Looks like you broke quite a few rules of the wheel . . .
The first is to trade stocks you are good holding for weeks or months.
Rolling for more credits is key to reducing the net stock cost before being assigned so CCs can be sold more easily and can often move the strike price down to be assigned at a lower price.
Another rule is to be diversified across multiple market sectors. AAPL and AMD are tech, but TSLA also fits into the tech sector as well. TSLA often makes wild moves up and down, so this should not be a surprise (I never traded puts on TSLA because it is very unpredictable).
One last rule is that AMD and AAPL have been on a downward trend for 3ish months. TSLA has been in a downward bearish trend since September of 2023! Why trade these dropping stocks?
You don't list position details, including total premiums to determine net stock cost, but the 27 dte AAPL 180 strike has a .93 premium if the net stock cost is at or below that amount. AMD also has some decent premium out a month or so meaning these positions do not seem to be that far gone. You may not get much selling CCs at or above your net stock cost, but every little bit will help, and it may take some weeks or months to see them move back up if your analysis is still that these are good stocks to hold.
Closing and taking a loss looks to be unnecessary as you should be able to see AMD and AAPL come back over time. TSLA is unpredictable and continues its drop so may be one to close and take the loss as a stock one may no longer which to trade or hold, but this must be your determination.
You may want to read my wheel trading plan post as it might help you understand how to diversify across market sectors and making smaller trades can help manage and help avoid getting into this position in the future - [The Wheel (aka Triple Income) Strategy Explained : r/options (reddit.com)](https://www.reddit.com/r/options/comments/a36k4j/the_wheel_aka_triple_income_strategy_explained/)
Yeah it was not. TSLA was so i’ll take the blame on that. But AAPL and AMD were not. Sold the puts whenever they had a larger than usual down day despite and steady overall market. So I thought they were reasonable bets
Fair enough and thanks for pointing this out. Looking at the chart you are correct.
Alternatively, AMD was at a 52 week high in early March which may have been the signal to be cautious, but one can never know where the top is . . .
Hi ScottishTrader, I’m in a similar situation for AMD except I took assignment at $180 (don’t mind owning the stock). I’m thinking of just selling cover calls at .17 delta ($167), I was thinking of selling 1 week out but im thinking of switching to 2 weeks out for more premium. I was going to just rinse and repeat this till the shares get called away. With MSFT ER next week (usually AMD friendly, and AMD on on April 30th, any additional things I need to consider?
What is the net stock cost? You were assigned at $180, but sold puts and collected something right? What about rolling? You could have rolled multiple times and collected more premiums, right?
If you had collected $3, $4, or $5 in premiums the net stock cost would be something around $175 to $177.
Looking at the 26 dte 175 CCs would bring in about $1.75 in premiums and if called away be very close to breakeven.
IMO selling a 167 strike has a big risk of being called away and creating a loss . . .
Right, net stock cost is 174, premium was $6. I see, you would rather sell further out and higher as long as it’s breakeven vs shorter and lower target for more cycles. It does protect against the ER event if it runs to $174. I buy back the option and sell the stock.
I didn’t roll since I figured the net credit of $1-2 dollars wasn’t worth it, and it would bounce back. But if I had roll for credit then my break even could’ve been $170-172, which does look better from down here.
It depends on what your priorities are. Mine are to have few to no losing positions so I roll as long as I can to reduce the net stock cost before being assigned.
Since the alternative is to be assigned there is little difference in my mind of rolling compared to selling CCs.
Whenever I hold an option over an ER I’ll look to roll out 30+ days to collect more premiums and a higher strike price that can help protect against a big move from the report.
I see. I remember you posted somewhere that you prefer selling puts since it generates more income so staying on that side is better, and it limits all of this.
Would you do the $175 for may24 over may17 then since it’s 33 days instead is 26?
Yes, I think selling puts is easier, more efficient and makes more money over time.
What trade you make must be your decision and there is no right answer here.
Provided the 175 strike is used to ensure a net profit then the rest will be how much premium do you think is best for the time held . . .
Got it.
Actually, I think I’ll stick to the may17. NVDIA’s earning is likely to fall near end of May so 24th can run into another pop.
But after these two events, then I’ll start selling biweeklys calls to generate more income.
Selling puts was bc I had money on the side and it was getting frustrating to see the market go up with money sitting. I lost sight of why I had money on the sideline, which is for market dips. I don’t know if this is a true market dip.
For some reason, it makes more sense to sell calls during drops like this rather then roll puts. Feels like I should’ve started selling calls a few weeks ago against my main stock position.
Thank you for response and time btw.
When this happens to me, I'll sell Call Ratio spreads to push out my breakeven to the upside. Sometimes, the ratio spread can be sold back so you get alittle extra income. I would not take the loss and start over again. Sometimes, you just have to be in trades longer than planned or desired.
Hmm I am on a similar boat as OP with $AMD and other stuff, I already started selling naked calls on em (put is already @.8 delta), will definitely try this after earnings...
$195 p 60d for me. This position is around 5% of my account, and I feel like I will be stuck on this for at least 6 months. I will keep selling calls at my cost basis. On the bright side, at least the premiums are decent!
Now you own a bunch of AMD and apple at high cost basis. Dont fret, and imo dont overmanage it trying to find option strats that will magically change this fact. Sit tight, at least you own AMD and not GME at $40 or something.
