Summary of long-term options operations

I've compiled my recent series on options trading. For newbies, I suggest reading books first to understand what options are, what calls and puts are. Then practice with low-priced options on small stocks, or use a demo account. Don't dive in headfirst!

Someone asked: What are the benefits of long calls?

1. Small bets with big potential returns - limited investment with unlimited upside, possible returns of several times, dozens of times, or even hundreds of times

2. Limited losses - the maximum loss is just the cost of buying the option

3. Since I usually buy long calls with 1-2 year expirations, you only need one or two good opportunities during that period to make big profits, like the staged exit strategy I summarized a few days ago

4. It's generally hard to estimate stock prices for tomorrow or next week, but easier to estimate prices a year out - provided you understand the underlying well and have the right directional view.

Some operational strategies for staged entry and exit with options:

1. When the market is misjudged, establish positions with LEAPS calls or sell puts

2. When volatility increases, sell portions in stages to recover costs

3. Continue staged selling during upward moves, even turning it into negative cost basis, then hold the remainder comfortably - I call this the safety margin for options

4. With sufficient remaining time, they might multiply several times more. With costs low enough, we can hold through volatility

My personal experience with timing long call purchases and sales:

1. Timing: Near major volatility lows, add positions in stages

2. Exit timing: Since I usually choose 6 months to 1 year durations, take opportunities during price surges to exit in stages and recover costs

3. Complete staged exits based on opportunities - don't wait until expiration approaches

4. If it becomes a weekly option, I suggest exiting by Thursday that week - don't wait until expiration day when you're passive

This was turned negative before earnings - generally don't gamble on earnings🤔

Someone asked about allocation percentages for options?

I haven't calculated precisely - I allocate some based on my common stock holdings by feel, but not too much. Main holdings are common stock, roughly 10:1 ratio.

Selling puts experience

I don't recommend small investors sell puts - buying long-dated calls can easily multiply several times, while selling puts maxes out at about 1x return while tying up margin.

1. Same timing as buying calls - sell puts in stages during major declines

2. Exit strategy: I usually wait until expiration or after making 95%+

3. If the stock price reaches your strike and you lack funds to take delivery, suggest closing 1-2 weeks early

A put selling case study:

Sold last September when XPeng was around $9 - sold the 4/17/25 $10 puts. Now XPeng is around $18 with no chance of exercise - just hold comfortably until expiration for 100% gain! If it drops to $10 you get cheap shares

$TSLA Thoughts on long-dated options:

1. February data is always weak annually, plus Model Y transition period exploited by media

2. Elon recently offended many - corruption plus layoffs causing turmoil

3. With all this combined, the stock has dropped enough - best small bet/big return is long-dated calls (specific strikes based on individual judgment)

4. June Robotaxi rollout - time it yourself.

Margin requirements for selling puts and calls?

Put selling margin = stock price *20% + premium

Call selling margin differs at 50% of stock price + premium (remember puts 20%, calls 50%). Best to have shares when selling calls!

Organized on mobile - sorry for messy formatting😂

Be friends with time!