Thanks. I closed the positions in this account. Still playing the positions in the account where I have no short-sell restrictions. +33% on this last lot.
No. If you own long options of a lower strike and of a longer duration, you can sell a call option against your long call option thereby creating a call-spread.
Very essential for the strategy to work given how things unfolded.
Buying puts to hedge can only work for so long as you just saw. The QQQ neither has pushed up far enough to put us in a safe place nor has it rolled over and we’re ending the week.
Hence, why selling calls against a long call position is often necessary.
Let me stress this point here. For the Targaryen Portfolio, if we didn’t have the capacity to sell calls against our position (thereby creating a call-spread), then we would just close out our trade and book our profits now.
Alex Klap
November 21, 2024 1:43 pm
yeah, I cannot do that either. Getting an error in Fidelity
Canadians can’t short in registered accounts (such as RRSP, TFSA and FHSA). To implement all the strategies you employ in this portfolio, we need a margin-enabled non-resgistered account.
I have applied to Tier 2 trading before with Fidelity, but it looks like they are not approving it. Without it, I cannot do this kind of trade. I applied again today, but I am not sure if they will approve
So it’s not quite naked. Naked means they’re not hedged by anything. Here, we own a long call-option which directly hedges the November 29 $512’s.
Consider the difference. Let’s imagine we didn’t own any call-options at all. We just had cash in the account and sold the November 29 $512’s at $2.15. Now imagine some massive news comes out next week and the QQQ climbs to $600 a share.
If that happened, the $12’s we sold, would go up to $88. We’d lose $8,800 on 1 contract.
But since we own the $500 January calls, those calls would go up to $100.00. We’d be able to sell our $500 January calls at $10,000.00 and close out the November 29 $512 calls at $8800. We’d lose $1200.
But do you see how it’s hedged. Not naked. I use the “covered” vernacular and have forever when talking to other trades. We just call I covered becuase it’s backed by the $500 calls. Technically we don’t own the stock. But we own the rough equivalent. A high delta option. Delta meaning it goes up at near 1-to-1 ratio with the QQQ. So it’s basically the same as owning the shares from a risk point of view.
Naked means not covered at all and that requires the highest option teir approval. I don’t ever deal with short-selling naked options. Anytime we ever sell an option, it’s going to be covered by a long position we own.
Thanks I see what you’re saying. I was thinking that you had to outright own the 100 shares for it to be a covered call, but since we bought the 15.00$ QQQ calls, that is like owning 100 shares
It’s almost exactly equivalent. The only minor difference is the difference in delta between the January 17 $500 Calls and the QQQ common stock AND the other difference is if the writer of the November 29 $512 calls exercise their options early, we don’t have shares to deliver. In most cases, that isn’t a problem because the broker will either force the account holder to sell the entire thing and/or experience the $500’s and deliver those to the holder of the options.
I’ve heard of people exercising early, it’s never happened to me in thousands of options trades over 30years. In fact, I’ve only ever dealt with exercising a handful of times ever.
Joey
November 21, 2024 2:22 pm
So by selling these calls is it safe to say we’re expecting a neutral to bearish outlook for next week? If we had a bullish outlook we wouldn’t want to risk our calls getting exercised right?
No. We’re bullish biased big time. Think about why. If the QQQ rises to $512 next week, our January calls would explode higher. They’d trade at like $24 or something. The $512 calls we sold would temporarily rise, but they would go down to $0.00 if the QQQ doesn’t trade NORTH of $512. And we’d actually keep making money up to like around $514-$515. That’s when our profits would get capped. We’d stop really making money on any further upside in the QQq at that point.
This is my first time selling calls so I didn’t really understand. I was only considering the covered call when I typed this and didn’t understand how the 500$ January call was a hedge against this in case the market decided to explode upwards. So basically we’re bullish but we want QQQ to stay around 512$ before Nov 29th. Still have more to learn but thanks for the info.
Right now, our portfolio has 1 contract Long the January 2025 $500 call options. 1 contract in the November 22 put expiring tomorrow. and 1 contract short the November 29 $512 calls.
By
/ November 21, 2024 
Could you suggest an alternate to selling this CALL? One of my account I cannot short sell.
If I couldn’t sell calls against my long call position, I’d close out the trade in Targaryen.
Thanks. I closed the positions in this account. Still playing the positions in the account where I have no short-sell restrictions. +33% on this last lot.
Any reason you’re using 2 accounts? Tax reasons?