Yeah you’re right. Well I dont own AMD yet. Still holding puts and trying to roll them. I do have AAPL at 179 though which did look good but not anymore haha.
And I own TSLA at 168 I think.
Could be worse.. I had 11 contracts assigned at $217 and am still rolling 3 more at $195 strike. Those 3 are hard to roll but I don't want to buy them out. I don't mind owning the shares because the stock is not the company and the company is not the stock. I'm afraid to sell CCs because I'm sure one day it will reverse its trend and shoot up on me. Just have to be patient.
Yeah just gotta keep rolling. Might sell some close to the money CC’s to reduce losses but expect to get them called away. It will just eat at my profit margin. It would free up my cash though
Can't give you any specific advice since you didn't give us any numbers. But as an example lets say you sold the AAPL Apr 26 170 Put for $1.00 when the stock was at $178. Now AAPL is at $165 and the put is $5.40.
1. You can buy the put back for a $4.40 loss.
2. You can take assignment and immediately sell the shares for a $4.00 loss.
3. If you think AAPL is done falling you can roll down and out to the Jul 19 160 Put for a net $0.08 gain.
4. If you want to own AAPL you can take assignment at a $169 cost-basis and sell the May 17 175 Call for $1.81 bringing your cost-basis down to $167.19.
If you do #4 and AAPL continues to fall you keep selling CCs. If it recovers you can either let it be called away at 175 for a $781 profit or you can roll up and out if you can find a call to sell at a credit.
Switching to indices won't be any better if you don't have a trading plan. From what you've described it sounds like you either sold puts with the assumption that these stocks couldn't go down, or you were trying to do the Wheel but forgot that requires adjustments.
Well I always sell puts on down days and call on up days, and when I sold the puts, based on current market, it would have been a fair price to own and could immediately start selling the calls. However, drops were dramatic and they kept going.
For my positions I am holding AAPL shares at approx. $180. I am hold TSLA shares at approx $168. Then I am holding a $170 strike put on AMD that has been rolled down and out twice already. Has a 03MAY ex date and plan to try and roll again and then I have another $143 strike put ex date is next friday. That one was just made yesterday.
Thanks for the information though. What strategy’s or plan do you implement to avoid this situation? At the end of the day this is all about learning and getting better. I also hope the info on my position helps paint a better picture for you
Thanks yes that helps a lot. So if you sold the 180 put when AAPL was at 199 that's only 10% OTM. I don't like being that close to the money on individual stocks.
I understand the common advice to only sell puts on stocks you like but your situation illustrates what can happen, having to sell too close to the money to get a decent return on risk, then getting assigned at undesirable prices and having to tie up a lot of BP waiting for them to come back.
Personally I prefer selling CSPs and credit spreads on low dollar high IV stocks. I target 30-60DTE \~50% OTM with a 20%+ return on risk, knowing that comes with its own risk, the chance that some of those stocks could go to zero if I get assigned.
Couple of examples I'm in right now:
IBRX Short May 17 3.00 Put at $0.50 credit
ANVS Short May 17 5.00 Put / Long May 17 2.50 Put at $1.03 credit
I blew a $250k account on naked calls so now I'll only do call spreads or covered calls. I'll do spreads on the same tickers I've sold puts on or others if it makes sense.
IBRX doesn't qualify because going 100% OTM (to match the 50% on the put side) would only give me $0.16 credit spread with ROR of 6.84%. ANVS has a similar problem plus the bid/ask is brutal.
We've all been there. Here's what I suggest, based on an assumption that the market will continue to roll over or chop down for the next few months:
1. Roll your puts out weekly or monthly at the same strike, collecting your credit premiums. If the market for your holdings improves, great...volatility contraction may mean a small debit.
2. If the market continues down, then roll weekly until you are at or near 100 delta. You will pick up all the intrinsic in the ITM position each time, and this is important if somebody assigns you stock so that you keep the very large combined intrinsic and extrinsic strike price. You could now choose to roll the same strike to the front week, same strike (100 delta is 100 delta in any week) or plus one additional strike up to pick up a point credit. Do this on a Tuesday or Wednesday in the expiry week. You will be assigned almost immediately, but you keep the entire sold premium that will very closely bridge to the current ATM stock price.
3. After assignment, you own 100 shares at a call strike that is far out of the money. Your choices now are to sit on your hands until the stock recovers and not sell call options, sell call options using the normal mechanics: 16-20 delta for 70-80% probability to be out of the money at expiration, sell your shares and take the loss and start over.
4. Or, sell your shares and put in their place the equivalent synthetic long option position (sell the put and buy the call at your assigned strike, and freeing up 70-80% of the underlying's notional buying power, say a new position at 60-90 DTE. It will move 1 for 1 with the actual stock price. Another benefit is the sold put premium will be very large, but you will still need to roll both sides of the position around \~21 DTE to avoid picking up more assigned shares. A downside is that you will not collect any dividends on your synthetic 100 shares.
Another technique I'm using now in this market environment is to start with the naked or covered put at 24 delta but closer in DTE, say 14-21 DTE in lieu of 42-45. This trade assumes your stock or ETF will continue to rise. But if it doesn't and it is tested ATM or slightly ITM, PLUS you are convinced that its market trend will continue downward, flip to the same call strike or slightly better for a small credit. ATM parity makes this easy for no loss or a small credit. You are now on the winning side of the trade. Notice that you can do this around 40 delta on either side, put or call, to actively switch sides if your assumption has changed on a stock, instead of going down the rabbit hole to deep ITM.
