Couple questions about options

[pb4uski]

It was in my Roth IRA.

Ouch... that really hurts then.

 

[pb4uski]

Every so often someone will start a thread asking people to post their worst investing decision of all time.

From here on out, I think you will officially be the winner of this game every time we play.

Au contraire... the investing decision was brilliant... the disinvestment decision.. well, let's give Fermion a break and not go there.

Shoulda, coulda, woulda.....

 

[pb4uski]

From my understanding, I would have worded this in the opposite way: VIX is high because the cost of options are high. ...

I worded it poorly... I meant that the VIX being so high was indicative that the cost of options was currently high.

 

[finnski1]

Yes, I was assuming the option was held to expiry. I'm just trying to understand the economics of using index call options to invest in the stock market.

Newbie here.... but as I understand it since the VIX is so high that the cost of options is high as well... IOW, in "normal times" where the VIX is say 20 rather than 58.... what would that 9 month at-the-money call on the SPY cost?

Side note.... If the SPY were to close Dec 2020 at $150, then I would feel like a freaking genius!

There is one caveat to this.
If one bought the SPY instead of the option they could continue on and even though they were down ($110,000) at that point it is still only a "paper loss" whereas the option expires and is "real" loss.
One could hold the SPY itself for a very long time and hope it comes back.

 

[pb4uski]

... If one bought the SPY instead of the option they could continue on and even though they were down ($110,000) at that point it is still only a "paper loss" whereas the option expires and is "real" loss.
One could hold the SPY itself for a very long time and hope it comes back.

I suspect that we have a lot of members who are currently in this situation.

 

[RetireAge50]

I suspect that we have a lot of members who are currently in this situation.

Although I bet there are not really many even with paper losses, rather their previous gains were trimmed (for now).

 

[finnski1]

Although I bet there are not really many even with paper losses, rather their previous gains were trimmed (for now).

good point. It's all a matter of perspective.

 

[Montecfo]

There is one caveat to this.
If one bought the SPY instead of the option they could continue on and even though they were down ($110,000) at that point it is still only a "paper loss" whereas the option expires and is "real" loss.
One could hold the SPY itself for a very long time and hope it comes back.

Both losses are in fact "real". You need a "real" gain to get your money back on SPY.

Only one is taxable.