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I routinely roll my losers. I usually let my winners expire worthless!! You make a compelling case to roll winners as well to get more bang for the buck in terms of buying power! 🙏
By the way, also congrats on the idea of setting price level alerts on corresponding calls. I was always looking to trigger alarms on extrinsic value but missed the obvious.
Thumbs up: Rolling my EV covered calls bi-weekly ... and deep ITM LEAP calls involves a lot of variables for me ... taxes (which for my EV stocks is difficult to juxtapose (iirc), incremental Theta to 20-30% vs. your 5-10% ("milking") Stock price hopefully 'hyper-low' (if simply buying-back), Low implied volatility (if simply buying back) ... since EV stock IV fluctuation is great. Deciding if it's worth 'a wait' to re-sell covered calls ... i.e., for stock prices to elevate first I'm afraid of alerts but trust my wife to help me see the variables everyday. Utmost blessings!
I wasn't financial free until my 40’s and I’m still in my 40’s, bought my third house already, earn on a monthly through passive income, and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing in the financial market is a grand choice I made. Great video! Thanks for sharing! Very inspiring! I love this.
Hey Randy, this video is nothing short of awesome. I have puts in ABBV an O that turned greatly against me and with the knowledge you passed here i'm sure i will be able to turn them around into winners. You are hands down the best into teaching this trading strategy.
Your statement is actually a NOT correct. If an option is DITM or far OTM, many times, theta will be higher for farther dated options than for near expiration options.
@@StockandOptionMyLifeOfLearning that’s really interesting. Thank you for the quick response to address my confusion. Do you have any current examples of stock/strikes I could look at to see this? Thx 🙏🏼
Pretty much most options that are DITM or OTM typically tend to be that way. When they are ATM or closer to ATM the theta will be higher for near term expirations but as they get farther and farther away from ATM, that typically changes.
I have been rolling out a cash secure put because the stock price tanked and it is deep in the money. I roll out the put option to a further date in order to still collect premium. I hope price will rebound and go higher than the strike so the contract can become worthless
Thank you for sharing and for your support! That's one of the strategies we use when a stock moves against us also. I hope it works out for you. If you haven't seen it already, here is a video I made about several positions that went against us during the March 2020 crash and how we handled them: th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
good info, thanks for sharing. I would note however the volume for the BIP example was too few IMHO...as demonstrated by the spread prices on the $50 Puts.
Thank you for sharing your thoughts on it. If you're not OK trading in low open interest stocks, then I agree, it's probably not a good stock to trade options in.
@@StockandOptionMyLifeOfLearning I'm very mechanical in my underlying selection, Randy. I want tight spread, highly liquid options as one criteria i use.
Thank you for pointing that out! That is a very important consideration. I have a video I made on margin. If you or anyone else would like to check it out here’s that link: th-cam.com/video/XU9LF5KmtJ8/w-d-xo.html
Thank you for that Jim. 😊 In Interactive brokers, if you go to your option position and right click, it’ll then give you an option that you can set an alert. Or you can go to your option chain and right click on whichever option you want to set the alert on. Then at the far right where you see the bell, you click on that and create your alert. In ETrade I don’t know of a way you can set an alert on an option but like with most brokers, there is a section to set an alert on the price of a stock.
Hi Randy, first of all i must congratulate and thank you for making and sharing this great video to all of us. This really simplifies alot and after learning from the video, at least we know we are doing the right thing. I have a couple of questions and hope you can shed some insights to it:- 1) Deep in the Money Vertical Put Spread - Will we the Option seller be assigned if we roll this DITM Options to a much further dates later? Meaning will the Option Buyer have the right to opt for assignment before the expiry dates? If the answer is YES (they can opt for assignment) then what the purpose of Rolling? 2) For Selling Call Spread - If the Options is ITM and dividend is up and coming soon, can we roll it to a further dates (and not subject to the dividend) or should be just close it at avoid the dividend assignment totally? 3) Stop Loss or Profit Taker mechanism - Is there any way we can set Stop Loss or Profit Taker to prevent extreme losses or cap our profits in the Options Spreads? I am also using IBKR and trying to learn if this can be done.. Have you any video on this to share? Looking forward to your guidance and revert. Thanks again and please keep up with the great work! There should be more people like you out there who is so generous in sharing! Cheers
Thank you for your support! Here are my responses: 1) as long as there's still enough time value in the put option you sold, it most likely will not be assigned. If it's an American style option, then the owner of the option always has the right to assign it whenever they want. However, it would not financially make sense to assign an option unless there wasn't much time value left in it. You also want to keep an eye on any dividends if we're talking about call options. This video will help explain assignments better: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html 2) if you have sold a call option in a dividend company, and you don't want the call option assigned, you want to make sure that the time value portion of the call option is at least how much the dividend will be or greater when you get close to the ex dividend date. Otherwise, your odds of having the call option assigned go way up due to a strategy called dividend capture. I talk in depth about that in these videos: th-cam.com/video/bP-IdURvHRc/w-d-xo.html and th-cam.com/video/cwoqR5fNHkA/w-d-xo.html Also, here's a video I made on rolling covered call options: th-cam.com/video/7s4iakIyDNQ/w-d-xo.html 3) you can set limit orders on IBKR. That limit order can be set so that once you reach a certain profit target the order will fill. You can also set alerts for when options reach a certain value and when a stock reaches a certain price. When it comes to stop loss, you can also set all kinds of orders you just want to dig into the different types of orders that IBKR allows for. It includes everything you could think of. I do not believe I have made any videos on stop loss or profit-taking mechanisms.
