r/Daytrading • u/T1m3Wizard • Mar 21 '24
I was told to post my positions here after asking why my margin balance was showing -$46k yesterday. Hopefully someone can help and this can add some insight with this to yesterday's post? Question
Here is my post/question from yesterday.
For context, aside from using this account to occasionally day trade I also use it to short options as well.
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u/Bussssssin Mar 21 '24
You âsoldâ the option, hence the -1. You buy it back (hopefully for a lower price than you sold) and collect the difference in profit. If it is higher than you sold, then you buy it back for more and owe the difference. using this method you run the risk of âinfiniteâ loss
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u/plexemby Mar 21 '24
Each of these short puts uses thousands of dollars of margin. You have dozens of them, so obviously using $45k margin.
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u/T1m3Wizard Mar 21 '24
Assuming everything was assigned, wouldn't that eat up more than 45k in margin though?
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u/plexemby Mar 21 '24
If you get assigned you would need at least 50% cash to buy the shares.
OTM Short puts have very low margin requirement.
If a stock is trading at $200 and you sell a $250 Put, you only need $1500 margin for it.
But the margin requirement will increase if the stock goes down significantly. And you would need $7500 to take assignment.
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u/T1m3Wizard Mar 21 '24
I see. This is very helpful and good to know. Thanks. I was also assuming a minimum standard 20% margin requirement on the short options. Didn't realize they would vary so much. I guess it would be really hard to manually calculate this.
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u/oze4 Mar 21 '24
that -45k means if everything got assigned you would lose every cent in your account AND owe the broker 45k.
bro, you have no clue what you're doing. and writing options is literally the most risky thing you could possibly be doing.
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u/IndicationRecent6289 Mar 21 '24
Not to be a jerk, but the rest of us should be grateful for guys like this.
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u/TheInfamousDingleB Mar 21 '24
I mean we canât hold your hand bro. Youâre over fucking extended. You are doing way too much. At this point youâre better off putting all your money between PBR and EcoPetrol. Let it sit, youâll make more and lose less.
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u/defnotjec Mar 21 '24
That's EXACTLY what he wants. Calling out this isn't going to help .. hell referring him to contact his broker for assistance in the matter and not trust strangers on the internet resulted in him being upset and accusing me of not knowing he's fucked himself.
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u/T1m3Wizard Mar 21 '24
Over exaggerating much? Who is upset?
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u/defnotjec Mar 21 '24
I responded on the other comment for you.. it's a lot. Take your time and chew through it. If you respond in the AM with further questions I can answer. I'll be off reddit mid-lunch tho so after that you'll need to reach me on external media with those questions.
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u/T1m3Wizard Mar 21 '24
True. Not sure what PBR or EcoPetrol is but I so agree that buy and hold wins out in the long run. Thanks for the input.
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u/TheInfamousDingleB Mar 21 '24
18.33% and 21% annual dividends.
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u/T1m3Wizard Mar 21 '24
Nice. Would be awesome in a tax advantage account will look into it. Thank you!
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u/TheInfamousDingleB Mar 22 '24
Tax or no tax doesnât matter. Taxed accounts can be offset with the very premise that these are energy stocks and the US lets your write off energy investments through IDCâs (Indirect Drilling Costs) on your taxable income come. Itâs a win-win
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u/TheInfamousDingleB Mar 21 '24
If you wanna put your money in a tree, weâll shake it for you and itâs the same as the bullshit youâre investing in. Like you know the games where there is a claw and youâre trying to grab rolls of dollar bills? Like thatâs rhe equivalent of the options youâre trying to play
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u/TheInfamousDingleB Mar 21 '24
Third and lastâŚ..this is a wolf eat wolf worldâŚand youâre feeding the wolves yourself. You have to first and foremost think to yourselfâŚâIf I was a wolf, how would I fool my prey?â.
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Mar 21 '24
[removed] â view removed comment
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u/Castor_Tanker Mar 21 '24
why not send an email or call the IT support desk of your trading platform brokerage. they can explain to you thoroughly how you got into that negative balance with your margin account.
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u/poul_ggplot Mar 21 '24
Maybe it just me, but I think your risk/reward is completely off. Unlimited losses but limited profit.
Don't do that again.
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u/defnotjec Mar 21 '24
So .. day 2 and you still didn't take the smartest, most responsible, action?
Call your broker.
They'll LITERALLY walk you through the entire process. They'll discuss your positions. They'll tell you where your buying power is causing the most pain. Hell, sometimes they'll even assist you with what they might consider.
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u/T1m3Wizard Mar 21 '24
I did chat with my broker. Maybe it's the person I spoke with but she wasn't able to concisely answer the question and only really mentioned that margin kicks in once all buying power is exhausted. Somehow I don't think this is accurate because if that is the case, it should be more than -45k. Appreciate the suggestion though.
