It's been a busy Friday for me, as it has for many others. There was some easy trading where winning positions got rolled into target delta new positions for next week. Nothing interesting.
I AM attempting two rolls that I haven't previously tried.
The interesting bits, details below:-
- a split-flip roll of some -760p that didn't go out (retained the 1 week to expiration) that moved the strike from -400c to -550c. Still ITM but also easy to imagine going OTM.
- a flip roll roll of -640p that also kept the same expiration date, moving a strike from -640p to -610p
Here are positions that needed help, and what I've done with them:
-400c for May 28. A straight roll to June 4. No available rolls improve the strike, so add 1 week; the credit is minimal either way, and this way I get the soonest available feedback. I'm hoping for a situation where a 4 week roll is available that will improve the strike. This is also a candidate for a future split roll (turn a single call into several calls, thereby improving the strike significantly).
This position comes from an experiment started last week with a flip roll from a -760p (the other -760p got a standard straight out roll to get us to the next position). Results thus far is that I'd be slightly ahead if I'd kept this as a put. Slight enough that at other times in the week this one was ahead by a similar amount to how far it is behind now. With my larger view of flat to down, I still like this better than the -760p; even though my larger trading strategy would normally make this the priority.
-760p for May 28.
This is my biggest focus, with the farthest ITM. Last week I did a flip roll, turning one of these into a -400c. That's the one that got a straight out roll above.
The interesting part of this position is trying a split-roll to see how this does at improving things. I settled on a 4 call for 1 put split roll. The 1 for 1 would have landed me at the -400c, adding an additional week to June 4. When I started looking at how things improved using 2, 3, and 4 calls per put, I found some interesting results. Even the option to perform this split roll was setup earlier in the week when I preemptively closed some CC in preparation and didn't open replacements as preparation for this. This provided the uncovered shares necessary (margin to do this is WAY above anything I'm comfortable using margin for, so I had to have shares available for the CC).
The first choice I evaluated is the 2 for 1 split-roll. It improved the strike by something like $90. From 400 to 490 or so. It was such a big strike improvement, I would have gone with this if it weren't still nearly $100 ITM. The 3 for 1 was quite a bit better of course than the 2 for 1 (I don't remember specifics though).
The 4 for 1 split roll gave me my best balance between strike improvement, and minimizing my perceived risk. What I executed turned some -760p into -550c at a 4 for 1 ratio. That is a $150 strike improvement, going from $180 ITM on the put side to $30 ITM on the call side.. I'm still ITM by $30 with these calls, and I have 4x as many calls as I had puts. If my flat to down larger view continues through next week then these even have a chance of being OTM and get closed for pennies. Is it wrong to root for another week of down?
Important additional info about this change in position. I couldn't get a fill without going to a market order. And the bid/ask spread on the overall position was murder. I was only able to execute this 4 for 1 roll in two different transactions. First the BTC on the 760s. Then the STO on the 550c. You'll need margin or a big cash cushion to pull this off. As the contracts were close to $200, that's $20k for each put to BTC. I got it right back on the STO, but I've been in situations where I didn't have the cash to pull off the BTC and therefore I couldn't do a 2 step roll.
And the REALLY interesting dynamic. I expected to roll out as well on this split-roll. That didn't happen - this is a 5/28 to 5/28 roll. I did look at the June 4's as well and they got me very little additional benefit. Adding an extra week for effectively no change in the position was surprising to me. And keeping these only 1 week away is a big bonus to me - sooner feedback and adjustment opportunity, as well as the most voracious part of the time decay curve.
-750p for May 28.
Straight roll to June 4.
-640p for May 28
The interesting part of this roll is this split roll. I found that a 2 for 1 split roll got me a $30 strike improvement: 640 down to 610, while retaining the 5/28 strike There was little meaingful value to adding a week at the same time. So these rolls got me a significantly better strike at the same week. This isn't a free lunch - I have 2 puts where I previously had 1. That's a lot of incremental cash to back these puts. That cash comes from closing out winning puts and using the winning puts backing to cover these.
The other interesting / surprising result to me, and a heads up / warning for what qualifies for deep ITM. This one was about $60 ITM (not $100, $150, or $200 as I've needed to deal with elsewhere) and it's already not budging. Imagine my joy (/s) when I found no strike improvement for either a 1 or 2 week roll. Admittedly the option is still a week to expiration but time value was still approaching 0, so I decided on the early roll anyway for simplicity and reducing risk of early assignment (very very unlikely; I mostly didn't want to lose track of these and accidentally take these to assignment next week). The ones that didn't get the split roll were moved out to June 4 at the same strike.
