I have been trading option for a while now. Started off with cheaper stocks like F and AAL. If I get assigned, I just wheel it. I have moved up to NVDA and have been constantly making profit. My question is, what is your strategy for trading larger priced stocks like the ever-popular SPY? I have around $100,000 on my options account that I've been trading multiple contract on weeklies. Do I need to just have a larger account or only trade 1 contract at a time?
Help me understand these larger premium contracts.
Posted by pilotof727s
6 Comments
If you have large enough account, trade SPX so you don’t have to worry about assignment issue (it’s cash settle and no early assignment). Whether you want to trade 1 contract at a time depends on your strategy and risk tolerance.
Use spreads, you can trade more contracts, have protections with defined risk. You can trade SPX or XSP which is same as spy with no assignment risk.
Have you looked at buying long-dated Calls as *stock substitutes?*
80-delta is generally recommended, and you can go as short as 100DTE, but 1-year is better (gives you more time to be right, and they’re not as dynamic/volatile).
I like Nvidia too, and with spot tonight at **180.17**,
the 358DTE 145C at 79-delta is selling for **55.38**.
You can see that you could buy 3+ of those for the price of 100 shares.
And after adjusting for Delta, you’re getting 2.5x leverage to NVDA.
Move in to 113DTE and the 80-delta 152C is going for **35.18**.
That gives you delta-adjusted 4x leverage to NVDA.
Get the direction right, and they’re a ton of fun.
But remember that the leverage cuts both ways.
Look at the premiums on leveraged ETFs, such as UPRO or TQQQ, substantially lower than SPY and similar behavior. You can buy several contracts for the price of one SPY contract.
Trade the cash-settled versions: SPX or XSP. No assignment possible.
What do you think is the difference? I mean you trade the exact same way. I’ve never bought penny stocks I did sell covered calls of snap for a little while but that’s it. I have a very small account and all I trade is NVIDIA and AMD for now so with $100,000 if you know what you’re doing trading smaller penny stocks I don’t see how there would be an issue with larger stocks.