Stocks to Watch Thread

[BMAN]

I fucking STARED at Uber call options for like an hour Monday and decided they were too expensive

why didn’t I try to catch that falling knife

Don’t worry I stared at SPY last week, went to pull the trigger, but then work got in the way and ran out of time.

 

[The Wizard of Moz]

Don’t worry I stared at SPY last week, went to pull the trigger, but then work got in the way and ran out of time.

I ended up buying 100 shares at 22 today and immediately writing a 24 strike call on it. I also wrote a 15 strike put on it yesterday

My long term belief in Uber isn’t there, but in the short term I think they will recover. Either way the 2 options generated about 500 in premium which is almost 25% of the stake I took in Uber (though the put I wrote could add to the stake, but I’m totally good buying Uber at 15)

these are all less than 2 week options. For as hard as I’ve been hit on the stock side options have been really helping to offset that

 

[Snowblind]

I ended up buying 100 shares at 22 today and immediately writing a 24 strike call on it. I also wrote a 15 strike put on it yesterday

My long term belief in Uber isn’t there, but in the short term I think they will recover. Either way the 2 options generated about 500 in premium which is almost 25% of the stake I took in Uber (though the put I wrote could add to the stake, but I’m totally good buying Uber at 15)

these are all less than 2 week options. For as hard as I’ve been hit on the stock side options have been really helping to offset that

Kinda late to the show here, but do you have any articles or anything to get a better understanding of puts, calls, options etc?

 

[Arketebel]

Kinda late to the show here, but do you have any articles or anything to get a better understanding of puts, calls, options etc?

If you are looking to learn, this can get you started:

Financial Terms Dictionary

Investopedia's comprehensive financial terms dictionary with over 13,000 finance and investment definitions

www.investopedia.com

 

[The Wizard of Moz]

Kinda late to the show here, but do you have any articles or anything to get a better understanding of puts, calls, options etc?

I learned a lot of what I know from studying for actuarial exams. I specialized in the investment track (like picking a major)

I’ll write out some overview stuff and would be happy to expand on anything

At the highest level, an option is a financial agreement that gives one party the option to buy or sell a stock at a specified date in the future (called the option expiry) at a specified price (called the strike price). 1 option contract has an underlying of 100 shares of stock.

The option writer (also called seller) gives the option buyer the option but not obligation to transact at the expiry date for the strike price.

a call option gives the option buyer the right to buy shares of the stock at the stock price in the future.

a put option gives the option buyer the right to sell shares of the stock at the stock price in the future.

I think an example will help. Let’s say a stock is trading for 20 right now. And let’s say you’re holding 1 3-month call option with a strike price of 22. That means in a month you have the option to purchase the stock for $22 per share.
fast forward 3 months in the future and let’s look at 2 situations

1. the stock price is 18
2. The stock price is 30

in situation 1 you would NOT exercise your option to buy 100 shares for 22 dollars per share because You would be paying more than they’re currently worth. If you wanted to 100 shares you could just buy the stock at 18 per share instead ofchoosing to pay 22

in situation 2, you would exercise your option to buy 100 shares for 22 dollars per share because it is a cheaper price than you get on the market currently. But what if you don’t want 100 shares of the stock anymore? Well, you can exercise your option to buy the stock for$22 and then immediately sell that stock for 30, gaining 8 dollars per share (in practice options are often cash settled so you would just get $8*(100)=800 as your payoff in cash

A put is analogous on the flip side. You want the price of the stock to go down so that you can sell at a higher price than the stock currently trades for.

so what’s the point for the option seller? Where does he get incentive. Well, the option buyer is getting an option to do something in the future. In order to get such an option, they have to pay for it. The option premium is the amount the contract trades for. It’s what the buyer pays the seller in exchange for the option in the future.

also important: there are different styles of options. For every stock I’ve come across they have been American style options. That means that you can exercise your right to buy or sell at any point between now and the expiry date. In most instances it’s more advantageous to sell the option for its then market value than exercise early, but there are situations where this is not the case. a European style option is one in which you can’t exercise the option before the expiry date

Another thing I mentioned:

A covered call: this is when you sell an option on a stock you own 100 shares of (or however many option contracts you write). so let’s say I own 100 shares of a stock that goes for 50 per share. I write 1 3-month call option on this stock with a strike price of 55. For this, I get 300 dollars. So let’s look at the situations again and let’s assume it’s a European option for simplicity

1. the stock is less than 50 after 3 months. Let’s say 40 per share

Your value is 4,000 dollars from your 100 shares and 300 dollars from the call you sold that has now expired out of the money (in the money, at the money, and out of the money are terms used to describe the stock price and strike prices relationship. If a stocks price is lower than a call strike price then the call is out of the money)

2. the stock is between 50 and 55 after 3 months. Let’s call it 53.
the option still expires out of the money, but you now have a gain on your stock position and you get the call premium

5300+300=5600

3. The stock is higher than 55

now the option is in the money and the option holder will exercise his right to buy the stock for cheaper. But you have 100 shares in your account, so you can hand those over for 5,500 (the strike price times the 100 stock)

mathematically let’s look at it as if you aren’t just handing shares over. Let’s say the stock is 100 per share. Your payoff is

100*(100)= 10,000 for the stock you own
100*(55-100)= -4,500 you owe on the call option (you have to buy 100 shares at 100 and can only sell them at 55. You lose 45 per share you sell)
300 from the call premium

5,800 is your payoff here

And that would be the payoff if the stock was 1,000. The math shakes out the same.

What a covered call is doing is capping your upside on a position in exchange for a premium. If I hadn’t written the call in thislast scenario I’d have 10,000! And I only have 5,800 and that kind of sucks. But in the other 2 scenarios I was able to beef up my return a bit with the extra premium

 

[Cassity14]

I'm a big believer in Delta making it out of this long term. Of any airline, they have the most in assets to avoid going under during this.

When Constellation Brands makes its next dip, I'll probably buy some there too.

Haven't yet decided whether or not to get in on the cruise line gamble. If I do, I think it will be with Royal Caribbean for the same reasons as why I chose Delta among airlines - staying power.

 

[Triplethreat]

I think there is an insane amount of money to be made in a market like this... if you want to look at the bright-ish side of things.

Once we come out of this, it may take a good long while to get back to our end of 2019 numbers but there is just so many businesses on sale at a premium right now.

 

[bob2the2nd]

I think there is an insane amount of money to be made in a market like this... if you want to look at the bright-ish side of things.

Once we come out of this, it may take a good long while to get back to our end of 2019 numbers but there is just so many businesses on sale at a premium right now.

I started jumping in 3 weeks ago. I picked up tesla super low (380), but botched a couple of others and bought the following week when things had started to go back up. At this point Im in the swing big and hope to hit a home run.

Park hotels
Royal Caribbean
Carnival (last week at 8)

 

[Triplethreat]

I started jumping in 3 weeks ago. I picked up tesla super low (380), but botched a couple of others and bought the following week when things had started to go back up. At this point Im in the swing big and hope to hit a home run.

Park hotels
Royal Caribbean
Carnival (last week at 8)

I've been heavy in the casinos currently. I know they just may be the riskiest of the bunch, however I see so much upside there. If they were to even get back half of where they were in January, you're looking at a 200% return off the lows.

So I own a lot of $MGM, $PENN - these stocks were so oversold on the news of them shutting down you could have already hit a 300% gain on them if you purchased on March 23 when they hit their ultimate lows.

I also picked up some interesting tech stocks I've been eyeing for a while.

$SPCE - Virgin Galactic Holdings - could be the first commercialized space tourism company. I see massive long term upside here and getting them at a price is fantastic.

$VSLR - Vivant Solar - I'm huge on solar energy and think it's very clearly going to be one of, if not the main source of energy in the future.

 

[bob2the2nd]

I've been heavy in the casinos currently. I know they just may be the riskiest of the bunch, however I see so much upside there. If they were to even get back half of where they were in January, you're looking at a 200% return off the lows.

So I own a lot of $MGM, $PENN - these stocks were so oversold on the news of them shutting down you could have already hit a 300% gain on them if you purchased on March 23 when they hit their ultimate lows.

I also picked up some interesting tech stocks I've been eyeing for a while.