So you can basically have a roll order in the market at all times with a limit that would give you, for example, a similar or higher return per month for the additional duration than what you got for the initial CSP? Sounds like a great strategy, especially since watching IV at different strikes and DTEs continuously is just not feasible. The only thing that you need to pay attention to, is not to roll your strike after an earnings day. Very cool idea!
Theta is eaten away every day. What I’ve noticed though is that generally, say on a Friday afternoon, the theta or more noticeably the time value portion of an option, will decrease somewhat because of the coming market closure for two days.
Another great video. How do you feel about rolling an option forward weekly, while adjusting the strike price by a nominal amount ($0.50 - $1.00 strike) closer to ATM. I right now I feel like this could work when I sell a put option and the stock crashes. Do you have thoughts on this?
Terrific video - thank you! I also sell Puts, but certainly cannot manage a portfolio like yours. I like to use ETFs like IWM. I don’t mind being assigned and selling calls; rolling also a valuable option! I need to explore my Etrade platform more for those tools you were using. Thanks again - new subscriber!
Thank you for your comment and support! There are some nice option and stock trading tools on ETrade under the "Market & Ideas" tab and then go under "Options".
@@markopavic9473 ..Good Day ! Selling a put option at a red bear stock moment, when Implied Volatility and premiums are higher, and when the share price is very near to its support price on its graph, the great likelihood is that the stock price would bounce up soon and your put option would be happy. Thus, selling that put at that red market time is very likely profitable
Great video, one note about rolling deep ITM puts is that once every quarter you usually get a spike in volatility due to earnings reports, so if you are stuck in a deep ITM put, you might as well roll it till after earnings, you collect more premium and sometimes stock jumps and gets you out of the money
Great instruction! Thank you so much. I recently had a put move against me so its very deep ITM today. One of those crypto mining stocks. You cover how to handle rolling a deep ITM PUT and touch on "if the moving averages ... underlying stock" have not changed. The mining stock is 30% down and at all time low, is it too risky to roll this PUT? Do any of your videos discuss if your underlying assumptions on the stocks direction change how to handle a short PUT strategy? Cheers, great video best and only one I have found on TH-cam!
Thank you so much for that! I really appreciate it! If the fundamentals of a company have changed so that I no longer feel comfortable owning it, at that point, I’ll liquidate the position no matter if I have a loss or not. That’s my personal rule. I don’t so much worry about the direction of the stock because we’re able to generate cash flow by, if it’s a dividend stock collecting dividends and also selling covered call options. Other traders may have a personal rule that if the direction changes they are out but since I trade in companies that I believe will be around 20, 30, even 50 years from now, it doesn’t bother me too much if their direction changes. The way that we go about collecting cash will just change until they switch directions to a bullish trend.
You might also found this video helpful if you still feel comfortable owning the company but want to try and repair the position: th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
Hi Randy! If you’re rolling options does that mean you’re also subject to the wash sale rule and the losses are disallowed on your taxes since you bought to close and sold to open within the 30days?
I am not an accountant, but from the conversation I had with my accountant, wash sales don’t apply to options either to your benefit nor detriment. Each one is viewed individually. But I would encourage you to check with your accountant to make sure because I have found that even between accountants, opinions can vary.
When I ran into this on my taxes, it does not appear that wash sale rules apply because the first option (the shorter expiration date option) is treated as a different security from the second option (the longer expiration date option). Essentially as long as the strike price or expiration on the options are different, they're treated like completely different securities ( Just like trading two different stocks). Wash sale rules also don't apply for the buying and selling of the first option. Whatever price you bought to close at is treated as the cost basis, and the original sell to open is your gross profit. The IRS just sees it as you opened the position on the date you sold and closed it on the date you bought, and never touched that particular option again. If you for some reason sold and bought that same exact option again, then I think you might run into wash sale issues.
I figure annualized return as follows: option premium, divided by number of days until expiration times 365 days to annualize it divided by capital at risk or if you want to figure your return on margin requirement then the amount of required margin.
Can you do a video on rolling a deep ITM Put Credit Spreads ? I am having a hard time with it. In order to roll a Put Credit Spread and still be profitable, I had to increase the spread width, but that increases the collateral too. Though I did it, I feel that's not a good idea. How can I salvage a Put Credit Spread going against me ?
Thank you for your suggestion and support! I'll try and go into detail on rolling DITM put credit spreads in the future. If you haven't seen them already, I've done a couple more videos on rolling naked put options including: th-cam.com/video/cNdDt6l0saY/w-d-xo.html & th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
Does rolling over covered calls or puts (in the money) never trigger wash sales? For example, can you roll over a weekly covered call or put (that's in the money) to the next week and not trigger a wash sale (so long as the roll over is at a profit)? Or do you have to roll forward at least a month?
I apologize I do not know the answer to that question. I would encourage you to check with your local tax professionals to make sure you get an accurate answer. Each country and even states laws can be different.
Always learn a lot from your videos. I have a question though as im really new to trading especially options, can i used a different strike price when rolling the put options deep in the money if i there's no same strike price available that is month or more away from my current expiration. Thank you so much
Thank you so much for your support! I'm glad you're finding them helpful. Yes you can always use a different strike price to roll a position. I have one right now that's that exact same situation. We are short the $77.5 put and there's no $77.5 for the December expiration. Just keep an eye on whether it'll be a debit or credit when you roll it, if that matters to you.
