I’m starting on a new journey into stock options – that wild world of bets and speculation, fast money and faster losses.
I started by officially opening a new brokerage account week of Dec 7th. My intent is to document my experience, lessons, trades, and what I’m thinking along the way.
Here’s the catch up…
I started thinking about options this past summer, but was frustrated by my current broker preventing me from trading options. Finally early in December, I decided to open a new account and apply for approval from scratch. At this point, I did three things:
- I researched and read reviews of various platforms. I had a vague idea of the type of interaction I’d want – not a platform focused on technical analysis with fancy charts and line drawing, not a new platform hoping to gain market attention by giving away shares for referrals and other such schemes. Lastly, I was looking for reliability. I narrowed to Charles Schwab and TD eventually going with Chuck.
- I read Reddit: r/investing, r/options, r/WSB. I was trying to get a feel for the boundaries of risk and reward, learn the language, and start building intuition about the mechanics. It was more about getting lots of dumbed down descriptions on different ways to look at options. And honestly, I feel odd saying this, but I didn’t trust books that I was seeing. Anything promising get rich quick just isn’t where I am.
- Finally, I paper traded. I spent the first week of December trying strategies. What happens when I buy a call or sell a put. I found Investopaedia’s site and initially it looked ok. A week in, I had enough of the lagging and trades not possible. Apparently TD’s ThinkorSwim is good. Oh well.
I’m a week into December and I’ve made my first and only deposit. I’m only depositing $2,500 and won’t add more. I’m lucky enough to have this as money I’m willing to lose. This is money I want to take more risk for more reward, but no yolo nonsense. My goal is after 12 months to be north of $4,000. That’s 60% growth or 5%/month.
I’m excited about two companies to start with: GE and VLDR. On Monday 7th, I’m waiting for funds to deposit. On Tuesday 8th, funds show up, but I can’t trade anything. Ok, maybe the funds haven’t cleared. On Wednesday 9th, I still can’t trade. Now I’m frustrated and I email some rep who sent an auto email asking if I needed any help getting started. He informs me there’s a 3 day waiting period for first trades on a new account. Fine.
On Thursday 10th, I’m still not sure I can trade – is it 3 days from account open or from when my deposit shows up? But today I try and success. I make four purchases:
General Electric
I’m long GE and have been since Larry Culp came on board. I bought again in March and I’m bullish on a turn around. I think $12 is going to happen soon, maybe after Jan ’21 earnings report, but maybe not. So I bought two calls but at different times. Then I took my big bet with a LEAP at $15 in a year.
Velodyne
Part of my objective is to participate in high growth industries that are just starting. AV is one. And I wanted a company positioned to be a platform that auto manufacturers will coalesce around. To start, I purchased VLDR to participate in a run up, but then write calls to slowly chip away at my cost basis for a stock (and industry) that will be expensive for a while.
I ended up purchasing VLDR on a down day so I didn’t immediately write a call, but waited a couple of days until Monday 14th.
So, now caught up. I end the week of December 14-18 at an unrealized loss of $18.60. VLDR closed $20.07, OTM with the CC having ~$32 of market value remaining. GE calls are down in value (-$32, -$38, and -$26 respectively), but I don’t care at this point.
I’ll leave this catch up with my forward looking actions.
- I think I’ll double down on my GE calls for Mar and Jun @ $12. The calls are trading lower due to a down week, but I continue to be bullish with the upcoming earnings report in late January.
- With VLDR, my initial thinking is to roll my CC out another month. I want to continue targeting a premium of 5%/month on my initial cost basis. I’ll wait for an up day this week or following, but not longer.
Best references so far:
- InTheMoney Youtube channel
- R/WallStreetBets post on basics of options
- R/Options post on selling covered calls