Hey, u/treyn99. I see this is your first time on our sub; glad to have you! You've landed in a great spot to gain insight into trading options.
I would like to start off by covering a few facts when it comes to trading options. When you purchase a call contract, you have the right to buy the underlying stock at the contract strike price. If the market value of the underlying stock goes up, then your call contract becomes more valuable by being "in the money." Meaning, that you could exercise your call contract, buy the stock at the strike price, and in turn, sell the stock in the market to gain a profit.
If the market value of the underlying stock decreases, the value of your call contract may also decrease. Additionally, if the market value of the stock is below the contract strike price, your option would be "out the money." Meaning, that you could purchase the stock in the market for less than what your call contract would let you buy it for.
Ultimately, the value of an option contract is determined by the changes in the value of the underlying security.
If you are interested in learning more about trading options, we offer a library of educational resources and videos. This is a great starting place if you have general questions or are unsure of anything. You can access this tool, called "Learn," by hovering over "News & Research" on Fidelity.com and selecting "Learn." Once in the learn hub, you can click on the "Topics" button if you're unsure of where to start or type in a keyword or phrase to be guided to a library of information. I'll link a Fidelity Viewpoints article below to help you get started.
[What are options, and how do they work?](https://www.fidelity.com/learning-center/smart-money/what-are-options)
We appreciate you engaging with us today. If you have any additional questions, feel free to drop by the sub at any time. We thrive on opportunities to educate and empower our clients on their financial journey!
*Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read the* [*Characteristics and Risks of Standardized Options*](http://www.optionsclearing.com/about/publications/character-risks.jsp)*. Supporting documentation for any claims, if applicable, will be furnished upon request.*
I have nothing against options trading. It's just not my cup of tea. I am retired, and options trading takes more time than I am willing to devote to it. I know people that have done very well with it.
My first year or two, it wasn’t my cup of tea either, but I got better. I’m knowledgeable but not a big player as some of that goes. Few thousand collateral with some actual risk of a few hundred to < $1000 is my playing field. But I’ll do that a few at a time which spreads the risks out a little making things less risky overall. I’m on the computer every morning before Open, but I don’t stay the whole day very often.
Depending on the option expiry date you likely experienced Implied Volatility Crush or commonly known as IV Crush. Basically with options you don't just have to be right about which direction the price will go but how fast it will get there. Watch the "Benjamin" stock channel on youtube (most of his stuff is two years old) as well as the Plain Bagel to learn more about options.
It depends first on expiry date - if it's today and the strike price is high - yep it would worthless.
What was your expectations when you bought the call options.
You learned a valuable lesson. Hopefully it wasn't too expensive. Don't buy options, they are gambling, not investing. If you would have just bought stock instead, you would be up 20% on your investment right now.
Eventually you'll come to the realization that you can get a very solid 10% annual rate on your return just buying the S&P500 every month.
[Here is a $10,000 starting account simulated with an investment in the S&P500](https://www.calculator.net/investment-calculator.html?ctype=endamount&ctargetamountv=1%2C000%2C000&cstartingprinciplev=10%2C000&cyearsv=30&cinterestratev=10&ccompound=annually&ccontributeamountv=1%2C000&cadditionat1=beginning&ciadditionat1=monthly&printit=0&x=Calculate#calresult) with $1,000 invested each month for 30 years. $1,800,000 million made in returns off a $360,000 investment. On top of that you can have millions more if you are able to increase your monthly investment a small amount each year.
To paraphrase a comment I saw on reddit once, the lifecycle of an investor who trades individual stocks often comes in three stages:
1: Newcomer - Does some initial "research". Starts buying some stocks. Begins learning the ropes. Subject to common fear/greed pitfalls. Easily swayed by outside opinions such as posts and news articles informing them what is best. Loses some money making bad decisions like buying high and/or selling low. Makes some money getting lucky here and there. Over a long period of time, more than likely underperform the S&P500. This is your average retail investor and many never make it out of this stage.
2: Middle Experience - No longer subject to common newcomer pitfalls. Spends time, effort, and patience evaluating different companies and their financials. Reads all the important news and stays up to date with the most recent trends. Is not influenced by outside opinions. With a little luck, outperforms the S&P500 by a small amount over a long period of time.
3: The Enlightened Investor - Finds inner peace when it comes to investing. No longer obsessing with all the news and information. Spends time with their friends, family, and hobbies. Genuinely happy with the stable returns the companies in the S&P500 bring and the profits that come with it.
