Quote:
Originally Posted by eanzenberg
Yeah, you effectively cap your upside. $160 for NVDA is 10% from where it is today, timed to Jan 2026. The extrinsic value you get from “selling” the option is earned by holding the total downside risk over that time period. And, you cap your upside. Majority of stock returns happen during periods of significant rapid up-swings (obviously).
But if you can time the market, have an edge, and have bandwidth to babysit these then yeah, go for it ��
|
Few points of clarification, I made that post on 6/2 when NVDA was $135, which represents 19% upside, you were paid $11 for that call netting $124 or respectively ~30% upside. The more volatile a stock, the higher the implied volatility and the more income you are paid, NVDA was only an example. As I already mentioned, should the stock rise above $160 close to expiry, you can roll it further out and to a higher strike, thus increasing the upside. When you roll a covered call, it immediately triggers a ST loss that can be immensely valuable going into yearend. NVDA is obviously an outlier but it is incredibly rare for a stock to move in a straight line higher, it will peak and trough through time and when it moves lower due to systemic market conditions you can always close your option at a profit while writing covered calls when valuations become stretched again. IE an investor with strong conviction, could have closed covered calls on NVDA during April for a substantial profit and then increased their allocation into NVDA at a lower price. Alas, hindsight is always 20/20 but the market follows repeatable patterns and during extreme volatility, retail always overreacts creating numerous opportunities that can be effectively hedged via options like writing CSPs.
This obviously does not work in the event of an ever elusive buyout, if you are concerned there is significant price appreciation prior to a major catalyst, you can take part of your income from the covered call and buy an OTM call that will appreciate at a significant multiple compared to the underlying security. There are many ways to navigate upside limitation.
It has nothing to do with "timing" the market nor "babysitting" options, you can win by being the house and selling options to degenerate gamblers. With that being said, there is nothing wrong with a buy and hold strategy, it certainly has been proven over time to be a profitable strategy and create multi-generational wealth.
Quote:
Originally Posted by vipereaper30
Good advice I need to heed.
How are you assessing IOVA with recent events? I'm considering a shift into more bio and this one is still on my list.
|
I 3X'd my position last month in the high 160s after the brutal Q1 miss. EV of only $400M is clearly dislocated from the market, with a $300M run this year and lung along with cervical data readout later this year will multiply the TAM by tenfold. The IP with over 220 patents is worth significantly more than where we stand today, welcome to early commercial stage biotech. The recent 5yr data release at ASCO was incredible for 3L Melanoma, I firmly believe it will be revolutionary in 2L. Anyways, I will post my thoughts and thesis on it this Sunday, would love your feedback and criticism after (along with anyone else in the medical field).
None of this is financial advice, just my .02 with change to give.