guys.
i have two calls that have a strike price of $100 with an expiry of january 2027
i imagine two calls are commanding 200 shares of SLV
right now im making a gain of $151.51 on both calls.
my 76 shares of SLV is making more at $202.79 than my two calls of slv which i thought were 200 shares of slv.
i thought 200 shares would be making more money than just $160
can someone explain please?
$SLV
byu/hyde1634 inoptions
Posted by hyde1634
7 Comments
I mean SLV is $62 right now. The price of your two options has gone up $80 since you bought. Ie if you were to buy a third one it would cost $80 more than you paid for the first two. That’s what that profit is.
But you still need silver to go up more than 50% to get to your strike, and your leap has over a year for that to happen in. That is a ton of movement and a very long time. They’re not going to go up all that fast.
You need to continue to educate yourself on call options. They dont work like shares.
For your shares, every $1 that SLV goes up, your shares go up $1. Easy to understand
Your 100 strike option is 25 delta. This means that for every $1 SLV goes up, your contract will go up 25 cents. Do some research on option Greeks for more info.
You clearly don’t understand the concept of the time-value component of an option premium. You really need to do some reading (lots of links under the sidebar buttons) before you hurt yourself badly trading options when you have no clue how they work.
That isn’t criticism; none of us were born knowing this stuff, so your current lack of knowledge isn’t your fault. However, if you choose to ignore the advice you’re getting to get educated on the subject, future losses (which will definitely happen) ***will*** be your fault.
Hi, as others said, you really need to learn more about options. This book is solid (it’s a pdf):
[Options for the Beginner and Beyond,](https://www.r-5.org/files/books/trading/schoolbooks/W_Edward_Olmstead-Options_for_the_Beginner_and_Beyond-EN.pdf) by Professor Olmstead of Northwestern University
And just read Chapters 1 through 6, which gets you to LEAPS options. You can stop there and become a very successful options trader. LEAPS Calls on ETFs are all I do now.
But here’s your specific problem:
You bought out-of-the-money (OTM) Calls because they looked cheap to you.
Or because you have a price target of 100 by next January.
But that’s a losing game.
If SLV got to 100 **you’d still lose money**, the Premium you paid for the Calls.
***ALWAYS*** buy Calls ITM at 80-delta or higher.
Yes, they’ll be more expensive, but Delta, besides what it actually is, is kind of the probability that the option will expire ITM; that is, with some value.
Your 100 Calls have about a 25% chance of expiring ITM.
An 80-delta Call has about an 80% chance.
So which is the better trade?
You did good by buying 1 year out (and you don’t need to go farther than that).
Now you just need to buy at 80-delta.
The Jan’27 51Cs are selling for 15.78. That’s the one you want to buy, if not even deeper ITM.
And I’m not just *telling* you this, I’m actually *doing* it myself:
[SLV Calls 15Jan27 80-delta](https://imgur.com/a/c3oXBe4)
Those Calls will beat OTM Calls every time.
And you still get a lot of leverage with them:
Leverage = (Spot / Cost of Call) x Delta
= (61.94 / 15.78) x 0.8 = 3.1
You’re getting 3.1 times leverage to SLV, and that’s *plenty*.
Because remember, leverage cuts both ways.
Read the chapters I assigned, then read through that again, then ask me if you have questions.
Take care.
Tastylive is a good practical resource. Here is their discussion of delta: https://www.tastylive.com/concepts-strategies/delta
You obviously do not intend to read anything that has been shared with you so far. Locking this before anyone else wastes their time. This level of question belongs in the Safe Haven thread, AFTER you read the educational links at the top of the thread.