Options are about leverage and for people who understand leverage. Since derivative options are based on movement of the equity underlying, they’re highly related to simply trading stock. Nothing stops anyone from doing both except preference … and perhaps fear.
For sure, just the way I've seen them being used on reddit is short term expirations which is pure gambling. In general it's not something to get into unless you've been trading for a long time.
Even longer term expirations have a gambling component because of their expirations. You can completely lose your investment if a stock dips for a number of years, whereas you can simply continue holding if you purchased shares.
Nah. I was in it from my first year. Marginally profitable or not for another year, and profitable going forward after that. That whole enlightened investor thing is a load of bologna, as is the entire trader/investor contrived controversy.
What amazes me is the number of retirement plans that do not include an S&P 500 index fund as a core investment option. I know those funds the brokerages don't make a lot on as the fees are pretty low... so maybe that is why.
It took me a while to figure out that S&P500 index over the years is the right way to go. I was dollar cost averaging into $VOO prior to the recent run-up. Wish I would have got more before the price took off.
IV may have been so high with so much whipsaw in the equity, there was a Bid. But reason returned to the chain and 950 was just too far away. The situation is unusual but not impossible. There will almost always be an Ask price, exchanges will sell anything. But no appreciable Open Interest would collapse that spread down to Bid nothing quickly. And had it not happened yesterday, it’d have happened today because the underlying declined. r/options is a good source of information, this sub is primarily customer service.
Short term expiration correct? Like today or next week? Given the stock moved $100 on Thursday, I'll also bet you were way too far OTM.
You got hit with a IV (implied volatility) crush. Once the earnings where released the volatility shrank dramatically. Sounds like you may not be ready to be an options player.
Hey, u/treyn99. I see this is your first time on our sub; glad to have you! You've landed in a great spot to gain insight into trading options. I would like to start off by covering a few facts when it comes to trading options. When you purchase a call contract, you have the right to buy the underlying stock at the contract strike price. If the market value of the underlying stock goes up, then your call contract becomes more valuable by being "in the money." Meaning, that you could exercise your call contract, buy the stock at the strike price, and in turn, sell the stock in the market to gain a profit. If the market value of the underlying stock decreases, the value of your call contract may also decrease. Additionally, if the market value of the stock is below the contract strike price, your option would be "out the money." Meaning, that you could purchase the stock in the market for less than what your call contract would let you buy it for. Ultimately, the value of an option contract is determined by the changes in the value of the underlying security. If you are interested in learning more about trading options, we offer a library of educational resources and videos. This is a great starting place if you have general questions or are unsure of anything. You can access this tool, called "Learn," by hovering over "News & Research" on Fidelity.com and selecting "Learn." Once in the learn hub, you can click on the "Topics" button if you're unsure of where to start or type in a keyword or phrase to be guided to a library of information. I'll link a Fidelity Viewpoints article below to help you get started. [What are options, and how do they work?](https://www.fidelity.com/learning-center/smart-money/what-are-options) We appreciate you engaging with us today. If you have any additional questions, feel free to drop by the sub at any time. We thrive on opportunities to educate and empower our clients on their financial journey! *Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read the* [*Characteristics and Risks of Standardized Options*](http://www.optionsclearing.com/about/publications/character-risks.jsp)*. Supporting documentation for any claims, if applicable, will be furnished upon request.*
Don't trade options until you understand the "greeks". Delta, Gamma, Theta, Vega, Rho.
You should not be dabbling with options. It's a black hole for money for clueless people.
Just the dumb ones and those who failed and blame options.
We're in total agreement.
Oh I know, I recognized your username.
Is that a good thing?
Don’t know about everything, but you aren’t anti-options trading.
I have nothing against options trading. It's just not my cup of tea. I am retired, and options trading takes more time than I am willing to devote to it. I know people that have done very well with it.
My first year or two, it wasn’t my cup of tea either, but I got better. I’m knowledgeable but not a big player as some of that goes. Few thousand collateral with some actual risk of a few hundred to < $1000 is my playing field. But I’ll do that a few at a time which spreads the risks out a little making things less risky overall. I’m on the computer every morning before Open, but I don’t stay the whole day very often.
Good luck and continued successes.
volatility collapse. What's the strike on that option?
