u/TheInkDon1

Hi, all. My first post here, I hope it adds value.
I'm a simple momentum investor: I look for price trends and buy what's going up. Beyond that I don't look much at Fundamentals at all.

On 9/14 I found TXG, and it's become my yardstick for anything else. From mid-May it's just pretty much been "up and to the right."
I asked AI this morning about its whole story from IPO in 2019, and especially the past 5 months 300+% run, and I won't paste that all here (mostly because I can't defend it, as I'm not a Fundamentals guy).

But it sounds to me like they have a moat in the areas of "sincgle-cell RNA sequencing" and "spatial biology."
AI also notes that they operate on a "razor and blades" model, where they sell the machines that do the sequencing (the razor), but then users have to buy the "specialized consumable reagent kits and microfluidic chips (the blades) needed to run every single experiment."

I mostly just know that it's up 40% since I bought it 20 days ago, and I've been adding more (with a 10% trailing stop on all shares).

If anyone feels like digging into it further, I'd love to hear your take on it. I see the history of it, and it's been boom-and-bust at least twice, which is why I'm keeping a tight stop on it.

Here's the Google query I used:
TXG went public in 2019. In about a thousand words, can you give me a narrative of what they do, what their products are, and their stock price performance since then? Especially focus on the past 5 months.

Hi all, someone asked me in chat my thoughts on selling Puts, and margin and assignment, and what I wrote back got long, so I thought others might glean something from it. No need to read this if you're fairly familiar with CSPs.

TL;DR: Only sell CSPs on tickers you'd genuinely BUY ANYWAY. "Juicy premium" is not a thesis. If you get assigned, sell CCs at your cost basis to exit, or at 30-delta to keep the shares. Rinse and repeat.

I've been doing options for a bit over 5 years now, and that doesn't make me any kind of expert, but I've done just about everything you can do with them and been through a lot of different scenarios. And just so you kind of know who I am before I go spouting off, I'm 62, a Nuclear Engineer, and have been investing/trading/playing in the stock market since 1992. Mutual funds, stocks, ETFs, and now options almost solely for the past 2 or 3 years.

You probably know that selling a CSP is the simplest thing you can do with options, and everyone should start there (other than CCs for some, which I'll get to later).

Say you like SOXX right now because it's up 88% in the past 3 months and you want some of that action. (Btw, I always recommend ETFs: much safer than individual stocks.)
You could buy it outright and maybe catch 88% over the NEXT 3 months.
But if you're going to buy it anyway, why not sell a CSP right ATM? And I do mean RIGHT at the money.

Watch:
SOXX closed at 639.45 Friday, call it 640. (I know it's expensive, but just follow along with the math and apply it to the ticker of your choosing.)
Next Friday's 640 Put is selling for 23.30 at Midpoint.
What's the ROI on that?
It's 23.30 divided by the $640 (per share) collateral you have to have (unless you have a margin acct, then you may only need 1/3 to 1/5 of the collateral; take advantage of that, but don't overdo it).
That's 3.6%. In a week. For a ticker you were going to buy anyway.

That's one use case for Puts: buying a stock you were going to buy anyway.

Another use case is to earn a return on your money.
What if you sold that ATM CSP every single week and never got assigned? Do we get to multiply by 52 weeks? Pretty much, kind of. At least to get a feel for how much return that really is. It's 189% apy.
Is that bigger than getting 88% every 3 months for SOXX shares, like it's been doing? No, not by a long shot. But assuming it keeps up that pace (and I know that "past performance doesn't predict future results"): 88% 4 times in a row (not compounding) is 352%. Hmmm, better off buying shares.

But wait, remember margin, and how it decreases your Buying Power Effect (or whatever your broker calls it)? Hmmm, say you get 4:1, then you get to multiply that 3.6% per week by 4 because they only hold one-fourth of your money in escrow. Then that becomes 14.4% per week. And all of a sudden that IS larger than 88% in 3 months.
But that margin multiplier cuts both ways, so be careful with it, and ensure you understand it.