$SPCE - Virgin Galactic Holdings - could be the first commercialized space tourism company. I see massive long term upside here and getting them at a price is fantastic.

$VSLR - Vivant Solar - I'm huge on solar energy and think it's very clearly going to be one of, if not the main source of energy in the future.

Ive been going back and forth with some friends, and its interesting. They are in biotech stocks (long term) + stocks that traditionally are very safe and give off good dividends.

SPCE and VSLR are both long term stocks that could potentially play out huge. But ultimately I feel like there is a ton of easy money to be made right now (like in RCL/CCL, MGM, PENN, etc). These are all stocks that are down specifically because people cant go on vacations. Well eventually people are going to be able to go on vacations again (maybe not tomorrow, but in 6 months...) So even if we dont see these stocks return to 100% the value they had before hte crash even at 75% and you can still double/triple your money

 

[The Wizard of Moz]

It honestly is kind of funny when people say things like “man I wish I could get in at a 15% discount to this stock right now I’d back up the brinks truck” then when it trades at a 60% discount a month later the same people say “are you crazy I’m not touching that, markets are spooky right now”

as if there’s ever a time when stocks give back this much market cap without spooky stuff going on. I have been trading/investing about 5 years and I’ve learned over that time that there will never be a shortage of bears and sky is falling people when things get hairy. And that emotions are very hard to overcome in the moment. No one likes looking at 20% losses when you try to catch a falling knife. But have a plan before things get hairy, digest new information as appropriate, and don’t hide in cash when things get scary. At the same time I have not thrown all my money in trying to predict a bottom. I’ve dollar cost averaged in to company’s that a month ago when I said “I wish it was this price” then seeing them substantially below that price. Then on big up days like today I’ve sold covered calls. On big down days I’ve bought or sold puts.

But I have one friend absolutely notorious for always doing the “man if I could get this price” and then when it’s that price is calling me crazy for asking if he bought. Don’t have FOMO and chase gains but don’t be paralyzed with fear and so loss averse you sit on the sidelines the entire time

 

[BMAN]

I may or may not be sitting on the sidelines. 1. Not sure I really know what the hell im doing still and 2. I still have a wedding to pay for

 

[Remi]

I’ve been going back and forth on this also. I had almost the exact same thinking as Cassity with Delta, Royal Carribbean, and Constellation brands. Would also like to buy Wells Fargo and say a Cedar Point. It’s a tough call. Even if you dive in with 10k, and you return say 30% in 2 years you are up 3k which isn’t life changing money. I get it, it’s better than sitting in cash and have to risk a lot to get a lot. But unless you are throwing around big dollars it’s hard for me to get around the gain piece. I’ve thought about wiping out my student loans and taking my 6% (interest rate) “return”. Still debating. Especially since I already max a 401k and Roth IRA.

 

[Out of the Rafters at the Q]

I may or may not be sitting on the sidelines. 1. Not sure I really know what the hell im doing still and 2. I still have a wedding to pay for

Just to help your mindset, I take everyone talking about stocks online the same way I take my buddy with a gambling problem talk about his nights out at the casino.

If you only logged his feedback, you'd think this guy was making a killing. He goes out on the weekends with another one of your friends, and man you should've seen it! We won so much we covered everything for the night, then went and did x. You feel like you keep missing out on this great time, and man is he lucky that he keeps winning more than he's losing.

But, you know the truth. People are much more likely to tell you their positives than their negatives.

For everyone here telling you "Get into stock X because of Y!" you have to realize that they're not brilliant insiders. That value has already been baked into the price of the stock, and so have a ton of other factors they're not bringing up to your attention.

If you want to gamble on something, go for it. But don't feel like you're missing out on some great deal. Unless you have great insider knowledge, at best you're gambling on a hunch.

By staying out, avoiding the rollercoaster, and taking care of other things like your upcoming wedding, you're being financially responsible. Pat yourself on the back.

 

[Triplethreat]

Investing isn't gambling.

That's simply an egregious comparison.

Buying companies you believe in and who have good growth prospects going forward is not a gamble. It's not speculation. There are a lot of factors to weigh when purchasing stake in a company you like.