Thank you for the video. May I ask what program you’re using for the alerts? I’ve only come across price alerts for the underlying, not for the option prices. Thank you!
Thanks for your question. I use the trading platform for Interactive Brokers. You go to Trader Workstation and then Option Chains. From there you can set alerts on any strike price you want. I'm not sure if this feature is available on other trading platforms. I also use E*Trade, and I don't think they have a feature available to set alerts on option chains. Thank you for your support!
Hello Randy, Rafael here... reviewing your video, what would be your rule if you have Earnings coming soon to a option that has not to much time left. Let's say, I opened CSP KSS then KSS went gap down, rolled out and ITM, now recovered some of losses, but there is Earnings coming. Keep rolling the CSP even with Earnings close ? Thank you in advance.
Hey Rafael, generally I like to avoid earnings if possible but in certain situations and with certain stocks, I feel comfortable trading through earnings. I think this video will answer your questions: th-cam.com/video/yO10aF8TcVg/w-d-xo.html
with the first example why wouldn't you just let the contracts expire OTM and then short the contract at a later expiration date? why do you buy to close if its going to expire worthless anyways and you get the premium?
Great question! Thank you for your support. I could have done as you described but I have multiple reasons to close options early. If you haven't seen it already, you might like to check out this video in which I discuss the reasons why I close options early: th-cam.com/video/Nqr1DWWOkQI/w-d-xo.html
Now that I'm retired I'm forced to continue funding my IRA selling put options. I USEUALLY sell options 1 to 3 weeks out and use the premium to purchase shares in my preferred stock. I would love to sell ITM put LEAP options for higher premiums but I don't know how to do it safely.
Thank you so much for sharing 👏 and for your support! I made a video on selling LEAPS put options. If you haven't seen it and would like to check it out, here's the link: th-cam.com/video/E47DYu6DLkI/w-d-xo.html
Thank you For the video, What is reason of rolling over to a put option with same strike price which is ITM which can be assigned even after rolling over, why we are not taking OTM when we roll over. I am new to options , my apologies if my question is not technically correct, Thank You very much for the video!!
Thank you for your questions and support! If the technicals and fundamentals have not changed then I don’t mind rolling an ITM put option. This is true especially if I expect the stock to come back towards my strike price. In a situation where the technicals have broken down on the chart, and my short put option is in the money, then I will try to roll the strike price down. If I do that though, I always like to do that for a credit or at worst break even, so sometimes I have to roll it several months out in time as well as down. As far as being concerned with the option being assigned to you, as long as there’s sufficient time value left in it, even if it is ITM you generally will not have the option assigned. Assignment risk greatly increases when the time value is pretty much all gone. Does that answer your questions?
Using my upgraded version of the wheel has always generating really good cash flow for me over the years. If you’re new to it and looking to put life savings into it, I would really encourage you to throughly learn it before using real money. You can learn a lot about the way we trade on this channel by going though my videos. You might also consider doing my online course: mylifeoflearning-randy.mykajabi.com/offers/EgeavtWJ And then also consider following my real live trades in which I share why I did each trade, including the ones that goes against us and how we repair them: www.patreon.com/mylifeoflearning Education is key and then I would encourage you to practice trading with play money before using real money. Here is a video series that shows our cash flows that might help give you an idea of how we trade and the cash flow/return we’ve generated: Option Trading Monthly Cash Flows (our UPGRADED Wheel Options Strategy returns) th-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html
Great Informative video. I also do that and 5-8 positions in my portfolio all the time. But i do weekly options. advise me if the monthly options are better then weekly
Thank you for that and for your support! That's the subject of the video I just released yesterday. Here's the link if you'd like to check it out: th-cam.com/video/1Bl69YJ04cM/w-d-xo.html
@@sudhirmadan4299 I agree that weekly options offer better premiums. I often can buy to close for a 70% profit by Wednesday, so I can sell another option that week. I calculate the premium divided by the days to expiration to determine the Profit per day. 95 times out of 100.... 4 weekly premiums add up to more than 1 monthly premium. Knowledge IS power, only IF you apply that knowledge.
Other than time value alerts, would it be ok to set delta alerts as well? I feel when a certain delta is approached, it would be easier to manage because you won't allow an underlying to go DITM. What do you think? Love the channel!
Thank you so much for that and for your support! I think that would be a great idea especially if you use Delta. I'm not aware of a way to set an alert with Delta but if you could do that, I think it sounds like a really good idea.
Hey Luis thank you for your questions and support! I made several videos about your questions. If you haven't seen them already and would like to check them out, here are the links: th-cam.com/video/Nqr1DWWOkQI/w-d-xo.html and you might also like th-cam.com/video/YZr7CJ7rM5U/w-d-xo.html and th-cam.com/video/cNdDt6l0saY/w-d-xo.html I think those might answer your questions, if not, please let me know.
hi Randy - New Sub here. I have a deep in the money put credit spread on NVDA 6/24 175/170. Was thinking of selling to close one leg and rolling the other leg out one month. Hopefully get a credit on both legs - thoughts?