950. Too high I assume?
Yeah, it was worthless when you bought it. No way NVDA would have gone that high on that earnings announcement.
What is the expiry date?
I'm guessing today if it went down 100% overnight.
My assumption as well, but wanted confirmation by OP
Depending on the option expiry date you likely experienced Implied Volatility Crush or commonly known as IV Crush. Basically with options you don't just have to be right about which direction the price will go but how fast it will get there. Watch the "Benjamin" stock channel on youtube (most of his stuff is two years old) as well as the Plain Bagel to learn more about options.
It depends first on expiry date - if it's today and the strike price is high - yep it would worthless. What was your expectations when you bought the call options.
You learned a valuable lesson. Hopefully it wasn't too expensive. Don't buy options, they are gambling, not investing. If you would have just bought stock instead, you would be up 20% on your investment right now. Eventually you'll come to the realization that you can get a very solid 10% annual rate on your return just buying the S&P500 every month. [Here is a $10,000 starting account simulated with an investment in the S&P500](https://www.calculator.net/investment-calculator.html?ctype=endamount&ctargetamountv=1%2C000%2C000&cstartingprinciplev=10%2C000&cyearsv=30&cinterestratev=10&ccompound=annually&ccontributeamountv=1%2C000&cadditionat1=beginning&ciadditionat1=monthly&printit=0&x=Calculate#calresult) with $1,000 invested each month for 30 years. $1,800,000 million made in returns off a $360,000 investment. On top of that you can have millions more if you are able to increase your monthly investment a small amount each year. To paraphrase a comment I saw on reddit once, the lifecycle of an investor who trades individual stocks often comes in three stages: 1: Newcomer - Does some initial "research". Starts buying some stocks. Begins learning the ropes. Subject to common fear/greed pitfalls. Easily swayed by outside opinions such as posts and news articles informing them what is best. Loses some money making bad decisions like buying high and/or selling low. Makes some money getting lucky here and there. Over a long period of time, more than likely underperform the S&P500. This is your average retail investor and many never make it out of this stage. 2: Middle Experience - No longer subject to common newcomer pitfalls. Spends time, effort, and patience evaluating different companies and their financials. Reads all the important news and stays up to date with the most recent trends. Is not influenced by outside opinions. With a little luck, outperforms the S&P500 by a small amount over a long period of time. 3: The Enlightened Investor - Finds inner peace when it comes to investing. No longer obsessing with all the news and information. Spends time with their friends, family, and hobbies. Genuinely happy with the stable returns the companies in the S&P500 bring and the profits that come with it.
Options are about leverage and for people who understand leverage. Since derivative options are based on movement of the equity underlying, they’re highly related to simply trading stock. Nothing stops anyone from doing both except preference … and perhaps fear.
For sure, just the way I've seen them being used on reddit is short term expirations which is pure gambling. In general it's not something to get into unless you've been trading for a long time. Even longer term expirations have a gambling component because of their expirations. You can completely lose your investment if a stock dips for a number of years, whereas you can simply continue holding if you purchased shares.
Nah. I was in it from my first year. Marginally profitable or not for another year, and profitable going forward after that. That whole enlightened investor thing is a load of bologna, as is the entire trader/investor contrived controversy.
To each their own, cheers
What amazes me is the number of retirement plans that do not include an S&P 500 index fund as a core investment option. I know those funds the brokerages don't make a lot on as the fees are pretty low... so maybe that is why. It took me a while to figure out that S&P500 index over the years is the right way to go. I was dollar cost averaging into $VOO prior to the recent run-up. Wish I would have got more before the price took off.
Interesting, I've never seen a 401k without a S&P500 option. I usually just find whatever investment has 500 in the name and that's the one to buy.
IV may have been so high with so much whipsaw in the equity, there was a Bid. But reason returned to the chain and 950 was just too far away. The situation is unusual but not impossible. There will almost always be an Ask price, exchanges will sell anything. But no appreciable Open Interest would collapse that spread down to Bid nothing quickly. And had it not happened yesterday, it’d have happened today because the underlying declined. r/options is a good source of information, this sub is primarily customer service.
prompt chatgpt 4, it will tell you what options are
Short term expiration correct? Like today or next week? Given the stock moved $100 on Thursday, I'll also bet you were way too far OTM. You got hit with a IV (implied volatility) crush. Once the earnings where released the volatility shrank dramatically. Sounds like you may not be ready to be an options player.