research into puts, etc. before I'd do anything, otherwise I'd screw myself somehow.

 

[dasherHampton]

I think you're making this more complicated than it is.

A covered call is the safest investment vehicle you can use. You can't lose money you already have. You can only lose potential profits.

You have 500 shares of AMD. You'd be willing to sell at $27 a share.

Instead you sell an agreement to someone that allows them to purchase the shares at $28 a share on May the 3rd, and they pay you $655 for that agreement. If the stock is below $28 on that date you keep the $655.