Hey Matt credit spreads can be tough when they go against you. It really depends on your financial situation, goal with the position, and what you think NVDA will do in the future. Here's a video series I made on repairing positions that have gone against you if you'd like to check it out: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html And here's a video series I made on trading in spreads: th-cam.com/play/PL3j38I2YtGw272tus6umU_zxFdwnJ8E0c.html
If i buy to close my naked put with a loose and i sell to open a further out.. Will i be hit with a wash sell , not be able to deduct the loosing trade ? I have a baba lost further out in 2024.. Thanks
Randy you said you roll 85% of your puts to the following month.What if you rolled your puts 4-6 months out instead of monthly.you would capture more premium?
Hey James thank you for your question and support! If you rolled them out 4-6 months instead of 1-2 months, you would receive more cash in your pocket up front, however it's been my experience that unless the option is very far OTM or DITM, your return won't be as good for those longer farther dated options as it would for a nearer term option. But I think that's a great strategy, especially if you didn't want to do as much trading and or wanted to get a larger pile of cash upfront in exchange for a longer commitment.
Actually your comment is not correct. Theta is not always greater for nearer expiration dated options. If an option is DITM or pretty far OTM, many times, it's theta will be greater than that same strike price option that has a lower DTE.
Awesome videos. Thanks. When is the right time to roll over a DITM which has over 35 days left in exp - is it the last day of exp or when extrinsic value remaining is
Thank you for your question and support! If I have sold an option that has gone deep in the money and I want to roll it, I first look at the technicals to help me decide if I think there's a possibility that the stock will come back to my strike (over the next 35 days in your example). If I think that's a possibility, then I will place a limit order at a price that I'd be happy getting and let it sit out there until probably the week of expiration if I don't mind the stock being assigned in hopes that it will get filled at a great price. If however you do not want the option assigned, then you should definitely look to roll the option when it has 10% or less extrinsic value. Does that answer your question?
Thanks for the question and your support! Generally, short options are only assigned if there's not much time value left in them. As long as there is a decent amount of time value left in them then, the person that bought the option is better off selling the option instead of getting it assigned. The one exception, is if the stock is about to go ex dividend and you were doing covered calls. On several occasions, there will appear to be not much time value left in the covered call option, however when you calculate in the potential dividend, it makes it attractive for someone to call your stock away from you to capture that dividend. I hope that helps!
Theoretically you can roll a put option out indefinitely. It's easier to do if it's a naked put option as compared to a credit spread if the stock were to go against you in a big way. As long as there's time value left in the near term option, it should not be assigned. It's only when a put option loses pretty much all of its time value that your risk of assignment goes way up.
Great video, I see that you like to roll the deep in the money puts, can you tell me if you prefer that over taking the stock and selling 30 day calls at the price you were put the stock until maybe you get a pop in the stock to sell calls higher?
Thanks for you support and the question Lee. That's always a fun decision to make. Generally what I look at is the return I get by rolling the put option, compared to the return I would get if the stock is going ex-dividend over the next month or two, coupled with the premium from selling the call option. I'm generally able to get better premium by rolling the put option, however if the stock is going ex-dividend and I don't think it would be called away from me before that date, I definitely consider letting the stock be put into my account and selling a call option against it while collecting the dividend. Does that answer your question?
@@StockandOptionMyLifeOfLearning Just rewatched the video, so even if the 50 put is deep in the money (stock trading 45)the calls tell you that in essence it's the best time to roll the put out in time. Isn't it true that you are buying back a losing trade and hoping for the next option to make up for the loss and then some? Am I missing something?
You are buying back a losing trade but since you should be able to get a credit when you roll the position, you're improving your overall position in that stock. Theoretically you can continue to do that as long as the stock is not put to you, which will enable you to continually improve your position. You might also look at the possibility of when you buy to close the $50 put, go out two or three months and see if you can roll the strike price down to $47.50 and still pocket a credit. Many times I'm able to do that as well. Does that answer your questions?
Thks for sharing, had a deep ITM put option that i sold and with just 1 day to expiry the stock price was still capitulating way below strike price, going into deep ITM. I had to close the position as i don't wish to get assigned by expiry. The speed in which the stock price dropped and the fast increasing premium price that went up way beyond the initial premium that i was paid when i sold the Put, affected my trading psychic and made me uncomfortable in rolling down at the same/lower strike price. Yes, even though by rolling down at the same/slightly lower strike price means I'm getting paid an higher amount than even the deep ITM premium that i have to pay to close, but seeing the stock price capitulating and premium rising so fast, it's just too much to stomach. Did you had this experience before and how to overcome it?
Thank you for sharing that! That has definitely happened to me before. That’s one reason why if an option I’ve sold is OTM and doesn’t have much time value in it, I almost always close it out early, either by rolling it out or closing it out and putting that capital to work a new position. Here’s a video I made on that subject if you’d like to check it out: th-cam.com/video/Nqr1DWWOkQI/w-d-xo.html The other thing to always keep in the back of your mind is that expiration day can cause stocks to do weird things. As the options that are still open get settled, it can cause stocks to move aggressively in one direction or the other. That does not always happen, but sometimes it does. That’s why sometimes, if a position has gone against me, I’ll actually wait until expiration day, if I can’t get a good enough roll order before that, just to see if that happens.
