So selling covered calls is a lot trickier than buying puts. What we need to see happen is a massive move in Nvidia before we sell covered calls. So we probably wouldn’t be looking at covers calls until Nvidia hits $150 a share or thereabouts. We’d need to see compelling evidence that the stock is reaching some sort of a near-term or intermediate-term top. We’ll be selling longer-term covered calls against our position once Nvidia goes on a full run.
Hi Cosimo — so generally speaking, here’s how it works with options in terms of positioning when you’re trying to buy options, you buy to open. And when you want to sell or “close” your options position, you sell to close that position.
But I’d highly caution against buying options at all until you have a very strong understanding and are comfortable with them. For example, we discussed a whole bunch of ratios ahead of the trade. If an investor doesn’t get the ratios right, they can get into a lot of trouble. If they accidentally make the wrong order by putting in “Sell to Open” instead of “Buy to Open” it could be a disaster. For the Samwise Portfolio, we choose to buy roughly a 7% put position relative to our long position. Since we were long $25,000 worth of Nvidia, we bought $1,950 worth of puts. $1950 / $25,000 = 7.8%. Any higher than that and it could start to get too expense. Any lower, and the protection doesn’t work.
So let me reiterate that an investor really needs to be very very comfortable in their understanding of options before trading them at all.
Here are some general terms and their meaning for everyone’s general knowledge and information. We’ll soon be covering an introduction to options which will cover some of these terms:
Buy to Open means an investor is beginning or opening a new LONG position. You Buy to Open when you want to buy puts or buy calls and hold them in your portfolio. You can go LONG or SHORT calls and puts. For the positions we just started, we did Buy to Open because we went LONG the put options. We bought to open the QQQ $450 December 2025 Puts and bought to open the Nvidia December 2025 $85 puts.
Sell to Open means you are beginning or opening a new SHORT position. You do that if you feel that the options are going to go down in value. You can go LONG or SHORT a call or a put. There are a lot of strategies involving selling a put/call option short. But due to the risk of loss and how dangerous this can be, we’ll almost never Sell to Open an options position unless we’re buying a spread or selling a covered call.
Sell to Close means you want to sell a long option position you already own. For example, if we wanted to close our the Nvidia $85 Puts we just recently bought to open, we would sell to close that position. If we wanted to get rid of the QQQ $450 Puts we just bought, we would sell to close that position. Because we’re “selling” to “close” or get rid of that option.
Buy to Close means you want to COVER a short option position. If you’ve Sold to Open a position and you want to close or cover that short option position, then you would buy to close it.
Those are the four key ways of initiating or closing a position.
By
/ October 9, 2024 
Hi Sam. With the idea of hedging our positions, what would be the ideal scenario to sell some covered Nvda calls .
I currently have not applied for more advanced options trading beyond covered calls, but I do hold some decent sized positions in Nvda.
So selling covered calls is a lot trickier than buying puts. What we need to see happen is a massive move in Nvidia before we sell covered calls. So we probably wouldn’t be looking at covers calls until Nvidia hits $150 a share or thereabouts. We’d need to see compelling evidence that the stock is reaching some sort of a near-term or intermediate-term top. We’ll be selling longer-term covered calls against our position once Nvidia goes on a full run.
Good morning, Sam –
Regarding the NVDA puts, did you buy to open or sell to open?
Hi Cosimo — so generally speaking, here’s how it works with options in terms of positioning when you’re trying to buy options, you buy to open. And when you want to sell or “close” your options position, you sell to close that position.
But I’d highly caution against buying options at all until you have a very strong understanding and are comfortable with them. For example, we discussed a whole bunch of ratios ahead of the trade. If an investor doesn’t get the ratios right, they can get into a lot of trouble. If they accidentally make the wrong order by putting in “Sell to Open” instead of “Buy to Open” it could be a disaster. For the Samwise Portfolio, we choose to buy roughly a 7% put position relative to our long position. Since we were long $25,000 worth of Nvidia, we bought $1,950 worth of puts. $1950 / $25,000 = 7.8%. Any higher than that and it could start to get too expense. Any lower, and the protection doesn’t work.
So let me reiterate that an investor really needs to be very very comfortable in their understanding of options before trading them at all.
Here are some general terms and their meaning for everyone’s general knowledge and information. We’ll soon be covering an introduction to options which will cover some of these terms:
Buy to Open means an investor is beginning or opening a new LONG position. You Buy to Open when you want to buy puts or buy calls and hold them in your portfolio. You can go LONG or SHORT calls and puts. For the positions we just started, we did Buy to Open because we went LONG the put options. We bought to open the QQQ $450 December 2025 Puts and bought to open the Nvidia December 2025 $85 puts.
Sell to Open means you are beginning or opening a new SHORT position. You do that if you feel that the options are going to go down in value. You can go LONG or SHORT a call or a put. There are a lot of strategies involving selling a put/call option short. But due to the risk of loss and how dangerous this can be, we’ll almost never Sell to Open an options position unless we’re buying a spread or selling a covered call.
Sell to Close means you want to sell a long option position you already own. For example, if we wanted to close our the Nvidia $85 Puts we just recently bought to open, we would sell to close that position. If we wanted to get rid of the QQQ $450 Puts we just bought, we would sell to close that position. Because we’re “selling” to “close” or get rid of that option.
Buy to Close means you want to COVER a short option position. If you’ve Sold to Open a position and you want to close or cover that short option position, then you would buy to close it.
Those are the four key ways of initiating or closing a position.
Understood, and Thank you! Exactly the clarification i needed.