Yes tax reasons. Canadian retirement accounts can’t short stocks or options.
Yeah i’m Canadian too but decided to go with 1 margin account for simplicity’s sake
What app are you guys using for selling short? I am using Webull but doesnt like its interface.
Using IBKR. I like it but not the most user friendly interface. It has the cheapest conversions fees from CAD to USD.
Same. Closed the position for a 32% gain. Not bad even if our put is cooked tomorrow
Hi Sam, don’t we need at least 100 QQQ shares to sell these $512 calls?
No. If you own long options of a lower strike and of a longer duration, you can sell a call option against your long call option thereby creating a call-spread.
Very essential for the strategy to work given how things unfolded.
Buying puts to hedge can only work for so long as you just saw. The QQQ neither has pushed up far enough to put us in a safe place nor has it rolled over and we’re ending the week.
Hence, why selling calls against a long call position is often necessary.
Let me stress this point here. For the Targaryen Portfolio, if we didn’t have the capacity to sell calls against our position (thereby creating a call-spread), then we would just close out our trade and book our profits now.
yeah, I cannot do that either. Getting an error in Fidelity
Likely need to have spread trading activated.
Canadians can’t short in registered accounts (such as RRSP, TFSA and FHSA). To implement all the strategies you employ in this portfolio, we need a margin-enabled non-resgistered account.
I have applied to Tier 2 trading before with Fidelity, but it looks like they are not approving it. Without it, I cannot do this kind of trade. I applied again today, but I am not sure if they will approve
I had to get a margin account in order to be able to sell naked calls
So it’s not quite naked. Naked means they’re not hedged by anything. Here, we own a long call-option which directly hedges the November 29 $512’s.
Consider the difference. Let’s imagine we didn’t own any call-options at all. We just had cash in the account and sold the November 29 $512’s at $2.15. Now imagine some massive news comes out next week and the QQQ climbs to $600 a share.
If that happened, the $12’s we sold, would go up to $88. We’d lose $8,800 on 1 contract.
But since we own the $500 January calls, those calls would go up to $100.00. We’d be able to sell our $500 January calls at $10,000.00 and close out the November 29 $512 calls at $8800. We’d lose $1200.
But do you see how it’s hedged. Not naked. I use the “covered” vernacular and have forever when talking to other trades. We just call I covered becuase it’s backed by the $500 calls. Technically we don’t own the stock. But we own the rough equivalent. A high delta option. Delta meaning it goes up at near 1-to-1 ratio with the QQQ. So it’s basically the same as owning the shares from a risk point of view.
Naked means not covered at all and that requires the highest option teir approval. I don’t ever deal with short-selling naked options. Anytime we ever sell an option, it’s going to be covered by a long position we own.
Thanks I see what you’re saying. I was thinking that you had to outright own the 100 shares for it to be a covered call, but since we bought the 15.00$ QQQ calls, that is like owning 100 shares
It’s almost exactly equivalent. The only minor difference is the difference in delta between the January 17 $500 Calls and the QQQ common stock AND the other difference is if the writer of the November 29 $512 calls exercise their options early, we don’t have shares to deliver. In most cases, that isn’t a problem because the broker will either force the account holder to sell the entire thing and/or experience the $500’s and deliver those to the holder of the options.
I’ve heard of people exercising early, it’s never happened to me in thousands of options trades over 30years. In fact, I’ve only ever dealt with exercising a handful of times ever.
So by selling these calls is it safe to say we’re expecting a neutral to bearish outlook for next week? If we had a bullish outlook we wouldn’t want to risk our calls getting exercised right?
No. We’re bullish biased big time. Think about why. If the QQQ rises to $512 next week, our January calls would explode higher. They’d trade at like $24 or something. The $512 calls we sold would temporarily rise, but they would go down to $0.00 if the QQQ doesn’t trade NORTH of $512. And we’d actually keep making money up to like around $514-$515. That’s when our profits would get capped. We’d stop really making money on any further upside in the QQq at that point.
This is my first time selling calls so I didn’t really understand. I was only considering the covered call when I typed this and didn’t understand how the 500$ January call was a hedge against this in case the market decided to explode upwards. So basically we’re bullish but we want QQQ to stay around 512$ before Nov 29th. Still have more to learn but thanks for the info.
Right now, our portfolio has 1 contract Long the January 2025 $500 call options. 1 contract in the November 22 put expiring tomorrow. and 1 contract short the November 29 $512 calls.