If they are American style options, which most American stocks and a lot of ETFs are, then they can be exercised early. However, if they are European style options, like SPX and are RUT, then they are not assigned early. They are what’s called, cash settled at expiration. Here’s a video that will help: th-cam.com/video/RrWEqdmUYOI/w-d-xo.htmlsi=IfIEPF4ObSFi9aSc
Great video. How do I set extrinsic value alerts? And how to figure extrinsic value amount? Seems like your using the bid/ask spread to do this? Very interested, Thanks
Thank you for that. Yes if the option is OTM then the current value of the option will all be extrinsic, if it's ITM then a quick and easy way to get the estimated value of the option is to look at the corresponding (call if you have sold puts and vice versa) options value. It wont give you an exact extrinsic value but it will be close enough to let you know if you should look into it more. That's just an easy way to give you a quick estimate of it. In my Interactive Brokers trading platform, I set alerts on the call and put options at all the strike prices I have sold options at so that when they get to my set amount, I’m alerted. By setting it on both the call and put options, you’re covering your bases if the option goes ITM or not. I show an example of that, I believe in my last Monthly Cash Flow video, if you’d like to check it out. Does that answer your question?
So you roll out OTM options instead of closing the position? Normally people just close their OTM positions or let them expire and just enter a new position. Usually you roll out ITM positions.
Thanks for your question. If nothing has changed fundamentally with the company and I can get a sufficient return, then I will roll options no matter if they are OTM, ITM or ATM. Of if I can’t get a sufficient return and I don’t have anything lined up to replace the position, then I will let it expire while I look for a replacement. Does that answer your question? Thanks for your support!
@@StockandOptionMyLifeOfLearning Yes it does. Thank you. I've been thinking about rolling positions that are OTM but the premium is usually too small since in many cases the strike is way OTM.
Yes I know exactly what you mean. When there isn't enough premium, then I definitely close it out or let it expire and trade a new position. I actively watch over 160 stocks for that exact reason, so I always have something else to trade that will produce good returns.
Hi thank you for your information. Is there any downside to rolling more than once? Is it better to close and reopen a new position or does it just depend?
Thank you for your question and support! It is situational specific, sometimes it will even change day to day. Generally speaking though, there's no downside to how many times you roll. I don't like to roll until most of the time value premium is gone. I usually like to roll as 1 order. The exception is if there's not enough return by rolling a position. In that case, we will close out the short put and look to sell to open an option in a completely new stock.
Assuming i did a sell put, strike price is $670, premium is $10, expiration is 30 days. At Day 15, the market price drop to $650 but the buyer did not exercise. The following day the price shoots up to above $670 and was consistently above strike price till expiration. After expiration, will the stock be assigned to myself?
Hey Martin thanks for that your question and of course your support! If your example stock did drop to $650, as long as you had some time premium left in that option then as you mentioned, it would be a mistake for the owner of the option to exercise it because they would do better by just selling the option for the increased profit. The only time you have to consider being assigned is during the exact time when the stock's price is in the money on the option you sold. Once a stock's price is out of the money, you no longer have to worry about it being assigned to you. Even if it was in the money previously, once it's out of the money, you're good to go with zero potential of it being assigned unless it were to go back in the money.
Hi Randy, Thanks for the terrific videos. I learned a lot from them. I have a question about rolling sell put option. After selecting Roll of my Sell Put option in my Etrade account, it has a Price Type with the market, net credit, net debit and even selections. I wonder if your trading platform has those selections and which one should we choose.
Thank you for your question and support! I use Interactive brokers for my my main option trading account, however I also use ETrade for my retirement account as well as a couple other accounts. So I am familiar with the terminology on ETrade. I would never choose market because you can get a really bad fill price due to wide bid/ask spreads and slippage. When I roll options I always try to do it for a net credit or net cash into my pocket even if it's just a few pennies per share so net credit is the one I choose the most. If you're willing to pay out-of-pocket per share when you roll a position, than you would choose net debit. If you chose "even" then your rolling the position for no cash into or out of your pocket except for you will have to pay for the cost of the commission. I hope that helps!
Great video! For the deep ITM short put positions, I am currently rolling them over during the last hour before market close on the expiration day. I am testing this strategy to see its pros and cons. Before using this strategy, I usually rolled them over immediately when the short put positions were in the money; however, I found that it took much longer time to get back the loss of the previous position. Not sure what is the risk of the new strategy and will test it out.
Thank you for sharing and for your support! It'll be interesting to see how your test works out. You might also keep an eye on the bid ask spread as you get closer to the end of expiration day. From my experience, it can get more difficult to get those filled at good prices than earlier in the day or the previous several days before expiration day. I agree with you that as soon as a stock moves ITM, it may not be the best idea to roll it because often times, it will rebound and go back ATM or OTM. Also since the stock has been dropping, there's probably a little bit of extra volatility priced into that option. As the stock settles that will dissipate. We like to close our short option positions when there's 10% - 20% time value premium left in them.
@@StockandOptionMyLifeOfLearning Thank you for your quick response. I will pay attention to the change of the bid ask spread. Your insights are very helpful. Thank you very much for sharing!
I made a video series dedicated to repairing positions. Here’s that link if you’d like to check those videos out: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
Thank you for doing this video! I just subscribed and hope you don't mind a few questions :) When you first sell a put, how far OTM ( ever ITM?) do you ideally like to be? Do you like to change the strike price up or down to a more ideal level when you roll out your option? Lastly, do you prefer to do this type of trade with high or low volatility stocks? Thank you so much!