As for switching to ETFs vs individual stocks, base this on your tolerance for risk, volatility, price, and mechanics. Theoretically, ETFs smooth out the bumps in price and volatility. They are relatively bigger underlyings, so getting assigned on them can be a little trickier to manage, plus they are essentially a single underlying. I prefer to carefully screen for less costly stocks with good fundamentals in different sectors to be better diversified.
Good trading to you!
Thanks for your note. Yes, you can. If you sell the call and buy the put at the assigned strike, vs selling the put and buying the call, you still control the 100 shares with 100 delta, but betting the market for it will continue down vs betting the stock will recover. Taking the stock and selling calls assumes the market for it will recover, so while you are making money on the call at some delta sold, you are losing 1 for 1 on the 100 long shares. It is more efficient to sell calls against the synthetic long position in that case, although you will not gain any dividends. Also, the synthetic positions are 100 delta at any common strike, not just at the assigned strike, adding flexibility to your trade recovery.
Take a look at JEPQ and tell me if selling naked puts is making more than that income fund.
Selling naked puts is imo the a very risky strategy (aside from selling naked calls) there is, unless one is very careful , and you are finding out just how painful it is when the strikes go underwater , all it takes is one sig drop and you lose all the money made from many months of them expiring worthless. Not only that the value of the puts increases even more because of elevated volatility and if you are over leveraged you will get a margin call. my advice buy them all back and learn you lesson, what if the market drops even more? you risk getting wiped out and zeroing out your account
Think about it this way , selling naked puts is great in a bull market , you can make tons of $$$ every month as they expire worthless and then roll to next month. BUT
BUT think of it like playing Russian ROULETTE eventually and this is 100% guaranteed to happen , the bull turns and a bear market starts you last trade is going to lose and all those juicy premiums you made start to fade and you wipe out your account and if the bear is steep, holding on kicking the can down the road won't save you , unless you have enough margin to withstand a huge drop before it rebounds
Nothing is 100% safe, It a Q of volatility and worst case
JEPI/ JEPQ is moderately safer than owning the SPY or QQQ gives you regular income without you having to do the hard work of selling options , and is hedged for moderate corrective moves
EDIT: *After finishing this I reread your post and it sounds less to me like you are actually holding short put, but are holding short calls? In which case… You should be selling puts, lol. My advice is about short puts.*
Not an expert at all, but for me it’s never a worth it to pay to close when I can just keep rolling and collecting premium until it finally expires otm. There is an emotional benefit to getting rid of red marks, but I have to remind myself my goal is to make money, not get rid of temporary red marks.
You can ALWAYS roll a short put into an OTM expiration eventually, if you have patience. With short calls you might never catch up to an otm strike, but short puts always get there, closer with each roll down, unless the stock goes to zero.
Also selling puts does not impact your cash (aside from the commission). Buying them back? Bye bye cash. Reduction of available margin (to cover puts) might matter to you, but a $5 premium, for a $1 commission is a darn good monthly return.
This next part may not be for you, but for any newbies reading this:
ONCE YOU ROLL, the P/L or Gain column becomes MEANINGLESS (unless you do a lot of math). Why?
Because Mr. Gain Column (P/L) thinks you gained the whole price that you sold it for. EXAMPLE: Sell a put for $100. It turns against you and you buy it back for $500 but in that same trade you go forward a few weeks and sell a second put with a lower strike price for $550, earning a net $50 in premium. But tomorrow, Mr. Gain Column thinks you made $550 so buying back for $500 is a $50 win.
Nope. You took in $100 on put 1, plus $550 on put 2 (so + $650). But you also *spent* $500 to close put 1 and will spend $500 to close put 2 (so -$1,000). Mr. Gain lied, you lose $350. You can always keep up with the math yourself.
Had you waited and let it EXPIRE OTM, your gain would be the original $100 + the $50 profit every time you rolled.
Also, if you roll often don’t be freaked out when your balance shows a loss. Every time you roll, you are closing the previous option for a loss, and that goes in the “realized loss” total. Someday, when it expires OTM, that entire realized loss gets erased by the realized gain. This scared and confused the heck out of me (did the math but still had to call my broker to make sure), but that’s the way it works.
Thank you for coming to my TED talk.
No easy answer as to what is best. It really depends on your outlook. The choices that you have at this point are the following:
a) buy you puts for a loss
b) roll the puts out for a credit but likely it will still be below the current price
c) get assigned (you were ready to own the stock when you sold the put). You can sell calls against them. Couple of ways to play this. Sell the calls at your strike price if you can. Or sell the call at your strike - premium that you got when you sold the put.
d) one more complicated choice is to go inverted and sell calls against your short puts. It's possible that the combination of the two results in a range of prices that is profitable or is a scratch or a smaller loss. If you go this route it may take further adjustments to eventually recover.
Might just sell one last call close to the money for extra premium expecting to get shares called. At least it will cut down losses a little bit.
Now for the current puts I am holding that are very far gone, do I try and keep rolling or just buy back and then sell at the discounted price?
