I have some DITM 740 puts (sold them last week). I hope I've learned my lesson from previous roll attempts and will try to roll these into 720 (still DITM, but less than the 740's) puts this thursday (assuming they don't get exercised on me!). As of this writing the SP is slowly recovering, so thank you for your sacrifice!
The chances of those ITM puts being ITM on Friday keep dropping, based upon the trend right now. Not advice, just watching the trend line.
wow that was stressful. I can't wait for Friday or Thursday to close all my positions. Hopefully the SP holds.
Really stressing the "roll ITM puts" strategy for the first time for me. I've got some upper 700's and a couple lower 800's sold Puts expiring friday that are obviously deep ITM now. Per the "adiggs rule", it's interesting to me to get to experience this playing out first hand. Gives me a much better understanding of the mechanics. I'm going to wait and see what happens over the next few days, and be prepared to roll them out and down as much as i can - i like the idea of trying to keep the role at a net credit, will see if i can manage that. Again, having experienced it first hand now I understand it much better.
Just remember - we hit the 10% breaker rule today, so shorting was stopped during the first dip. They cant sell short again until tomorrow? (please correct me if I am wrong)
You are wrong. They can still sell short, they just have to do it on "the up-tick". (Or use their Regulation SHO exemption, if they have one.) And the up-tick rule is in effect until the end of trading tomorrow.
My short strangles are sitting at $845 -P and $875 -C for this Friday and next Friday. Was a bit nervous watching the underlying drop down to $619 this morning but my margin maintenance held up. Planning on not making the roll decision for this week's $845 puts until Friday and likely push them out to March 12 and keep the $845 strike.
Thanks. Well, shorting is limited then.. so might be what prevents us from going lower for the time being.
One suggestion I would add - pretend that you were rolling those positions today. What new strike on the different new expiration days can you get to, with a net credit that you like? I like to start tracking that ahead of when I actually roll - so far my posts about that info have me rolling under less desirable conditions than were previously available (and is par for the course when it comes to my predictions about direction, magnitude, and timing for moves in the share price). I also like to start tracking the amount of time value remaining in the position - as that gets close to 0, that's another indicator that I might be close to rolling. Hopefully it's close to 0 because expiration is close. For my positions: On the put side, I have a significant position for March 5 with an 830 strike. That is $141 ITM (shares at $689) with roughly $1 in time value. I am very pleased to discover that I can roll this to March 12 and the 825 strike for a $2 credit (at this moment in time). Being so deep ITM, I think of the roll for this position being more about gaining time. I consider every bit of strike improvement to be important, and to be gravy. I've also discovered this position is so deeply ITM that adding some of the earnings from the call leg to the put leg (taking a net debit to improve the strike more on the roll) is roughly $ for $. What I mean is that if I add $5 from the call side, then I get a roughly $5 strike improvement on the put. I'd rather that was closer to 2 for 1 or 3 for 2 (i.e. - turn that $2 net credit into a $8 net debit) and get a $15 strike improvement for making this choice. Therefore my decision today is that it is too early to roll due to each roll being more about gaining time; I'll be waiting. Meanwhile on the call side, that's doing really well. I lost out on part of this drop when I closed this batch of covered calls early with a 2/3rds gain. Would probably have a 4/5ths gain on those today, or would have opened a new position yesterday and already be rolling it into the current position. I've opened a new 680 call position for Mar 5 for a $35 premium. I chose Mar 5 as it's ~2 weeks out (too soon to be writing the Mar 19 with me using every other expiration) and the premiums are significant and going up with IV. I went for a reasonably ATM strike with the 680. I went so aggressive because 1) if the shares keep going down then I've gathered as much premium as I can (without selling ITM covered calls) to help keep those covered puts in range. And I'm ready to roll again if we're suddenly looking at upper 5s instead of upper 6s. 2) if the shares trade up, then both positions will be better positioned to get closer to ATM next week at roll time 3) And the premium collected, even if I use 75% of it to improve the leg that is doing poorly, will still yield roughly as much income in 2 weeks as my target for the month. Interestingly to me, I feel safer with that ATM covered call than if I'd been further OTM. The significantly larger premium provides more choices, and I like how the position evolves better, whether shares are up or down from here. And in superstitious news, the now ITM covered call and my predictive ability about direction / magnitude / timing of share price moves clearly means the share price is going up from here! That'll pummel this new call position I just put on (while also improving that big put). Maybe I can force the share price to go up!
Not-advice You might want to consider rolling that 875 leg down to a closer strike. The idea is that whatever the premium is on that 875 call it can't be much for whatever expiration you have. By rolling down, you'll be at the same expiration day but now you'll have more premium to decay between now and then. This is how I've found myself in an 830p/680c inverted strangle But it also generated extra premium that provides additional choices. And rolling the far leg (calls when shares are going down; puts when shares are going up) towards the share price is part of the maintenance strategy with strangles - using the good performing leg to generate additional premium than would have been available without the big move.
Cheers everyone, I've been following this thread for a while and going through option alpha videos. Today I did my first ever options trade: sold a 570/600 bull put spread for this friday. Lots to learn!