Hey Devin thank you for your questions and support! When I first sell a put option, I prefer to sell OTM if there's enough return, however if there's not enough return then I will sell put options ATM. I almost never go ITM. Generally I like to sell those put options at strike prices that are right at or just below support. As the stock moves around, if it moves down then I am open to rolling the short put option down. If it moves up, in certain situations, I am willing to move it up. Here's a video I made where I talk more in depth about that: th-cam.com/video/cNdDt6l0saY/w-d-xo.html I prefer to do put option trades with lower to mid volatility stocks. However I like to sell put options in those types of stocks after they have just experienced some sort of decline. That generally means there's a little more volatility priced into the option than normal.
@@StockandOptionMyLifeOfLearning Thank you for getting back to me so quickly! I just watched a handful of your videos and am about to watch a few more. You do a great job of explaining these strategies. I really appreciate it!
I'm not sure I understand 100% what you're asking but it sounds like you're asking if you have bought 10 SPY put options that expire over a month from now, can you sell that same strike price with a one week expiration? Hopefully that's what you're asking. If so then you should be able to use the 10 put option contracts that you bought to cover you on the shorter term ones that you sold. Or the other way I can interpret your question is, if you bought 10 SPY put contracts that expire in a month can you sell those same 10 put options after a week? The answer to that question would be yes. You should be able to sell that position anytime after you buy it. Hopefully one of those two answers your question, if not please restructure it for me and I'd be glad to address it. Thanks for your question and support!
Thank you for that Antoine and for your support! What I was trying to show is that if you're short an in the money put, since the call option is out of the money, the call option's value comes from time premium not intrinsic value. So you could calculate approximately, not exactly, but approximately, how much time value you would get by rolling that corresponding put option. It's not penny for penny but it's generally pretty close and it's a way to quickly, at a glance, see how much time premium you would receive by rolling that put option. Does that answer your question?
@@StockandOptionMyLifeOfLearning so what your saying you get the time value left on the current month plus the time value of the next month plus itm value also. is this correct. Also aren't you better off just rolling to a stock with the best premium as long as it meets all requirements.
Hi Randy, when you roll over a position does that mean you close the current put position and open a new position? Because I’m your patreon images it shows diagonal spread & reverse calendar. I got confused :) and thanks for all the videos.
Hey Sarkis thanks for the question. Yes that’s correct. When I refer to rolling a short put position, that involves buying a short put back to close it out and selling to open a new short put with a later expiration date. Depending on the situation I may roll the new short put strike price up, down or keep the same strike price. Does that answer your question? Thank you for your support!
@@StockandOptionMyLifeOfLearning thanks for your quick reply. One more question, how do you allocate you each position as % wise on the portfolio? As I saw mentioning few times have maxed out certain stock position in your portfolio. Are you following up 5% rule for each company?
Great question! Say for example, you have a $100,000 account and you sell 1 contract of $100 put options, if that was assigned to you then it would cost $10,000 to buy that stock. That would be 10% of your account. That would be too much in one position for me. I like to have at most 5% but prefer 1-3% in any one position. So to answer your last question, yes, that's 5% for each company. That's harder to do with a smaller account but I think it's definitely a good goal to aim for as soon as possible. This can also be done by using spreads but you want to be careful to not have 100% of your account at risk in 1 direction with spreads because if the overall market goes against your dominant direction bias, it could wipe out your account. For more details, if you haven't already, check out the video on Small Account Option trading: th-cam.com/video/0j6qvqna9aE/w-d-xo.html and Option Spread Trading: th-cam.com/video/JS2GkXvRFwI/w-d-xo.html
@@StockandOptionMyLifeOfLearning 3% that’s the goal. But from your videos your selling put and covered calls which are all one direction which is bullish as the trend is up. What happens when a crash like in March happens 35% decline. Basically you will be assigned all those sell puts on high price? Trying to understand the worse case scenario of your strategy that can happen.
3% sound good. When the market crashes then yes you will probably be assigned some shares. But you should also be able to roll some of the puts options out and down because volatility will be elevated. Generally the market doesn't drop as fast as it did in March, but let's just assume that huge drops are the new normal. When that happens, volatility goes through the roof! So you were able to use that volatility to either roll those short put options down and out or if the stock is put in your account then you can sell call options against that stock. Since I mainly trade dividend paying stocks, I'm also able to begin collecting dividends. If you watch how much time value premium you have left in the short put positions and roll them before they become worthless then your odds of them being assigned to you are quite a bit lower. You're going to have some puts assigned, especially if they go deep in the money. That's one reason why I like trading what I consider solid, stable stocks because they don't tend to decline quite as much and we know that even in a recession they're not going to zero. They may get cut in half but it's highly unlikely that they will go bankrupt. If you're doing credit spreads then that's why I always say it's a good idea to have a very small percentage of your account at risk any one point in time. Do a trade, when it becomes nearly worthless close it out and replace it with another one. I never think it's a good idea for credit spread traders or even debit spread traders to be all in. I believe spread traders should only risk a very small portion of their account at any one point in time because of they are one directional, and the market goes against them, they're wiped out.
Thanks for your question and support Michelle! There really aren't many downsides. The only ones that come to mind are that your capital is still tied up. If you roll a position that doesn't generate sufficient return that could be a downside. I generally don't roll a position that doesn't generate my required minimum return. There are however positives such as lowing your cost basis and generating more cash flow into your pocket.
@@StockandOptionMyLifeOfLearning When you're rolling an option, does buying back the option still cut into your profits before you open a new position?
Thank you for your question and support! Typically I do those roll orders as one order. If you do it simultaneously, like I typically do, then you're just looking at the net amount. You do have to spend money to buy the option back that you're closing out but simultaneously you're selling a new one, so you get the money back immediately. Does that answer your question?