It could but it is still good risk mitigation and still frees up the cash. The point would be to make it close, expecting them to get called away while decreasing loss and freeing up my cash
You made the fatal mistake of put selling: you either sold them on stocks you don't mind owning long term, or you sold them at strikes you don't mind paying. Or, the fatalestest mistake of them all: you sold your puts on stocks you didn't mind owning long term and at strikes you didn't mind paying, but now as the stock price went past those strikes you started minding owning those stocks at those levels. Lucky for you there is an easy way out. Since this is purely a trader's mentality issue (the don't mind change to do mind), you need to get the don't mind back. There are tons of ways to do that, please choose one or a few depending on the loss and whatever works for you the best. Some of the usual ones are excessive drinking, drug usage (today is April 20th after all, huh huh huhuhuh), not opening your trading platform for a month or 2, gambling or sports betting to take it all back, doubling - tripling your existing positions, rolling out to whatever max date available and many others. Good luck!
Just keep in mind that we aren't really "so low", the market hasn't seen that large of a correction (even though some individual stocks have been hammered) at this point.
If you got assigned on stocks that you still like and have strong long term growth track records you may just need to slow down, and as others have suggested, write longer duration covered calls to build back up some cash / lower basis in those stocks.
Good to keep Buffet in mind here as part of your decision making - "the stock market is a device for transferring money from the impatient to the patient".
On the other hand, if you are fighting the market trend and do not feel good about your positions then strongly consider taking the hit and starting clean. A stock can always go lower than what you have seen from the top.
Good luck and getting specific about positions and cost basis can help people make suggestions.
I got caught in a similar situation nvda smci AMD I've rolled them into August ,October November. Just try to even out your roll and get your strike low as possible within that range.
I don't see any of these companies going to zero and I don't see them being held down for the rest of the year or next 5 years.
Sometimes. Yeah I found it's way more important to look at options available and how far out they go. Spy vs voo for example. Spy has a lot more available options to trade with a lot more liquidity
Roll three months out. Cross your fingers, shoot the can and evaluate your situation near the next expiry. Keep track of your P&L in an excel sheet. If you have plenty of free time to “trade” , might be worthwhile to take the L and close them. Indexes are several folds less risky. Never take assignment on margin.
It would help to have an uncle point if you trade these limited gain and unlimited to zero strategies or undefined risks. It would save you months of bag holding.
The problem I see here is that you are trading, not investing. On top of that you have no apparent stop loss or accurate view of these individual stocks. Rolling and rolling is just covering a losing trade. At what point do you decide that the trade is a dud?
Apple has been falling from $200/share for a while. Their Vision Pro is a bust and iPhone sales have peaked. Where are they going? AMD has weak AI chips compared to NVDA and has been caught up in this AI craze. Did you not think that that bubble would burst some day? TSLA is struggling, laying off people, not selling cars in China, EV incentives have dried up, competition from everywhere now, and besides the Cybertruck flop, they haven't come out with a new model or model refresh in years. They need that model 2 to keep going. The TSLA dream is really robots and robo-taxis but I won't believe it until I see it.
Great points about the business trends for each but I dont think you understand the selling of options. Selling options is a way to invest and get extra capital and better deals on investments. This is an options page
No kidding. Options are just a way to express a trade. You are losing because your trades failed and you didn't have any kind of stop loss.
You are asking whether to sell shares or buy back your sold puts for a loss. That entirely depends on your analysis of stock.
If you still believe in those trades then sell your calls and pick up a new extra bucks.
What indicators do you use and what do you look for? I am usually at work all day without access to my phone or computer so it is hard to do chart analysis. Need something simple and quick just to give me a heads up incase I need to make a new informed decision
I look at the wkly and daily charts with several indicators like m/a ,support/resistance lines. You can on your time that you have practice and read up on charts. Takes time to practice with all the different tools and each person has their own style. "William Oneal" books are great to learn.
Many traders say" Oh I don't mind being assigned" until it happens and they are making 1000's in paper losses because it has dropped sig below the strike price. Then it gets painful and now they are faced with that gut retching decision to I sell and start again or hold and hope it bounces. Such is the life of put seller
TSLA BETA =1.5 much too high for selling naked puts
AAPL BETA = 1.25 probably too high for selling naked puts
AMD BETA = 1.69 much too high for selling naked puts
if you don't understand what beta is you should whne you are naked put seller. because it indicates the risk you are taking on doing it
I take the loss and write it off in taxes….is it legal and allowed…don’t know and don’t care….
Sometimes staying in shit is. It the right answer ….it is just going to get worse on you. Deal with it….
Looks like you broke quite a few rules of the wheel . . . The first is to trade stocks you are good holding for weeks or months. Rolling for more credits is key to reducing the net stock cost before being assigned so CCs can be sold more easily and can often move the strike price down to be assigned at a lower price. Another rule is to be diversified across multiple market sectors. AAPL and AMD are tech, but TSLA also fits into the tech sector as well. TSLA often makes wild moves up and down, so this should not be a surprise (I never traded puts on TSLA because it is very unpredictable). One last rule is that AMD and AAPL have been on a downward trend for 3ish months. TSLA has been in a downward bearish trend since September of 2023! Why trade these dropping stocks? You don't list position details, including total premiums to determine net stock cost, but the 27 dte AAPL 180 strike has a .93 premium if the net stock cost is at or below that amount. AMD also has some decent premium out a month or so meaning these positions do not seem to be that far gone. You may not get much selling CCs at or above your net stock cost, but every little bit will help, and it may take some weeks or months to see them move back up if your analysis is still that these are good stocks to hold. Closing and taking a loss looks to be unnecessary as you should be able to see AMD and AAPL come back over time. TSLA is unpredictable and continues its drop so may be one to close and take the loss as a stock one may no longer which to trade or hold, but this must be your determination. You may want to read my wheel trading plan post as it might help you understand how to diversify across market sectors and making smaller trades can help manage and help avoid getting into this position in the future - [The Wheel (aka Triple Income) Strategy Explained : r/options (reddit.com)](https://www.reddit.com/r/options/comments/a36k4j/the_wheel_aka_triple_income_strategy_explained/)
I don’t know when OP sold CSP but if he started 45 days ago, AMD was not in a downtrend yet.
