This happened to me as well, though with naked puts. Or maybe I got hit on the other side
My 'solution' that helped a lot, was the really really wide put spread. For me that was a $200 wide spread. I chose the short put as if it were a naked put (and still do), and then added a long put that was $200 further OTM. You'll find that the insurance put is probably under $0.50 and will never be worth very much. The overall position will evolve like a naked put until $50 or maybe even $100 ITM. You'll manage it as if its naked, it'll generate most of the same premium as if its naked.
But it'll also be defined risk and thus in an IRA (or how I do naked puts in brokerage) you can do 3-4 of these vs 1 naked put.
The way I'm getting leverage into my account are a series of defined source positions. They show up as margin, house surplus, maintenance excess, etc.. But the positions themselves come from defined risk positions, and thus the maintenance excess / house surplus changes very slowly with the share price, and rapidly with positions coming and going.
In particular I'm buying DITM leaps for lcc's (and have stopped selling cc's against my shares - I HAVE sold off a fair number of the shares, but with the leaps I've netted out at about +50% share equivalents).
I hold large cash balances that I use to back bull put spreads instead of naked puts. I'm using $100 bps these days - I occasionally shrink the spread width, but mostly not. This enables me to sell 7 bps instead of 1 700 strike naked put. And thus the wide spreads - I'd be too likely to sell 14 of the $50 wide spread vs. 1 of the naked puts; the income increase is outstanding, but the risk starts making me uncomfortable. I'd probably be better off returning to the $150 or $200 wide spreads, not because they are a particularly good use of the leverage, but because it acts as a better brake on my 'but but, moar!'.
For me it was naked puts in the Feb/March timeframe. The shares had rocketed up and briefly touched $900. I figured $800 or so was safe, and being aggressive with the puts was important as the shares were heading to the moon, and the put income was helping offset the call losses (I was struggling to keep the cc's up with the share price). Overall income was outstanding.
Then the shares reversed back into the 700s and I didn't roll the puts down NEARLY aggressively enough. Suddenly the calls were all OTM and in great shape, while the puts went deeply enough ITM that there were no longer good rolls available. Since I had just the week previously had a good roll (sm. net credit, $5 strike improvement) while $80 ITM I figured it was just a matter of time to catch back up (because clearly, the shares were going to turn around any day now).
That didn't happen and I lived with those DITM puts for 5ish months before finally resolving them (via bull put spreads!).
Or then - there was the time, back in June, where I added on a call spread to a put spread for the small additional premium. It looks totally safe to me and it was 'free'(*)! It was also a narrow spread ($20 or $40) and it went ITM to 50% ITM and looked like it was going to 100% (insurance call going ITM), and it all seemed to happen in the same day. I was new enough to spreads that I didn't have enough experience on how to manage, and just bought my way out around 50% loss, rather than waiting for a 100% loss.
(*) Where 'free' cost multiple $10k of $.
That's made me really gunshy of call spreads
With the naked puts --
What I did right - the puts were fully cash secured, so there was no margin call coming for me.
What I did wrong - didn't roll down aggressively enough, didn't take the loss early enough.
With the call spreads--
What I did right (I think). Take the loss before it got worse. I should have taken it sooner - and that only counts because I had that thought at the time and didn't act on it. Broadly speaking I'm finding that if the conscious thought goes through my brain to close a position for early/small profit vs. hold for later/big profit, act now; or whether its act now to close a position for an early/small loss vs. hold and hope for recovery, act now and take the early/small loss.
The pattern is the same - when I consciously think "close now, or later", then the decision has been made and close now.
Now that I'm doing $100 wide bull put spreads, if the same situation as the naked puts arises I'll be looking at a ~max loss. Ergo - don't let it happen. The things that I see:
1) when the shares are near a local low ($700 is that level right now as I see it), then I can be more aggressive with the put sales. Actually I'd love for the shares to hang out in the 720-760 range for like, forever.
2) when the shares are near a local high, get way way more conservative with the put sales. I may still be selling 730ish level puts even when the shares are going past 800, where I've sold some 730 puts recently when the shares were high 740s.
3) when not near a strong support, assume that any pull back is going to keep going, and roll down for max strike improvement and minimal credit to get to that strong support.
4) AND THEN - be ready to take the loss. An early loss is likely to be relatively small in % terms (it'll be high in absolute $). But it'll also easily be covered by previous sales and/or the next few sales. I've experienced this already with an early loss on call spreads back in June. The % loss was in the 40-70% range (ouch) and the month still made good income. Don't let a single position generate a significant setback.
All of this goes back to the wide spreads. With a $100 wide spread I've got a big range in which to manage them.
Another approach is to use no more than 1/2 of the available margin on whatever size spread one likes, where one of the management choices is to bring more leverage into the position to fund a really big move in the strike. So have the margin available to expand a $50 wide spread to $100 wide spread (or sell 2x of the $50 wide spreads) to improve the short strike and recover a position that is moving against.
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