Responding to
@vwman111 (I couldn't find the original post)...
I don't have any specific NOT-ADVICE for deep ITM cc, but I do have more of a laundry list of more aggressive and esoteric management techniques. In the end, they all boil down to "take on more risk than you normally would, in order to introduce leverage that will recover the loss more quickly" (of course, you could lose even more, even faster!). Because of that leverage component and exposure to larger, faster losses, the obvious solution to start with is taking the loss (buying out the cc) or taking assignment (sell the shares). Selling the shares may carry tax consequences that makes that well worth avoiding, but considering the obvious solutions may also be the best.
My first test on whether to roll, especially with cc, is the question: would I rather be assigned at my current strike, or would I rather be assigned at whatever I roll to? This is both a time value of money question, as well as actual end result. So maybe you can roll out 1-3 months (instead of 1 or 2 weeks) and get enough better of a strike and good use of the money for that timeframe, that just using a larger time window is a good choice.
I personally have gone out 2 years on a roll to save a position and determined for myself that was a mistake. I've corrected it since, but it did take me a year to find that resolution - mostly it was education on my part, rather than inability to implement the solution once I knew it.
There is the Wheel, an actual options trading strategy. Take the assignment (turn in shares, receive cash), and start selling aggressive puts, looking to collect good premiums while also seeking assignment on the puts (turn cash back into shares).
There is taking assignment and keeping the cash to back put credit spreads, rather than sticking to cash secured puts.
There is turning the current collection of covered calls into a collection of call credit spreads. I've done this previously on the put side, where I turned a collection of cash secured puts into 4x put credit spreads with a $200 wide spread.
And then some more exotic ideas:
- split rolls
- flip rolls
- split flip rolls
Split rolls would be turning 1 current contract into 2 or more new contracts. I.e. - roll 5x covered call into 10x (or 15x, 20x, ..) covered call. Those additional calls provide a lot of incremental premium that you can turn into a better strike (a lot better strike quite often). They also increase your leverage as gains and losses now accumulate faster (more contracts).
Flip rolls might be most interesting to you right now. A flip roll is rolling a covered call into a cash secured put. As an example an 800 strike call might flip into a 1000 strike put (about $100 ITM in both cases). You'd do this flip roll because you believe strongly enough that the shares are going up from here, that you'd like them to be coming to you rather than running away (you think that the $1000 strike put will go OTM before the $800 strike call).
The split flip is combining the two - so maybe split flip 1 800 strike cc into 4 950 (guessing) strike puts. The point is it'll be a better put strike than just simply being the same distance ITM.
Or convert the calls or puts into spreads.
And of course - mixing any of these together
With all of these more risky and exotic ideas, I would definitely be getting the best strike improvement available (subject to my net credit rule). The whole purpose here is to dig out of a hole, so the less deep (better strike) that you can get to, then the sooner you can climb out of the hole.
Mechanically the tricky bit here is that you need the backing for the new position you're changing into. So changing calls to puts - instead of shares to back the covered calls, now you need cash to back the puts that you didn't previously need. So you'll have to figure that part out.
Interestingly to me, those mechanics become an argument in favor of put and call spreads - both use cash as backing, so flipping a batch of put spreads into a batch of call spreads doesn't have this backing consideration.
There will be more as well - most any and everything that is a position you like, and if its a winner will offset the loss in the current position will do the job. Pulling back a bit, this is what all of these other management strategies are doing - replacing a losing position with a position you think more likely to win, and in doing so will offset a loss with a similar gain, and end up about where you started.