Pulling this out - i'm definitely paying attention to what my options are. I'm targeting later in the week to roll, as you say, looking to eek out the time value from the current positions. I also wouldn't complain if the rally continues the rest of the week and i can get closer to closing these out, or at least rolling them closer to the money. It also seems to me that I don't care so much exactly what the current stock price is during the course of the week - unless the puts go net positive for me and i can just close them. otherwise i'm rolling them out a week and down maybe $5... or maybe at the same strike if i can't get a credit otherwise. With them being so far underwater, i'm curious to see what my options are. One other point that I hadn't really internalized until this happened is the downside to the roll mechanism. My risk profile says i'm ok with x number of sold puts open. So by having to roll these existing ones for likely smallish credit, i can't open new sold puts for greater returns. So net - if the price is running away from me on the downside, i'm losing "divident equivalent" money. If i was playing the call side more agressively, this might be less of an issue, but I tend to be very conservative there. It's possible I need to be more aggressive there - while we were on the major upswing, it didn't seem to make much sense.
The OTM leg, providing it's far enough OTM I'll usually just let expire worthless. My initial strategy was to wait until Wednesday's to then re-open the short strangle for the following week. But I've been instead opening the new positions on the expiration Friday to try and take advantage of the extra time decay on the weekend. So I'll likely let the $875C just expire and open a new call at a lower strike and depending on the premiums may be able to lower the put as well but we'll see. I don't mind if they overlap a bit. I ended up with an inverted strangle last week as well with a -$815P and a -$780C which both would have been ITM so rolled both. Rolled the $780C all the way to $875 taking a slight loss but moved the put deeper ITM from $815 to $845 which more than made up for the call. This of course looked to be a huge mistake if looking at yesterday and this morning but seems to be recovering. I was looking for it to gravitate back to the $850 range...oops. I expect the next couple weeks are not going to produce quite the premium that I've been getting, but that's alright as I was targeting $5k/week average with this strategy and it's been performing 4x that so it can taper off a bit for a while.
Looking at this exact thing myself. Buy the ATM call, Sell the ATM put and have the same risk/reward as owning shares. You can of course do this with any strike, it works out the same. You can then buy a far OTM put to limit the amount of $ committed to the position for cheap, and sell calls against it. You can then take the free cash and do something else including adding more positions and increasing returns.
I would be very, very cautious and put in a lot of time learning (on page one of this thread, and other places) about options and more importantly early assignment before jumping in to these types of trade strategies. They are complex to say the least, that is if you are doing the research on IV and the greeks for each trade. Definitely a strategy to start small and learn before moving up. If you are looking for some historical context you can go through this whole thread and see a lot of learning in real time from others. Just my 2 cents
I'm not a fan of synthetic longs. I prefer owning shares and selling CCs against them. In a downtrend, put IVs can go through the roof and I'll be under water. This risk doesn't exist with owning shares.
Any reason why? I suppose one could contest there's not much difference either way (especially in a non-marginable account), but for equivalent positions (OTM -P = ITM CC) I actually prefer the CC over the -P. (I also don't try to max out my margin, which is the only material benefit of an OTM naked put over an equivalent ITM covered call.) Its pretty straightforward, with some tweaks available. The basic position (same strike and expiry -P and +C) is equivalent to 100 shares, +/- potentially some very small fluctuations between the call and put side greeks. You do end up eating the B/A spread on both ends of the position so that's a small downside vs just buying shares. Margin requirement is equivalent to a naked put, and that's the big thing to be managed. EMMV, of course, but IMHO if you're contemplating this kind of position you're bullish and as such you might as well structure a portfolio around shares + long calls instead (potentially selling calls against the shares as well). And also of course, there's really no value to this position in a non-marginable account where the put will have to be fully cash covered. The tweaks on the combination make it more interesting, if not less equivalent to 100 shares, where modifying strikes and expirys can better craft a P/L curve and optimize around volatility fluctuations, technicals, and market events. I generally prefer my short legs to expire before my long legs, and I generally prefer a little downside protection from the off in exchange for less upside potential...so I might pick an OTM -P strike that's, say, 2 weeks out, and then an OTM +C that might be 3-6 months out. Management of the -P then essentially becomes equivalent to managing a naked put. As noted above a protective put can also be added [at the expense of some profit potential] to further mitigate downside, effectively turning the position into a [long call + credit put spread]. This kind of tweaking can also be useful if you're working in a non-marginable account, as the OTM -P will demand less capital than an ATM -P. FWIW, I don't actually enter those kinds of positions either. As noted upthread my go-to is a calendar call spread, as they generally provide more conservative downside protection than above. I like to enter as a horizontal and then, ideally, roll into a diagonal in the subsequent -C cycles.
For one, there's no CGT issue if a sold Put gets exercised. I view TSLA as generally trending upward over the medium to long term, even after a sell off like this. Rolling a sold Put down and out is easier with a stock generally trending up whereas with a CC you're chasing an (upwards) moving target. Puts also generally attract a better premium so I can continue to earn more just rolling the same strike forward. Finally with TSLA the shares from an exercised Put have a decent chance of being sold for a profit as TSLA rallies on a Monday more often than not, partly due to the release of Friday options expiry pressure.