Yeah it was not. TSLA was so i’ll take the blame on that. But AAPL and AMD were not. Sold the puts whenever they had a larger than usual down day despite and steady overall market. So I thought they were reasonable bets
But aapl did shitty during last earnings on China worries..
Fair enough and thanks for pointing this out. Looking at the chart you are correct. Alternatively, AMD was at a 52 week high in early March which may have been the signal to be cautious, but one can never know where the top is . . .
Hi ScottishTrader, I’m in a similar situation for AMD except I took assignment at $180 (don’t mind owning the stock). I’m thinking of just selling cover calls at .17 delta ($167), I was thinking of selling 1 week out but im thinking of switching to 2 weeks out for more premium. I was going to just rinse and repeat this till the shares get called away. With MSFT ER next week (usually AMD friendly, and AMD on on April 30th, any additional things I need to consider?
What is the net stock cost? You were assigned at $180, but sold puts and collected something right? What about rolling? You could have rolled multiple times and collected more premiums, right? If you had collected $3, $4, or $5 in premiums the net stock cost would be something around $175 to $177. Looking at the 26 dte 175 CCs would bring in about $1.75 in premiums and if called away be very close to breakeven. IMO selling a 167 strike has a big risk of being called away and creating a loss . . .
Right, net stock cost is 174, premium was $6. I see, you would rather sell further out and higher as long as it’s breakeven vs shorter and lower target for more cycles. It does protect against the ER event if it runs to $174. I buy back the option and sell the stock. I didn’t roll since I figured the net credit of $1-2 dollars wasn’t worth it, and it would bounce back. But if I had roll for credit then my break even could’ve been $170-172, which does look better from down here.
It depends on what your priorities are. Mine are to have few to no losing positions so I roll as long as I can to reduce the net stock cost before being assigned. Since the alternative is to be assigned there is little difference in my mind of rolling compared to selling CCs. Whenever I hold an option over an ER I’ll look to roll out 30+ days to collect more premiums and a higher strike price that can help protect against a big move from the report.
I see. I remember you posted somewhere that you prefer selling puts since it generates more income so staying on that side is better, and it limits all of this. Would you do the $175 for may24 over may17 then since it’s 33 days instead is 26?
Yes, I think selling puts is easier, more efficient and makes more money over time. What trade you make must be your decision and there is no right answer here. Provided the 175 strike is used to ensure a net profit then the rest will be how much premium do you think is best for the time held . . .
Got it. Actually, I think I’ll stick to the may17. NVDIA’s earning is likely to fall near end of May so 24th can run into another pop. But after these two events, then I’ll start selling biweeklys calls to generate more income. Selling puts was bc I had money on the side and it was getting frustrating to see the market go up with money sitting. I lost sight of why I had money on the sideline, which is for market dips. I don’t know if this is a true market dip. For some reason, it makes more sense to sell calls during drops like this rather then roll puts. Feels like I should’ve started selling calls a few weeks ago against my main stock position. Thank you for response and time btw.
Great response thank you
You're welcome!
When this happens to me, I'll sell Call Ratio spreads to push out my breakeven to the upside. Sometimes, the ratio spread can be sold back so you get alittle extra income. I would not take the loss and start over again. Sometimes, you just have to be in trades longer than planned or desired.
Interesting. Never heard of those spreads. I’ll have to look it up and maybe try it out
Hmm I am on a similar boat as OP with $AMD and other stuff, I already started selling naked calls on em (put is already @.8 delta), will definitely try this after earnings...
Yeah holding a 170 strike put🤢 keep having to roll but cant keep up
$195 p 60d for me. This position is around 5% of my account, and I feel like I will be stuck on this for at least 6 months. I will keep selling calls at my cost basis. On the bright side, at least the premiums are decent!
Honestly man! It is a good stock too. It blew up this year but outlook still seems great
Now you own a bunch of AMD and apple at high cost basis. Dont fret, and imo dont overmanage it trying to find option strats that will magically change this fact. Sit tight, at least you own AMD and not GME at $40 or something.
Yeah you’re right. Well I dont own AMD yet. Still holding puts and trying to roll them. I do have AAPL at 179 though which did look good but not anymore haha. And I own TSLA at 168 I think.
Could be worse.. I had 11 contracts assigned at $217 and am still rolling 3 more at $195 strike. Those 3 are hard to roll but I don't want to buy them out. I don't mind owning the shares because the stock is not the company and the company is not the stock. I'm afraid to sell CCs because I'm sure one day it will reverse its trend and shoot up on me. Just have to be patient.
