/biz/ - Business & Finance

Don't have money to buy 100 shares of Amazon to write covered calls on?

Why not take advantage of poor man's covered calls and learn a thing or two about long term options instead of playing the more dangerous weeklies?

A diagonal spread is an options strategy established by simultaneously entering into a long and short position in two options of the same type (two call options or two put options) but with different strike prices and different expiration dates.

For example, if I buy an AMZN 1/15/21 $3700 call for $185.00 per share. My breakeven would be $3885.

You now own this long term option, this is called a LEAP. Although, 4 months out isn't really a LEAP, it's more like a 2022 but that's besides the point.

You can now sell weekly calls for strikes ABOVE $3885 without ever having to worry about losing money.

For example, the AMZN 8/28 $3900 call is currently $1.94 a share. So that's $194 in the pocket for you, if AMZN doesn't hit $3900 by next Friday.

And you still keep your long term AMZN call because you have a strong belief that AMZN will continue to go up!

So let's say AMZN hit $3500 by Friday. That's great! Your AMZN 1/15/21 $3700 call gained value, AND you pocketed that $194 by selling the AMZN 8/28 $3900 call!

You repeat this every single week, raising the strike prices if the stock goes higher, and keep lowering your cost basis for that long term call.

Now let's say Amazon somehow hits $3900 and you get assigned the AMZN 8/28 $3900c. Well, in this scenario, most likely the theta will have crushed the $3900 call that you've sold by a little bit. So you can either buy back that call, or if you just let it get assigned, you pocket that $194 and you also pocket a $15 differential per share! Because your breakeven is $3885, and you'd be assigned at $3900. Meaning you'd be buying 100 shares at $3700 and selling it to the call buyer for $3900.

This is a great way to invest long term, but also make money in the short term!

>>17905616
The pump is sad, let it crash and burn

>>17845409
I claim her. ALSO FUCK BULLS
BEARS OWN THIS MARKET NOW
CRASH AND BURN BABY CRASH AND BURN