I gave a lot of mathematical detail there with the ROI, but I want to make sure you see it; it's powerful, especially if you have margin.

Selling a CSP on A TICKER YOU WANT TO BUY ANYWAY, is 'better' than simply buying it. Because you get paid to buy it.

If SOXX closes the week below 640, you'll buy it there, but you would've bought it at 640 anyway, so.......so what?

Now what's your CB? It's Strike minus Premium: 640 - 23.30 = 616.70. And that's a 3.6% discount. (The same 3.6% we saw before.)

So if you were going to buy SOXX anyway, then selling the CSP puts you in a better position NO MATTER THE OUTCOME on Friday. Either you DON'T get assigned and make 3.6% for that week, or you DO, and you buy SOXX at a 3.6% discount.

And if the price ends up lower than your CB? So what!? YOU WERE GOING TO BUY IT ANYWAY.

Now reevaluate your thesis for SOXX: if you don't think it will go back up, get rid of it. (And of course, you do that with a CC; more on that in a minute.)

But where people get in trouble with CSPs every single time, is when they say, "I wouldn't mind owning SOXX at 640."
See the difference?

"I want to buy XYZ because...." is a very different statement than, "This premium is so juicy, I really wouldn't mind owning ZYX at xx.xx."

But you WILL mind owning it when it gets put to you below the CB, I guarantee it.

Want to do a CSP on something like IONQ with its 109% IV? Go ahead, at-the-money you'll make 4.8% this week. But don't cry when it drops 22% like it did the first week of June. That ~5% you made on the CSP won't feel like much buffer against a 22% loss.

And then do you hold because you think it's a quality ticker that should go back up soon (like SOXX)?
Or do you bail with a 17% loss? Or do you try to sell CCs at your CB for much less than that 5% per week?

Selling Puts comes down to really TRULY believing the ticker is one you'd BUY ANYWAY. Because sometimes you WILL be forced to buy it, so you'd better be okay with that outcome.

A quick note about assignment: if it hasn't happened to you yet, it's scary the first time or three. But just remember this: you're not really in the hole $64,000 (SOXX) or whatever (if you used margin; if not, then you actually paid 64k for the shares).
You're only *really* on the hook for the difference between the strike you bought at, and Monday's price.
So Monday if you want, sell those same shares at the market price, and you're flat again.
Or keep them, because that was sort of the plan: you were going to buy them anyway.

If you get assigned, sell a CC at CB and you'll get paid to get out (3.4% this week for SOXX), or at 30-delta or so if you kind of want to keep the shares and participate in possible appreciation.

And CCs are THE safest thing you can do with options. You can't do any WORSE than you'd do just holding the shares. All that can happen on the upside is that you have to sell your shares at a price you might later regret.
But don't: you made that deal with the market, and the market took you up on it.
Go back to the Put side. Same ticker if you want, or another.

And this is what I alluded to earlier, that some might start on the Covered Call side. And that would be because they already own 100-lots of shares of something they wouldn't mind selling at a certain price.

And just like Puts, that's probably the main use-case for Calls: to sell shares you own, and get paid to do so. (Divide the Premium at your chosen strike by Spot to get ROI for the period.)

And again, just like Puts, another use-case for CCs is to earn an ROI from the premiums. If the shares happen to get sold in the process, that's alright, just sell a Put to either get some more shares (so sell ATM), or to earn an ROI (then maybe sell at 30-delta).

I've been talking about Weeklies here just to illustrate the possible ROIs, but we should probably stick with "the TastyTrade way" of selling 30-45DTE options. They say 30-delta on both sides, but I sell ATM on the Put side, and at CB on the Call side, because I want to maximize return. And I really lean on 30 days, even 4 weeks/28 days if it's the weekend and I'm setting up trades for Monday.

But when selling Puts, by gosh, MAKE SURE it's a ticker you'd TRULY want to own.
DON'T let high IV and thus high premiums make that decision for you.
I showed with SOXX, which isn't too terribly volatile (though it does have an IV of 77% for this week), that you could theoretically make 189% apy selling CSPs and maybe never own a share.

