I mean, I have no experience using the following approach with somebody but I think another difference is that those are gambles, implying an upside, and GME during the dump is lighting money on fire. Like, if convincing somebody the thing actually isn’t a gamble because it has no upside, bypasses the gambling addiction part… I dunno, I’m just spitballing. It’s definitely awkward to tell somebody outright, “Yeah, I gamble a whole lot too, but I’m not an idiot.”
I know it was definitely insane thinking about maybe being forced to tell people to buy some small cryptocurrencies if they actually truly had some itch that needed scratching and they wanted something less risky with more potential upside. Didn’t think I’d see the day.
Maybe I’m just incredibly bearish on this memestonk shit because I’ve seen it all in cryptocurrency.
I do think having been through a few crypto bubbles helped keep me from wanting to dabble in GME or AMC at the top. Not that I didn’t lose money doing other dumb things but it was easier to recognize all the signs of a mania when you have lived through a few.
I think I am going to be going with a new strategy for these WSB meme stonks going forward. Once they start to rocket up I am going to buy shares and sell short dated well out of the money covered calls. The IV/premiums are always insane AF. Sure sometimes I probably get left bagholding terrible stocks but this seems like the easiest way to exploit what has been a trend of WSB manias for a while. Anyone who has paid attention knows that GME is not even close to the first one. Hertz was almost a year ago now. Every single time the short dated calls get super insane expensive and when you can get 20-30% of the share price back in option premiums (sometimes more) for way out of the money calls it’s hard to see this being a loser long term.
I guess I could sell naked calls but I don’t have the stomach for that. Anyways if anyone wants to tell me why this is dumb I would be willing to listen.
Yeah the DOGE plot is just a series of PnDs. All the memestonk price action currently is just gonna look like one of the PnD waves on DOGE when the dust settles
Interestingly I wonder if you will even see this happening much. I feel like the Shorts are going to be mighty fucking careful doing huge shorts going forward after this.
There used to be a dogepoker site and I played with some friends and I had like 15 million dogecoins but obviously once they were worth real money the site instantly jacked them and shutdown lol.
I’m saying call options are stupid expensive in these WSB pumps because the IV and price both go nuts. The safest way I see to take advantage of that is through covered calls where you buy the shares and then sell call options against them. If people selling naked calls wanted to be careful(not sure that will happen) that would make the premiums even higher.
Example from yesterday:
Bought 200 AMC for 9.70
Sold 2x15c @2.20 expiring next Friday
I have a hard time seeing how a trade like that can possibly be -EV for me. Yes the bottom can fall out and I lose some money. But in an awful lot of scenarios I make money on that trade right?
The call premiums were even more insane last week when we were in mania mode.
True story - I bought 200 bitcoin @ 50c each ($100 investment) way back in the day. Sold it a bit later for a few hundred dollars profit. I have zero regrets. At the point where it turned into five-figure money I definitely would have sold, even if I had temporarily forgotten about it.
It is likely +EV, but you cap your upside by selling the covered calls while having the downside if the stock drops back bigly below your cost basis
You also likely have trouble getting out of your position for max profit if the price explodes. I just ran into a similar issue last week with AMC. I had 100 @ $4.5 I bought before the run up and sold a $8 2/19 covered call. No chance the price doubles that fast right? Then last week happened
The problem I see with the memestonks though is that many of the crypto pnds are actually organic and because it’s speculative they keep happening, basically just following fractal versions of a market cycle. With GME it ain’t happening again.
Fair enough and that is definitely the risk. I guess I am imagining doing this over a large sample of WSB meme stonks. Of course sometimes you miss out on the peak but you harvest a huge amount of call premiums over time.
This has pretty much been my strategy and I’ve been rolling calls to exploit the premiums to the max. My best trade so far was when I had $15 calls set to expire on 1/29 and I rolled them into $40 calls that expired on 2/5 and got paid about $3.50/share to do that on 1/29. I am still holding 600 shares of AMC and I also currently have $15 calls sold against them. Been doing this in some other stocks too, but AMC has been by far my most profitable one.
It’s become one of my life missions, a sidequest if you will, to tell people not to kick themselves over bitcoin. Not because of a chin-up style pep talk, though there’s nothing wrong with those, but because nobody who bought a 10cent bitcoin held it to three figures, nobody who bought a 10dollar bitcoin held it to four figures, etc. That’s the only way a Keynesian Beauty Contest works! You can’t have a bunch of people holding 10cent bitcoins staring at each other until the heat death of the universe.
p.s. Any HODLer telling you otherwise is lying to you. Obv a lot of people bought at 10cent and sold at 4 dollars, then did it again buying at 20 and selling at 150, etc, but somebody had to buy the pizzas for 10000 bitcoins for any of this to work.
As far as capping upside, the options in these have been volatile enough that if a call is actually going to be exercised, you can likely roll it into a higher strike price at a later date, often at a profit. That probably won’t last forever though.
Yeah I am not saying you are incorrect, merely playing devils advocate.
If you are interested in selling premium, tastytrade is perfect fwiw, not sure if you are up and running on that yet but its designed for theta strategies.