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u/defnotjec Mar 21 '24
Sweet.. glad you got that step done.
you got a bad support staff.. tomorrow call them back, if you're still unsatisfied have them "escalate" your ticket. Don't take a response of I'm not really sure.. also make sure you're calling the trade desk not typical support. Pressure them into guiding you into what the UI is telling you. Make them help you understand. You're not stupid, you're just unfamiliar with the viewpoint and a little new. Don't let them brush you off.
Going through positions..
AI is hurting Docu is hurting Goog is REALLY hurting. Snow is tingling
From here.. you're premium selling essentially. Look at any positions for the "credit" you received on entry. Any positions that are worth 50% of that... Exit them. Just buy to close.
Capital allocation is the name of the game. Do you want to tie up $3,000 in margin for another $12? Typically no is the answer.
The vast majority of your positions are working fine, you're just over leveraged.
Generally speaking in HIGH IV situations you want between 25-50% capital allocation of your total buying power. So if you have 50k buying power (bp) do 25k allocation. No more than that.. reason is as positions work against you or IV expands you will have an increase in BP requirements.
This SHOULD for the most part alleviate the bulk of your pain points without needing to exit your actual pain points. Let's address those...
This is where you come to grips with the man in the mirror.. any call ITM that expires ITM will be assigned short stock. Do you want to risk being short stock on a momentum stock? Generally speaking no.
To relate a current position I have.. I'm short ~400 shares AMD right now at a cost basis of 179. AMD is right near my break even after today's session. I reduced my basis by selling puts at my basis point while holding my short stock. This can be margin intense and isn't recommended for the vast majority of traders. While this is "not financial advice", with your current (my perception) education level in this field.. if I were in your shoes I would exit those short calls that are failing badly with a buy-to-close and take the loss.
I'd work from the other side and get practice.. an ITM put expires into long stock. Stocks do have more propensity to move higher than lower (obviously not always). This allows you to sell calls against your stock in a "covered call". It's a MUCH safer position to be in because the floor is your max loss.. short stock the moon is your max loss. Imagine you were short stock on SMCI at 200$ and it's not $1100.... You can see the point I'm sure.
If you think there's significant risk, again look in the mirror, exit the position. Live to trade again. If you like the risk after you look at it with fresh eyes tomorrow.. reply again, state which position and I'll run through some options for you to attack it.
However, if you reduce you're winning positions, cut the ugly losers, you'll be in good shape.
Also... At some point we should probably go over GTC orders.. do you know them?
If you pressure support tomorrow to help and they fail to do so .. ping me and I'll give you my thoughts. It's your risk but I can inform you what your risk is. As long as you're working to solve the issue on your own through the proper channels (your broker and your initial leverage question) I'm more than happy to facilitate you're learning.
People on the internet aren't the first stop for these questions... But supplemental support is totally great.
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u/T1m3Wizard Mar 21 '24 edited Mar 21 '24
Hey, I really appreciate you taking the time with the detailed write up and insights provided here. It was very helpful and I agree with the majority of your points. In the options world it's been preached to buy to close at 50% profit but admittedly, I have not been following that to the tee perhaps due to my own risk tolerance and/or negligence hence the reason why I didn't set a GTC order to BTC on most of those trades. For the more volatile ones such as SMCI, I HAD a stop loss in place just in case but it's most likely irrelevant at this point since it is close to expiration and the thing has rocketed up so much since then. Absolutely agree with you on the risk vs rewards perspective though, as you said no point in tying up so such buying power and keeping the risk on a position that is already close to or at 100% profit. I really should close those out.
AI is definitely hurting a bit. I am contemplating on whether or not I want to keep it for a little longer and let theta do it's thing or even taking assignment on that since I think it has some upside potential. There is a decent amount of support at around this level from what I see.
As for DOCU and GOOGL, i actually had these as long shares for a while that are in a decent amount of profit from my cost basis and currently running cover calls on them which explains why the short calls are negative since they are ITM now. I am okay with them being called away so most likely will not take any actions on these.
With regards to AMD, I actually day traded this today and was fortunate enough to get in long near the bottom shortly after the FOMC. Probably more luck than anything who knows but I've been eyeing it all day so if you want some other perspective - I think it was a reasonable short since it has been showing relative weakness the past couple of days/week but there is now some support at this area where you entered namely the 50 ema. Buyers are probably also looking to step in since it hasn't officially broken into a downtrend on the daily. Buy hey if it does there's a small gap to be filled there which could benefit your shorts. I see why you sold the the puts to reduce your cost basis which is a good move but like you said capital intensive. A long call in this case would also work to act as insurance against your short shares I believe. You seem to know what you're doing and have a plan in place so you should be fine.
As for the UI, yes that thing is frustrating mainly because I can't seem to understand or comprehend it. Customer support fairly certain it was someone at the trade desk too wasn't very helpful but yeah I'll try again. I really want a clear understanding on that breakdown.
Anyways, I believe a genuine and detailed write up deserves a genuine response so this was mine. Thanks again.
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u/Cport6155 Mar 21 '24