What is FD? This acronym is short for "Faggot's Delight" and is used in the financial world to describe a particular type of stock option. When most people hear this term, they automatically think that it must be something dirty or obscene. However, that is not the case at all.
What does FD mean in stocks?
Originated from Reddit's subgroup 'Wall Street Bets', FD is short for 'Faggot's Delight'. It essentially just means options that are out of money that are expiring within a week. This terminology may seem malicious, but it's an internet group that is known for its malicious tactics so what can we expect.
What is FD? (Faggot’s Delight)
FD is a crude acronym that represents an option that is out of money and is expiring in a week. An option gives you the ability to buy stocks before the expiry date. The intrinsic value of the stock and the time premium is what determines the price of an option. However, when it comes to out-of-the-money options, there's no intrinsic value so the time premium is all that's left as a part of the calculation.
The Wall Street Bet gamblers are hoping that the stock price will increase to above the strike price in addition to the cost of the premium. This has to happen prior to the expiration date. If it does occur, they make a lot of money. If not, they are... you can take a guess.
You know all out of luck. The chances of this happening are slim to none, but Wall Street Betters find this gamble fun. If there is only one week left until expiration, the option will be worthless. So you need to know when to sell it.
If you think that the markets are going to rebound soon, you could wait until the last week and then sell the option for a profit. However, the chance of the market's rebound is getting smaller as the expiration date approaches.
The reason why they deemed this trading situation “Faggot’s Delight” is because whenever you trade them they tend to ruin your fun in the markets sort of to say. To put it simply, when options are out of money within a week, there's not much you can do but watch as you go deeper and deeper into the hole of losing money.
There's a low probability of the trade turning over to the other side (the one you initially planned for), so you might as well smile and enjoy it.
Risks of trading or investing in FD
If you are holding an out-of-the-money option and the markets start to crash, you should sell it as soon as possible. The longer you wait, the more chance there is that the option will expire worthless.
It's a risky move to hold on to the last week for the market to play out how you'd like. This acronym comes from a forum that has been responsible for bankrupting many gambling retail investors.
Sure, you can join a community of Wall Street Betters but be aware of the culture and information you receive from websites like that. It can be fun for some.
But it might be more fun and educational to explore this website in more detail instead. Know the difference between offensive betting culture and empowering investing education. But at the end of the trading day, you are perfectly free to explore the free markets however you please.