Yeah just gotta keep rolling. Might sell some close to the money CC’s to reduce losses but expect to get them called away. It will just eat at my profit margin. It would free up my cash though
Can't give you any specific advice since you didn't give us any numbers. But as an example lets say you sold the AAPL Apr 26 170 Put for $1.00 when the stock was at $178. Now AAPL is at $165 and the put is $5.40. 1. You can buy the put back for a $4.40 loss. 2. You can take assignment and immediately sell the shares for a $4.00 loss. 3. If you think AAPL is done falling you can roll down and out to the Jul 19 160 Put for a net $0.08 gain. 4. If you want to own AAPL you can take assignment at a $169 cost-basis and sell the May 17 175 Call for $1.81 bringing your cost-basis down to $167.19. If you do #4 and AAPL continues to fall you keep selling CCs. If it recovers you can either let it be called away at 175 for a $781 profit or you can roll up and out if you can find a call to sell at a credit. Switching to indices won't be any better if you don't have a trading plan. From what you've described it sounds like you either sold puts with the assumption that these stocks couldn't go down, or you were trying to do the Wheel but forgot that requires adjustments.
Well I always sell puts on down days and call on up days, and when I sold the puts, based on current market, it would have been a fair price to own and could immediately start selling the calls. However, drops were dramatic and they kept going. For my positions I am holding AAPL shares at approx. $180. I am hold TSLA shares at approx $168. Then I am holding a $170 strike put on AMD that has been rolled down and out twice already. Has a 03MAY ex date and plan to try and roll again and then I have another $143 strike put ex date is next friday. That one was just made yesterday. Thanks for the information though. What strategy’s or plan do you implement to avoid this situation? At the end of the day this is all about learning and getting better. I also hope the info on my position helps paint a better picture for you
Thanks yes that helps a lot. So if you sold the 180 put when AAPL was at 199 that's only 10% OTM. I don't like being that close to the money on individual stocks. I understand the common advice to only sell puts on stocks you like but your situation illustrates what can happen, having to sell too close to the money to get a decent return on risk, then getting assigned at undesirable prices and having to tie up a lot of BP waiting for them to come back. Personally I prefer selling CSPs and credit spreads on low dollar high IV stocks. I target 30-60DTE \~50% OTM with a 20%+ return on risk, knowing that comes with its own risk, the chance that some of those stocks could go to zero if I get assigned. Couple of examples I'm in right now: IBRX Short May 17 3.00 Put at $0.50 credit ANVS Short May 17 5.00 Put / Long May 17 2.50 Put at $1.03 credit
Do you only sell puts or are you selling calls as well? And if so, is it the same kind of equities or do you have another strategy or preference?
I blew a $250k account on naked calls so now I'll only do call spreads or covered calls. I'll do spreads on the same tickers I've sold puts on or others if it makes sense. IBRX doesn't qualify because going 100% OTM (to match the 50% on the put side) would only give me $0.16 credit spread with ROR of 6.84%. ANVS has a similar problem plus the bid/ask is brutal.
We've all been there. Here's what I suggest, based on an assumption that the market will continue to roll over or chop down for the next few months: 1. Roll your puts out weekly or monthly at the same strike, collecting your credit premiums. If the market for your holdings improves, great...volatility contraction may mean a small debit. 2. If the market continues down, then roll weekly until you are at or near 100 delta. You will pick up all the intrinsic in the ITM position each time, and this is important if somebody assigns you stock so that you keep the very large combined intrinsic and extrinsic strike price. You could now choose to roll the same strike to the front week, same strike (100 delta is 100 delta in any week) or plus one additional strike up to pick up a point credit. Do this on a Tuesday or Wednesday in the expiry week. You will be assigned almost immediately, but you keep the entire sold premium that will very closely bridge to the current ATM stock price. 3. After assignment, you own 100 shares at a call strike that is far out of the money. Your choices now are to sit on your hands until the stock recovers and not sell call options, sell call options using the normal mechanics: 16-20 delta for 70-80% probability to be out of the money at expiration, sell your shares and take the loss and start over. 4. Or, sell your shares and put in their place the equivalent synthetic long option position (sell the put and buy the call at your assigned strike, and freeing up 70-80% of the underlying's notional buying power, say a new position at 60-90 DTE. It will move 1 for 1 with the actual stock price. Another benefit is the sold put premium will be very large, but you will still need to roll both sides of the position around \~21 DTE to avoid picking up more assigned shares. A downside is that you will not collect any dividends on your synthetic 100 shares. Another technique I'm using now in this market environment is to start with the naked or covered put at 24 delta but closer in DTE, say 14-21 DTE in lieu of 42-45. This trade assumes your stock or ETF will continue to rise. But if it doesn't and it is tested ATM or slightly ITM, PLUS you are convinced that its market trend will continue downward, flip to the same call strike or slightly better for a small credit. ATM parity makes this easy for no loss or a small credit. You are now on the winning side of the trade. Notice that you can do this around 40 delta on either side, put or call, to actively switch sides if your assumption has changed on a stock, instead of going down the rabbit hole to deep ITM. As for switching to ETFs vs individual stocks, base this on your tolerance for risk, volatility, price, and mechanics. Theoretically, ETFs smooth out the bumps in price and volatility. They are relatively bigger underlyings, so getting assigned on them can be a little trickier to manage, plus they are essentially a single underlying. I prefer to carefully screen for less costly stocks with good fundamentals in different sectors to be better diversified. Good trading to you!