Today I rolled a DITM put option on TWTR. Bought to close the Jan. 28 $38 strike at a significant loss but sold to open the March 4 $33 strike. The stock was trading at around $34.70. How do you determine what strike to choose going further out in time? What the best criteria to look at when choosing that Strike to roll on to? Was that a mistake choosing the strike price that was slightly below the current share trading price? Isn't it worse to choose a strike price above the current stock trading price? I was wondering why almost immediately my position was showing a - negative loss. If I chose the same strike ($38) further out in time, wouldn't I need to see the share price above that strike or I could potentially get assigned or I'd have to roll it out again? Thank you. Please help.
If you believe the stock might continue going down, the goal should be to roll the strike price down and out so that the new put option is OTM. However if you believe that a stock is starting to stabilize and may stay where it’s at for a while, then you might consider rolling it out and down so that it’s ATM or close to it. If you think the stock has stabilized and quite possibly will go up in value, you might consider selling it ITM. Here’s another video I made on that subject if you’d like to check it out: th-cam.com/video/cNdDt6l0saY/w-d-xo.html Here’s also a couple videos that talk through some of the techniques I use to fix a put that has gone against us: th-cam.com/video/RVp9yTFrnoI/w-d-xo.html and th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
@@StockandOptionMyLifeOfLearning Thanks so much for all your responses! I will definitely watch them several times. Some how I've got to try to reduce my losses, it's not like it's killing me to lose, I just want to eventually be able to reduce the blow of significant losses. My timing was the worst about 6 weeks ago trying to sell puts on anything was a major fail, I figured wrong that all that hoopola about raising rates was pretty much baked in. I did fairly well selling puts in 2021 but did get blown out by being assigned NKLA, I'll go down with the ship on all my shares on that one perhaps. There are advantages to being able to write off your losses obviously , as you know. I refuse to go down without a fight, and there are very few stocks currently that I would be willing to take assignment on. So I've got to somehow learn to make the proper adjustments. Thank you again!
Thank you for your question and support! It really depends on which direction you think the stock will head in. If I have sold a put option and the stock moves against that strike price and goes ITM, if I believe that the decline will continue then I will try to roll the strike price down when I roll it out in time. However if you believe that it will stabilize and go back up above your short strike price or close to it by expiration, then on those positions I'm happy to roll it out in time at the same strike price. If you do not want it to be assigned to you, just want to make sure that there's still time value left in the option because when that gets close to zero, your likelihood of being assigned goes up quite a bit.
If the stock is OTM, I first want to make sure that the return is sufficient. If the return is sufficient, I'm always trying to sell it for at least the price I bought the stock at. If I feel bullish on the stock then I also sell it at a strike price higher than where I bought the stock at. When I'm rolling a covered call or PMCC I'm also looking to roll it once the time value in the near term expiration is pretty much gone if I can get a good enough return. Here is a whole playlist I made dedicated to covered calls if you haven't seen it and would like to check it out: th-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html I'm not sure if that answers your question, if not, please ask it in a different way and I'll be glad to respond.
If the option is OTM then the time value is simply how much the option is worth. If it’s ITM then you could either do the math (options current value - how much it’s ITM and calculate the effect of any dividends) or for a quick estimate take the corresponding option (if you sold a put look at the value of the same strike price call) and calculate the effect of any dividends if it’s going ex-dividend during your expiration period. For a little more details on the effect of dividends on options you might like to check out this video: th-cam.com/video/6AW3fw_bH2A/w-d-xo.html
Great video! May I ask your opinion for one of my option trade? I have a bull put spread on TSLA 19 Mar 21 800 -1/790 +1. Now it is deep ITM. Is it still possible and advisable to roll it to later date, lets say 1 or 2 months later so that there is possible more time for the stock price to be OTM? Thanks!
Thank you for your support! TSLA has been on a wild ride. Looking at the technicals it looks like it definitely has the potential to come down to at least around $510 to $470. At that point it's just a matter of will it try and go back up or not. Since it moved so fast in such a short period time, up and now down, it definitely has the potential to go back up but I think it could be hard-pressed to reach new highs in the near term. It looks like if you rolled that spread out to April you might be able to get a credit of around $0.60 per share or so. That might be a game worth playing to see if TSLA goes back up in the coming months, especially if you can keep rolling it for a credit and didn't mind your capital being tied up. Just really keep an eye on the time value that you have left in that short option because you don't want it to get to $0, unless you're OK with it being assigned to you. If it starts approaching $0, at that point you need to roll it again. Right now the March 19th $800 puts still have around $1.60 per share of premium left in them. I hope that helps! Let me know how it turns out.
It really depends on where the stock is trading at. As long as you're rolling for a credit each time, then your overall position loss should get smaller and smaller. Hopefully over time TSLA will come back and those options will expire worthless or you'll be able to buy them back for next to nothing. Generally I don't do very many bullish credit spreads, I sell naked put options and on occasion I'll do a bullish debit spread. But in your case, should be able to almost always roll those for a credit, or sometimes if the options go really deep in the money, you'll be able to roll them for a break even. Typically it doesn't cost you anything to roll out the same strike price. But since you're buying an option to turn it into a spread, it depends upon the price of the option you're buying as well. The principal would still be the same. You might have to be patient getting your orders filled because sometimes when those options go deep in the money, the market makers aren't as flexible on pricing and you have to let your order sit out there for a while so you get filled at a fair price.
