Options Q Worth Sharing (Patreon)

First of all - Options are dangerous but once you master them they are a game changer. 

This was a Q discussing a long options strategy for a stock, identified as "CLSK," with an expiry date of June 21st, 2024 and a $5 strike. 

I responded with my Options Rules:

1. Expiry: Choose options that expire at least one year out. This means that for a long position, you should be looking at options that will not expire in the near term. Instead, the suggestion is to give the trade time to work out, as longer-term options are less sensitive to short-term market fluctuations.
2. Cost: The cost of the option should be capped at one-third of the stock price. For instance, if the stock is trading at $10, the option should not cost more than $3.30. This is likely a guideline to manage risk and investment size, ensuring that one is not overpaying for the option relative to the stock price.
3. Moneyness: Avoid deep in-the-money options. An option's "moneyness" refers to the intrinsic value of an option in its current state. An in-the-money (ITM) option has value if exercised immediately — for a call option, this means the stock price is above the strike price. A deep ITM option has a strike price significantly below the current stock price, which makes it more expensive due to its higher intrinsic value. The strategy suggests avoiding these as they may be more costly and could potentially offer lower returns on investment. Also avoid out of the money 
4. Strike Price: Focus on options that have strikes in the money out a year and - always try strive for half intrinsic value half time value. 

Rules are key and I rarely break them but I did in 2023 when I bought a ton of Jan 2025 TSLA $150 calls which were out of the money as I was certain we would be far above $200 in short order and I wanted to maximize my buy.