Just the way I do it.
Play safely out there,
Mike in Atlanta

Hi, all. u/Sharp_Blackberry_902 made a post today about the government's ROI on Intel, and since I've been trading it for a couple weeks in a certain way, I thought I'd make a little post about how. This will be more tactical than deep in options theory, so if you're interested at all, please read on.

Cash Secured Puts

Selling a Put option gives the buyer the right to "put" shares to the seller at the strike price.
Simple, that's it. That's what selling a Put is. We're obligated to buy the shares at the strike.
If you don't want to do that for whatever reason, then don't sell the Put.

When people buy Puts, mostly they're buying downside protection for their shares.
With INTC at 115.77 here after hours, they may want protection against the share price dropping below 115, so they buy a 115-strike Put.

So who's selling these Puts? People like you and me who might like to own Intel at 115.
But what do we get out of it?
Premium.
People pay good money for insurance, and we're the insurer.

Normally I'd do screenshots, but I don't have a lot of time right now.
In the INTC option chain 34 days out (34DTE), the 2Jul26 expiration, the 115P is selling for 11.07 at Midpoint.

People are paying ELEVEN DOLLARS for a month's worth of protection on Intel shares worth 115 now.
What percentage is that insurance costing them?
11.07 / 115 = 9.6%
For just 31 days (from Monday) of price protection. 9.4% per month, give or take.

Would you like to make 9% per month?
Then sell those ATM Puts.

What's the worst that could happen?
Intel could drop some and you'd have to buy 100 shares at 115.
What's your Cost Basis?

Hint: It's not 115.
Because remember the Premium we collected?
CB = Strike - Premium = 115 - 11.07 = 103.93

That's 9.6% less than Intel's current price.
In fact, that's the 9.6% we calculated earlier.

But wait: why did I divide the Premium by the Strike?
Because your broker is going to sequester enough of your cash to buy those 100 shares at 115. $11,500.
Fair enough, right?

And that's the Total Loss you actually face: Intel could go bankrupt, go to zero, yet YOU still have to buy those shares at 115. Probably won't happen, but that's why they Secure your Put with that much of your Cash. A Cash Secured Put.

So the trade has you 'investing' 11.5k and making 1.1k on it.
9.6% in 31 days. 113% apy

And in a Margin account, you might only have to put up one-fourth or even one-fifth of the capital; think about what that does to the ROI.

Put Credit Spreads

Now do the same thing, sell that 115P insurance to somebody.
But what if YOU now took out insurance? Can you do that?

Well, you could buy a Put lower than 115 and protect yourself from a catastrophic drop in Intel.
And because of the way options work, you're only liable for the spread between the strikes.

So let's say you only want to risk $1,000 on this 1-month trade.
You'd buy the 105P for 6.30, $630.

You still sell the 115P for 11.07, $1,107.
But you use some of that Premium to buy your own protection.
So 1107 - 630 = $477

That's the Credit you receive for selling this Spread of Puts.
A Put Credit Spread.

But you're really not on the hook for that thousand-dollar spread: because you've taken in $477 net, you really only stand to lose the spread minus that:
1,000 - 477 = $523

Because if worst-case Intel goes to 50 or something outrageous, then sure, you have to pony up the $1,000 between the strikes.
But you got paid $477, so you use that money to pay off some of the obligation, and your real Max Loss is only $523.

(The loss works like this: you're forced to buy shares at 115, but then you can force someone else to buy them from you for 105. Bought at 115, sold for 105, you only lost $10 each on the 100 shares, or $1,000.)

And now let's think about ROI.
If I risk $523 and make $477, can you already see that that's a huge return?
It's: 477 / 523 = 91%
In 31 days.
I won't even apy it for you.

So those are the ideas, but of course there are a lot of best-practices around each one that you'll want to read up on.
But ask any questions you've got, and I can at least lay out the math of different scenarios for you.

Be good,
Mike