Newbie question - I sold some TSLA puts @ 80 for 6/7 - do I have to buy them back on Friday to close out the position?
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Newbie question - I sold some TSLA puts @ 80 for 6/7 - do I have to buy them back on Friday to close out the position?
Newbie question - I sold some TSLA puts @ 80 for 6/7 - do I have to buy them back on Friday to close out the position?
If the puts are out of the money, you also have the option of allowing them to expire worthless (for no expense). Or if they are in the money, you have the option of allowing them to be exercised, and to have the stock assigned to you at $80/share. This latter strategy is something used by some people to acquire the stock.
So, as long as TSLA stays >80, then I keep the $100 (- commission) and don't have another expense of another trade?
Thanks for the info!
Newbie question - I sold some TSLA puts @ 80 for 6/7 - do I have to buy them back on Friday to close out the position?
^^^
Yep. Good answers that cover kcveins' situation.
(As an options amateur, my primary strat for making $ on options is selling OTM naked puts to collect premium. I don't dabble in TSLA stock nor options, at the moment. Unfortunately, I missed all of the massive run up during the short squeeze. )
One problem w/getting assigned is that many brokerages will charge an assignment fee that could be somewhat pricey (e.g. $15 or $20 at TD Ameritrade).
One advantage of closing out the position early, esp. when a short put position becomes nearly worthless is that it frees up your buying power and eliminates the obligation/risk. You can do other stuff w/that buying power (sell more puts, buy more stock, etc.)
TD AM/TOS charges you no commission to close out short put (and short call) positions when the option is down to $0.05 or less. I tend to close out my short put positions at between $0.01 and $0.05 because of this.
I'm not sure if kcvein's goal is to collect the entire premium, collect some of it and take advantage of theta decay or to acquire TSLA stock at a discount.
Here's a hypothetical example: Let's say someone sold puts for some expiry at $80 strike at $1 (and collected $100 premium). Let's say the stock and time are on your side and eventually at some point, the put is worth $0.05. I'd just close it out. It frees up buying power (and I pay no commission for that) and I have no further risk/obligation. It might not be worth to squeeze out the remaining $5 of profit.
If you hold until expiration, it could rise above $0.05 due to the underlying stock falling and/or IV rising. Worse, the underlying stock could get hammered and fall to say $20 (picked this # out of the air). Well, the put price is going to rise A LOT and at expiration, if it's put to you, you're going to pay $80/share, even though the underlying is $20. And, you'd be in the hole ~$5900.
Whenever I sell a naked put and it gets executed, I have a habit of placing a GTC closing order w/a limit of a nickel or less before the next trading day. That way, I don't forget and reduce the chance of bad things happening.
Lets say that I sell some TSLA puts 12/21/13 @ 80. If the stock hits $80 between now and the expiration date, I don't have to buy the stock at that price...
My risk in selling the puts will be that my effective price will be $80 - $11 (current price for the puts) and that the stock may be trading lower than $69. So this is the case unless I were to buy to close out the position, correct?
Yep.Well, if the stock is below $69, then it's going to cost you more than $11 to buy those Puts back, thereby locking in your loss. So, only do that if you no longer believe in Tesla.
Well, you might. Sometimes the holder of the option will exercise early. That typically happens with dividend paying stocks, when the dividend is greater than the remaining time value, for instance. Tesla doesn't pay a dividend, so early exercise is unlikely unless the stock takes a sudden dive and the Put holder is scared it's going to go back up soon.
Well, if the stock is below $69, then it's going to cost you more than $11 to buy those Puts back, thereby locking in your loss. So, only do that if you no longer believe in Tesla. Better to stick to your guns and just buy the stock and hold it until it goes up.
Gotcha. So the person opposite to me (I sold a put, so he bought a call or did he buy a put?) is the one who can close out the transaction and it is not just related to the expiration date but to what his feeling of what is going to happen to the stock (or dividend payout). So once I sell a put, unless I buy to close or outright buy the stock, the onus of closing this belongs to the holder...
Ok. 'xplain this to me:
I have 2 Ameritrade accounts, a trading and an IRA. In both accounts I have calls expiring on June 22 2013.
In balanced & positions in my trading account, it is listed as:
TSLA Jun 22 2013 95 Call
In balanced & positions in my IRA account, it is listed as:
TSLA 100 JUN 13 87.5 CALL
Since I'm used to my trading account, every time I open my IRA, I get a little heart attack cause I think it's a $100 strike expiring on June 13... However, if I open it, it correctly list it as:
TSLA Jun 22 2013 87.5 Call
Is there some sort of a setting to modify the display? Why are they listed so differently between the 2 accounts?
Is anyone selling Puts as an stock acquisition strategy? I'm considering Jan '15 60 - 70 range.
Is anyone selling Puts as an stock acquisition strategy? I'm considering Jan '15 60 - 70 range.
I have 2 Dec13 70 PUTs, sold them for $8.2, been going down in value (which is what you want on a put, keep the premium and have it expire worthless), Or buy TSLAat $70-$8.20 premium received, or $61.80/share