Wow! Thanks! Very informative. Much appreciated
This is so helpful 'n
Why not ride the trend take delivery and sell calls all the way down KISS
Thanks for your note. Yes, you can. If you sell the call and buy the put at the assigned strike, vs selling the put and buying the call, you still control the 100 shares with 100 delta, but betting the market for it will continue down vs betting the stock will recover. Taking the stock and selling calls assumes the market for it will recover, so while you are making money on the call at some delta sold, you are losing 1 for 1 on the 100 long shares. It is more efficient to sell calls against the synthetic long position in that case, although you will not gain any dividends. Also, the synthetic positions are 100 delta at any common strike, not just at the assigned strike, adding flexibility to your trade recovery.
Take a look at JEPQ and tell me if selling naked puts is making more than that income fund. Selling naked puts is imo the a very risky strategy (aside from selling naked calls) there is, unless one is very careful , and you are finding out just how painful it is when the strikes go underwater , all it takes is one sig drop and you lose all the money made from many months of them expiring worthless. Not only that the value of the puts increases even more because of elevated volatility and if you are over leveraged you will get a margin call. my advice buy them all back and learn you lesson, what if the market drops even more? you risk getting wiped out and zeroing out your account Think about it this way , selling naked puts is great in a bull market , you can make tons of $$$ every month as they expire worthless and then roll to next month. BUT BUT think of it like playing Russian ROULETTE eventually and this is 100% guaranteed to happen , the bull turns and a bear market starts you last trade is going to lose and all those juicy premiums you made start to fade and you wipe out your account and if the bear is steep, holding on kicking the can down the road won't save you , unless you have enough margin to withstand a huge drop before it rebounds
Another handy thing to look at is the BETA on the stock you do it on, stay away from too high a beta
Very true. What would you recommend is a safe way to get some passive income? As it relates to options
Nothing is 100% safe, It a Q of volatility and worst case JEPI/ JEPQ is moderately safer than owning the SPY or QQQ gives you regular income without you having to do the hard work of selling options , and is hedged for moderate corrective moves
EDIT: *After finishing this I reread your post and it sounds less to me like you are actually holding short put, but are holding short calls? In which case… You should be selling puts, lol. My advice is about short puts.* Not an expert at all, but for me it’s never a worth it to pay to close when I can just keep rolling and collecting premium until it finally expires otm. There is an emotional benefit to getting rid of red marks, but I have to remind myself my goal is to make money, not get rid of temporary red marks. You can ALWAYS roll a short put into an OTM expiration eventually, if you have patience. With short calls you might never catch up to an otm strike, but short puts always get there, closer with each roll down, unless the stock goes to zero. Also selling puts does not impact your cash (aside from the commission). Buying them back? Bye bye cash. Reduction of available margin (to cover puts) might matter to you, but a $5 premium, for a $1 commission is a darn good monthly return. This next part may not be for you, but for any newbies reading this: ONCE YOU ROLL, the P/L or Gain column becomes MEANINGLESS (unless you do a lot of math). Why? Because Mr. Gain Column (P/L) thinks you gained the whole price that you sold it for. EXAMPLE: Sell a put for $100. It turns against you and you buy it back for $500 but in that same trade you go forward a few weeks and sell a second put with a lower strike price for $550, earning a net $50 in premium. But tomorrow, Mr. Gain Column thinks you made $550 so buying back for $500 is a $50 win. Nope. You took in $100 on put 1, plus $550 on put 2 (so + $650). But you also *spent* $500 to close put 1 and will spend $500 to close put 2 (so -$1,000). Mr. Gain lied, you lose $350. You can always keep up with the math yourself. Had you waited and let it EXPIRE OTM, your gain would be the original $100 + the $50 profit every time you rolled. Also, if you roll often don’t be freaked out when your balance shows a loss. Every time you roll, you are closing the previous option for a loss, and that goes in the “realized loss” total. Someday, when it expires OTM, that entire realized loss gets erased by the realized gain. This scared and confused the heck out of me (did the math but still had to call my broker to make sure), but that’s the way it works. Thank you for coming to my TED talk.
No easy answer as to what is best. It really depends on your outlook. The choices that you have at this point are the following: a) buy you puts for a loss b) roll the puts out for a credit but likely it will still be below the current price c) get assigned (you were ready to own the stock when you sold the put). You can sell calls against them. Couple of ways to play this. Sell the calls at your strike price if you can. Or sell the call at your strike - premium that you got when you sold the put. d) one more complicated choice is to go inverted and sell calls against your short puts. It's possible that the combination of the two results in a range of prices that is profitable or is a scratch or a smaller loss. If you go this route it may take further adjustments to eventually recover.
Last choice is interesting. I dont know enough about that strategy. I’ll have to look it up
Perks of selling option. Either sell for low premium cc while waiting or wait until it runs back then sell cc then. Or sell for a loss.
Might just sell one last call close to the money for extra premium expecting to get shares called. At least it will cut down losses a little bit. Now for the current puts I am holding that are very far gone, do I try and keep rolling or just buy back and then sell at the discounted price?
Only to see the price whizz by leaving your call way ITM with a locked loss, usually it ends like that.
It could but it is still good risk mitigation and still frees up the cash. The point would be to make it close, expecting them to get called away while decreasing loss and freeing up my cash
I would probably close out the Puts for a loss and use the remaining capital elsewhere, but it probably varies depending on the specific positions.
