The Theta Letter

New here? Start with episode 2, The loop, in audio.

Two ways to end up owning the same company, walked through one position that’s currently losing money.

On September 30, with AppLovin opening at $299.85, I sold an October 30 $280 put for $10.00. On the night of October 29 the holder exercised it early, a day before expiry, so I bought at $280. The credit brings my real cost to $270.00 a share. AppLovin closed on October 30 at $229.23.

The episode works through what that’s worth against the alternatives. Someone who bought outright that same morning is down more than I am, by the credit plus the distance between the price and my strike. Someone who didn’t buy at all is well ahead of me. So is someone who waited and bought lower. And if the stock had run to $350 instead, I’d have kept $10.00 and owned nothing.

It also covers what a put spread would have capped, and why I didn’t buy one.

14:37. The voices are AI. The written version is at thethetaletter.substack.com.

Educational only · Not financial advice · Not recommendations · Options carry risk of loss

Implied volatility in plain words, and why I aim at the 16-delta strike.

The premium an options seller collects is the price of expected movement. People overpay for protection when they’re nervous, and the stock usually moves less than the option was priced for. That gap is where a seller makes money.

Three parts, about twelve minutes:

What implied volatility is, worked through a $50 stock whose one-month put goes from 80 cents to $2.10 without the stock moving at all.

What the number won’t tell you. It says nothing about direction, and a rich premium is not the same as a mispriced one.

Why 16 delta. One standard deviation holds about two thirds of outcomes, leaving a sixth above and a sixth below, and a sixth is 16%. Plus three real trades where I missed that target and why.

Audio version of posts from August. The voices are AI, reading from writing I did and checked.

Written versions at thethetaletter.substack.com

Educational only. Not financial advice. Not recommendations. Options carry risk of loss.

The loop people call the wheel, start to finish.

I sell a put on a stock I’d want to own. Sometimes that means I end up owning it. Then I sell calls against the shares, and start over.

Three parts, about ten minutes:

Selling a put, and why getting paid to wait beats waiting for free.

Assignment, walked through a real trade in NAIL that went against me. Two puts, three rounds of calls, and an exit below both strikes that still cleared breakeven by about 9%.

Covered calls, and the upside you give up to collect the premium.

This is the audio version of three posts from July and August. The voices are AI, reading from writing I did and checked.

Written versions at thethetaletter.substack.com

Educational only. Not financial advice. Not recommendations. Options carry risk of loss.