pandemkodi Posted February 16, 2021 Report Share Posted February 16, 2021 45 minutes ago, vaakel_saab said: story chadivina kani ardham kale, simple words lo koncham cheppandi. covered call ammina 160 strike price @ 45$ ani cheppindu, tarvatha stock value 360$ pergindhi, nen inka covered calls ki loss undadhu ga, stock value pergithe? Did he say covered call or just call ? Quote Link to comment Share on other sites More sharing options...
pandemkodi Posted February 16, 2021 Report Share Posted February 16, 2021 2 minutes ago, Jilchika said: +999 Simple layman terms lo explain cheyyandi DB option experts on how he ended up with the loses? “IBKR covered my calls when the GME stock price was above $300” He sold calls probably naked for strike 115 and interactive brokers closed it around 360 thinking he will loose all or he don’t have enough funds if this goes up further .he got ** . 1 Quote Link to comment Share on other sites More sharing options...
mmharshaa Posted February 16, 2021 Report Share Posted February 16, 2021 entha aasa lekapothe motham life savings pettadu Quote Link to comment Share on other sites More sharing options...
pandemkodi Posted February 16, 2021 Report Share Posted February 16, 2021 4 minutes ago, mmharshaa said: entha aasa lekapothe motham life savings pettadu He didn’t bet that it will go up .. he bet on it goes down . Thing is brokeres won’t keep the naked calls open if the underlying ticker making super moves . That’s where he got ** . Had he(broker) kept the calls now he is in profits Quote Link to comment Share on other sites More sharing options...
Popular Post DummyVariable Posted February 16, 2021 Popular Post Report Share Posted February 16, 2021 41 minutes ago, Jilchika said: +999 Simple layman terms lo explain cheyyandi DB option experts on how he ended up with the loses? “IBKR covered my calls when the GME stock price was above $300” Not everyone can sell options. You need to cover them with money or stock. It looks like he had 400000 in his account. He sold $115 calls for $45 a piece- which means he received 4500 for every call he sold. Given that he lost close to 400k, he must have sold around 20 calls, receiving 90k in the process. However, the price of the options when they were closed must have been around 190$ Or more (time value etc) - this puts it at 380k-400k. Interactive Brokers has a bot that manages risk and will close sold options/spreads if it thinks that the trades are too risky(basically it sees if the money in your account can cover upward/downward movement/price of the stock). It will automatically close it when there are big movements in the markets for anything taken on credit. For debits it doesn’t do it. 1 3 Quote Link to comment Share on other sites More sharing options...
Balibabu Posted February 16, 2021 Report Share Posted February 16, 2021 2 minutes ago, DummyVariable said: Not everyone can sell options. You need to cover them with money or stock. It looks like he had 400000 in his account. He sold $115 calls for $45 a piece. Which means he received 4500 for every call he sold. Given he lost close to 400k, he must have sold around 20 calls, receiving 90k in the process. However, the price of the options when they were closed must have been around 190$- this puts it at 380k. Interactive Brokers has a bot that manages risk and will close sold options/spreads if it thinks that the trades are too risky(basically it sees if the money in your account can cover upward/downward movement/price of the stock). It will automatically close it when there are big movements in the markets for anything taken on credit. For debits it doesn’t do it. so exposed to infinite loss Quote Link to comment Share on other sites More sharing options...
DummyVariable Posted February 16, 2021 Report Share Posted February 16, 2021 5 minutes ago, Balibabu said: so exposed to infinite loss This is why they will close the position. If the stock at 4PM Friday hits 1000$, who will take that loss? Interactive brokers will not pay a single penny. They themselves buy them from exchanges and give it to you. Once they see that you have exhausted money in your account (risk wise), they will close it. Quote Link to comment Share on other sites More sharing options...
Jilchika Posted February 16, 2021 Report Share Posted February 16, 2021 What if this guy declares bankruptcy? Is he still liable to pay? Quote Link to comment Share on other sites More sharing options...
Rebel_Uncle Posted February 16, 2021 Report Share Posted February 16, 2021 1 minute ago, Jilchika said: What if this guy declares bankruptcy? Is he still liable to pay? 400k account nunchi gayab how can he declare that? Quote Link to comment Share on other sites More sharing options...
DummyVariable Posted February 16, 2021 Report Share Posted February 16, 2021 1 minute ago, Jilchika said: What if this guy declares bankruptcy? Is he still liable to pay? He already put his money in the account. The money is already gone. If you mean his home loan then he will have to work and pay that. He lost his savings, not his job. Quote Link to comment Share on other sites More sharing options...
FLraja Posted February 16, 2021 Report Share Posted February 16, 2021 16 minutes ago, DummyVariable said: Not everyone can sell options. You need to cover them with money or stock. It looks like he had 400000 in his account. He sold $115 calls for $45 a piece- which means he received 4500 for every call he sold. Given that he lost close to 400k, he must have sold around 20 calls, receiving 90k in the process. However, the price of the options when they were closed must have been around 190$ Or more - this puts it at 380k-400k. Interactive Brokers has a bot that manages risk and will close sold options/spreads if it thinks that the trades are too risky(basically it sees if the money in your account can cover upward/downward movement/price of the stock). It will automatically close it when there are big movements in the markets for anything taken on credit. For debits it doesn’t do it. But did he not sell the stocks next day? I mean he was forced to buy each stock costing at 200 totaling 400k for 20 calls? Today he has 2000 stocks in his account right? Quote Link to comment Share on other sites More sharing options...
DummyVariable Posted February 16, 2021 Report Share Posted February 16, 2021 3 minutes ago, FLraja said: But did he not sell the stocks next day? I mean he was forced to buy each stock costing at 200 totaling 400k for 20 calls? Today he has 2000 stocks in his account right? No, he will not get any stocks. Closing the positions does not mean that you will get stocks. A call bought is a right to buy at a certain price. A sold call is an obligation to sell the stock at a certain price. Quote Link to comment Share on other sites More sharing options...
FLraja Posted February 16, 2021 Report Share Posted February 16, 2021 19 minutes ago, DummyVariable said: No, he will not get any stocks. Closing the positions does not mean that you will get stocks. A call bought is a right to buy at a certain price. A sold call is an obligation to sell the stock at a certain price. Oh so he was forced to buy 2000 stocks from open market at 400 a piece and sell at 115 a piece in split second as he has no money left if it goes to 500 or 600 or 1000... Quote Link to comment Share on other sites More sharing options...
DummyVariable Posted February 16, 2021 Report Share Posted February 16, 2021 5 minutes ago, FLraja said: Oh so he was forced to buy 2000 stocks from open market at 400 a piece and sell at 115 a piece in split second as he has no money left if it goes to 500 or 600 or 1000... It is the options that were closed. The stocks traded will be at the market maker level. Quote Link to comment Share on other sites More sharing options...
FLraja Posted February 16, 2021 Report Share Posted February 16, 2021 14 minutes ago, DummyVariable said: It is the options that were closed. The stocks traded will be at the market maker level. right I am trying to understand what exactly happens inside , like how car engine works when you change gears Quote Link to comment Share on other sites More sharing options...
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