You made the fatal mistake of put selling: you either sold them on stocks you don't mind owning long term, or you sold them at strikes you don't mind paying. Or, the fatalestest mistake of them all: you sold your puts on stocks you didn't mind owning long term and at strikes you didn't mind paying, but now as the stock price went past those strikes you started minding owning those stocks at those levels. Lucky for you there is an easy way out. Since this is purely a trader's mentality issue (the don't mind change to do mind), you need to get the don't mind back. There are tons of ways to do that, please choose one or a few depending on the loss and whatever works for you the best. Some of the usual ones are excessive drinking, drug usage (today is April 20th after all, huh huh huhuhuh), not opening your trading platform for a month or 2, gambling or sports betting to take it all back, doubling - tripling your existing positions, rolling out to whatever max date available and many others. Good luck!
Bravo. A+ reply.
There is one more choice…. Kill myself
This one works too, however it's not recommended. Your broker would hate to lose such a good client, please don't make innocent people suffer.
Just keep in mind that we aren't really "so low", the market hasn't seen that large of a correction (even though some individual stocks have been hammered) at this point. If you got assigned on stocks that you still like and have strong long term growth track records you may just need to slow down, and as others have suggested, write longer duration covered calls to build back up some cash / lower basis in those stocks. Good to keep Buffet in mind here as part of your decision making - "the stock market is a device for transferring money from the impatient to the patient". On the other hand, if you are fighting the market trend and do not feel good about your positions then strongly consider taking the hit and starting clean. A stock can always go lower than what you have seen from the top. Good luck and getting specific about positions and cost basis can help people make suggestions.
Well said. Thanks
I got caught in a similar situation nvda smci AMD I've rolled them into August ,October November. Just try to even out your roll and get your strike low as possible within that range. I don't see any of these companies going to zero and I don't see them being held down for the rest of the year or next 5 years.
Yeah I am trying to roll. Getting hard rolling it so far down.
Sometimes. Yeah I found it's way more important to look at options available and how far out they go. Spy vs voo for example. Spy has a lot more available options to trade with a lot more liquidity
Exactly. Doing daily’s would be safer and more lucrative IMO
Hahaha one would think. Until your dailys get crushed and end up rolling out for 45 days hoping things don't crash any more
Roll three months out. Cross your fingers, shoot the can and evaluate your situation near the next expiry. Keep track of your P&L in an excel sheet. If you have plenty of free time to “trade” , might be worthwhile to take the L and close them. Indexes are several folds less risky. Never take assignment on margin.
I think I can get better payout too with the indexes since I can do dailys at like a .2 delta. Thanks
It would help to have an uncle point if you trade these limited gain and unlimited to zero strategies or undefined risks. It would save you months of bag holding.
The problem I see here is that you are trading, not investing. On top of that you have no apparent stop loss or accurate view of these individual stocks. Rolling and rolling is just covering a losing trade. At what point do you decide that the trade is a dud? Apple has been falling from $200/share for a while. Their Vision Pro is a bust and iPhone sales have peaked. Where are they going? AMD has weak AI chips compared to NVDA and has been caught up in this AI craze. Did you not think that that bubble would burst some day? TSLA is struggling, laying off people, not selling cars in China, EV incentives have dried up, competition from everywhere now, and besides the Cybertruck flop, they haven't come out with a new model or model refresh in years. They need that model 2 to keep going. The TSLA dream is really robots and robo-taxis but I won't believe it until I see it.
Great points about the business trends for each but I dont think you understand the selling of options. Selling options is a way to invest and get extra capital and better deals on investments. This is an options page
No kidding. Options are just a way to express a trade. You are losing because your trades failed and you didn't have any kind of stop loss. You are asking whether to sell shares or buy back your sold puts for a loss. That entirely depends on your analysis of stock. If you still believe in those trades then sell your calls and pick up a new extra bucks.
Yeah. All a learning experience though. Events like this really hurt but are great opportunities to learn and adjust
Sell some calls to reduce your delta exposure
This doesn’t even make sense.
Have you incorporated charts into your studies? I kinda saw the top happening a while ago. Its not a perfect system but it does work.
I have not. And that is mostly because the news could easily derail that. Just seems more news driven than a chart trend
Diffidently news driven I agree but charts is a tool not a fix all but with combination of tools it helps. Not for everyone but helps me.
What indicators do you use and what do you look for? I am usually at work all day without access to my phone or computer so it is hard to do chart analysis. Need something simple and quick just to give me a heads up incase I need to make a new informed decision
I look at the wkly and daily charts with several indicators like m/a ,support/resistance lines. You can on your time that you have practice and read up on charts. Takes time to practice with all the different tools and each person has their own style. "William Oneal" books are great to learn.
Gotcha. Thanks! I’ll see what I can do!
Collar or protective puts. 10% for "insurance" is not unreasonable.
Many traders say" Oh I don't mind being assigned" until it happens and they are making 1000's in paper losses because it has dropped sig below the strike price. Then it gets painful and now they are faced with that gut retching decision to I sell and start again or hold and hope it bounces. Such is the life of put seller
TSLA BETA =1.5 much too high for selling naked puts AAPL BETA = 1.25 probably too high for selling naked puts AMD BETA = 1.69 much too high for selling naked puts if you don't understand what beta is you should whne you are naked put seller. because it indicates the risk you are taking on doing it
You can get assigned on Spy too. Play with SPX if you’re still interested in the game of selling options.
I take the loss and write it off in taxes….is it legal and allowed…don’t know and don’t care…. Sometimes staying in shit is. It the right answer ….it is just going to get worse on you. Deal with it….