https://twitter.com/alexisgoldstein/status/1358152429037105152
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It would be pretty stupid for Musk to be pumping Doge now, rather than after he was done accumulating.
Just looking at purchases since January, my quick math shows the account spend over $300 million acquiring Dogecoins.
That sounds like some solid evidence of it being Musk. Who else has that much money to just fuck around and throw at Doge?
Lots of hedge funds. Pretty sure some of them have hundreds of millions of crypto.
My thought experiment:
How low would the price of BTC have to go to fulfill the following stipulations:
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$1 Billion USD has to flow from BTC to cash from people who are long BTC
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The buyers of the BTC can’t be anybody who holds BTC or other Crypto assets. They can be businesses, individuals, funds, anything, but the only rule is they have to be buying Crypto for the first time.
What is a covered call and why has every single “financial advisor” I’ve met in the last year pitched it as some kind of fail proof strategy?
Its just holding a share and selling a call on the share at the same time. IIRC you make money if the stock price doesn’t move very much. Because you sell the call that raises money fir you at the front if the trade.
It is definitely not a “good” strategy for most buyers. Just owning a diversified portfolio of shares is better.
Example: on Friday I bought 200 shares of VGAC at $16.01. I then sold 2 covered call contracts with a strike price of $25 and expiry date of 2/19 for a price of $0.73 per share. This lowers my effective price to $15.28 per share. If the price is $25 or higher at close on 2/19, my shares will sell for $25. If lower, I keep them. If I want to, I can sell calls against them again.
It can be a good way to bring in some extra profit on shares you plan to hold.
And to clarify the example, what you’ve sold for $0.73 is your obligation to sell those shares at a specific price in the future. So even if the price skyrockets to 60 for whatever reason, you still have to sell them for 25, so you’ve capped your upside by selling the call. This may seem like a small risk, but in theory this risk is exactly what you’re being compensated for by the call premium.
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Covered calls are an example of how structured financial products can be so deceptively appealing. Here’s the attraction:
You own 100 shares of AAPL stock, currently trading for ~$137 per share. You think they’re undervalued (which is why you’re holding them). Your friendly broker calls you up, and says, "Hey man, you should write some calls on AAPL stock. Specifically, you should sell January 2022 calls with a strike of $165, for which you’d get $10 per share, or $1,000 per contract. This is a no-lose situation for you:
- If the stock price stays under $165, you just keep the shares that you already had. But now you got paid $1,000 for it! That’s about a 7.3% bonus return for doing nothing other than holding the shares you already owned!
- If the stock price goes over $165, you lock in a sweet 20% return for the year.
So can I take your order now?"
The problem, as @TheDuker noted, is that if you’re long the stock already, you presumably think there’s upside value. But when you sell the call option, you’re capping that upside value in exchange for some premium. How do you know if that premium is enough? Hard question that’s gotten people Nobel Prizes, but the important point here is that if you think your stock is undervalued (compared to what the market thinks), the market premium almost certainly isn’t going to be enough compensation for you; you think the stock has more upside than the market thinks, so the market isn’t going to be willing to pay you as much as you want for that upside.
Other things that fall into this “seems like a no-lose situation” category:
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Convertible bonds. If the stock goes up, great - you convert your bonds into stock and participate in the upside. If the stock goes down, who cares because you just keep the bonds and continue getting paid off.
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Selling naked out of the money puts on stocks you think are overvalued. This is one that the Motley Fool advertised as “getting paid while you wait”. Here’s the pitch: You would love to own Apple stock - you’d be delighted to buy it at $100, but you think it’s terribly overvalued at $137. What do you do? Sell some puts with a strike of $100 per share. Can’t lose! If the stock price stays high, your puts expire worthless and you collect the sweet $5 per share premium. (You got paid while you waited.) If the stock price goes down below $100, you’re forced to buy at $100. But that’s totally ok, because you would have been happy to buy Apple at $100.
Trading options is mostly a sucker’s game for retail investors IMO, but they can be framed in ways that look super appealing.
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If you’re the type of investor with paper hands who takes profit when your value increases it does kind of seem like free money to sell covered calls to get paid for your risk aversion though?
Anyone able to give some cliffs on tax treatment of writing calls? I’m assuming the investor takes it on the chin there as well.
Is “takes it on the chin” code for “pays tax on trading profits”?
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It was code for “pays more tax than the buy and hold strategy results in”.
Searching CLVS on reddit yields a couple interesting results. It’s popped up a few times in the past couple weeks, then there’s a bunch of posts 4-5 years ago before, during, and after the runup above 90. I guess we’ve done this dance before
I’m legit expecting it to open above $10. The hype is building
Seems like a great strategy to pitch if you’re a financial adviser and your clients don’t care about benchmarking or risk-adjusted returns. Lets you lessen volatility at the expense of total return but this is fine if you’re really only going to get fired for poor absolute (not relative) performance. And I’m sure most of these big firms like Merrill Lynch give kickbacks to the advisers for executing the trade.
At this point, I’m only in for $450. However, I’m considering adding 5K tomorrow.
Going largely off memory, but I’m pretty sure it’s right:
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Any time you have a short position (i.e., where you sell something before you buy it), you are taxed at the short terms capital gains rate when you exit that position. The idea is that no matter how long the short position was open, you only actually owned the asset in the brief moment of time between when you bought it and when you closed the position.
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This applies to written calls, as well. If you write them and they expire worthless, you recognize short term capital gains at the expiration date. If you close the position by buying them back, you recognize short term capital gains/loss, as well.
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If you write covered calls and you exit the position by delivering the shares, you recognize capital gains/losses equal to (proceeds from the sale plus premium from the call) - original price of the underlying shares that you’re forced to sell. Whether this is a short-term or long-term gain depends on how long you held the underlying, not how long you held the option position.
This doesn’t seem right to me. Let’s say you’re a paper hands investor who just plans on selling if the position goes up by 20%. So you buy 100 shares of stock at $50 and your plan is to sell them if they hit $60.
If you write call options with a strike of $60, does that automatically make you better off? I don’t think so, for at least a couple of reasons:
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Stocks jump, sometimes a lot. Sometimes when you have a price target that’s 20% higher than the current price, the stock gaps up and your sell order gets processed at a price that’s 25% or 30% or whatever above the current price. If you sell calls, you’re giving away that value. Maybe it’s a fair trade in exchange for the premium you’re getting, but you’re definitely giving something away.
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The more obvious issue, I think, is that selling calls constrains your strategy. If you sell those calls and the stock goes up by 20%, you’re kind of stuck. You can’t sell the shares like you normally would, because then you’d be exposed to a naked short call position, which is clearly not risk free. And if you do a combination of selling the shares like you normally would AND buying back the calls to close out the position, you’re almost certainly going to lose money on the round-trip call transaction because the underlying stock has gone up by 20%. (This isn’t universally true - like we saw with GME sometimes the volatility can be so wild that the stock and call can move in opposite directions. But that’s rare.)
So I don’t think it’s anywhere close to free money, even for a paper hands investor.
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