It is a very large and diverse topic. That’s one reason why I got into option trading because I knew that if I spent the time, energy and effort learning it, I could probably make pretty good money using it because it was a more challenging topic to learn. But once you have it, it’s a lot of fun!
What happens to Wash Sale rule when we keep rolling our ITM CSPs to keep the hope alive from December to January to February for some credit (loss on BTC profit on STO) and eventually decide for an assignment. Please help. Thank you!
@@StockandOptionMyLifeOfLearning and @Tarun Jaiswal - if you are rolling from Dec to Jan, the Dec put is a completely different security than the Jan put - so there is no wash sale. You are thinking of just buying and selling XYZ repeatedly. If you sell XYZ 20 Dec put and buy XYZ 20 Jan put - they are completely different securities and the wash sale does not apply.
There is a good bit of open interest in that strike price, I’m showing 493 contracts, but Robert in a situation where I have an option and the market makers are making it difficult to roll it, I just set a limit order good till close and let it sit out there for a few days and generally if it’s a reasonable price, it’ll get filled. Does that help?
Hey Simon thanks for the question and your support! I generally have 30-40 positions on at a time in my main options trading account. I like to keep position sizing around 1-3% of the account. My absolute max is 5% of the account per position.
Hi Randy, how is it that you still have the ability to roll a put option that is deep ITM without it being assigned? Is it soley theta value that keeps it from being exercised at this point. 10% ITM or $20 ITM makes me always question how come these options aren't being exercised. Thanks for your content!
Thank you for the great questions and your support! Yes you are correct. If there's is theta or time premium left in the short put, even if it's DITM, the owner of that option is better off selling the option then assigning the stock. If they assigned the stock, they would be giving up the theta left in that option. When the short puts get down to < $0.10 or sometimes more, then the likelihood of them being assigned goes way up because typically, with the spread between the bid/ask there really isn't any time value or theta left.
Hi Randy. I rolled an expiration 26 days out on a losing CSP. My YTD P/L decreased by $1021. I rolled with a credit but my YTD profit decreased by $1021. Any insight why my YTD P/L decreased?
The only thing I can think of is that it reflected the loss on the position you closed out but did not reflect the cash you received from the new position. If the position moves back in your favor and it's a complete win for you, then at that point, maybe your overall P&L will reflect all the gains.
@@StockandOptionMyLifeOfLearning Thank you for replying. I am curious to see the outcome and I am hopeful that the stock moves upward by the new expiration. Thanks for your channel. I’m a big fan.
Hi Randy, I have a couple of sell put options which are expiring this Friday and are deep in the money. The first one is FSLY expiring May 7, $66 strike price, sell to open put option. Today's closing price is $58.06. I'm thinking about rolling it to May 21 (3rd Friday of the month) at the same strike price of $66. Should I roll it tomorrow Thursday or wait until Friday? Is this the best way to do it on the strike price and expiration date? How would you do it if you were me? Appreciate your input and looking forward to your response. The second one is VIAC expiring May 7 too, $41 strike price. Today's close is $39.10. Thinking about rolling it the same way as the first one.
Thank you for your support and question! With FSLY that is not a stock that I track or trade so I really don't have an opinion on the company. I only trade in companies that I really believe are fundamentally strong. However to answer your question, it really boils down to what do you think the stock is going to do and if you're OK with it being assigned to you or not. If you don't want it assigned to you, then you need to make sure that you have some amount of time value left in the option. Otherwise this close to expiration, you're a lot more likely to have it assigned if there's no time value left in the put option. FSLY appears to be at a support level. If it breaks through that support it will definitely head lower from here. If you'd like to protect against that, then you may consider rolling your short strike price down and out. I generally don't do weeklies for variety of reasons. I'm working on a video right now about that because I get asked about it so much so please be on the lookout for that. However in this situation, if you do not want to be assigned, then you may consider rolling your strike price down and out. Monthlies tend to have higher volume, thus smaller bid ask spreads. This is not my advice to you but if I was short that option, and still felt good about the company, I'd like to roll the strike price down because if FSLY does not hold support, were it closed last night, the next support isn't until around $49. VIAC is one that we've been on the fence about trading. It is trying to find support around the $38 area. So far that has held on the second downward wave. If it does continue to hold, then you're probably all right rolling that short strike price out. Again I prefer monthlies. If it does break down through that $37 and $38 support area, then I would be trying to roll that short strike price put down and out. I hope they work out for you!
@@StockandOptionMyLifeOfLearning Thank you Randy for your response. Appreciate very much! FSLY went down big today. I tried to roll it to May 21 with a strike price of $55. What do you think the strike price and expiration date that I picked? I haven't done rolling before and have some questions. What do I have to enter if I were to select the Net Credit under the Price Type? It defaulted to Diagonal strategy. Is that the correct choice?
I think you're going to have to go a lot farther out than two weeks to get a roll order filled and when you are rolling the strike price down and trying to get a credit. As far as price type, it really depends on what broker you are using. Just make sure before you place the order that the action type with the legs are exactly what do you want to have happen. The order type that you're describing sounds correct but without seeing it I don't want to tell you 100%. Just make sure that each leg of the order is accomplishing what you want done (Buy to close or sell to open).
@@StockandOptionMyLifeOfLearning I tried the June 18 expiration, the strike price of $40, and used the Net Credit type on FSLY. Don't know why it didn't get filled. Maybe it had to do with the amount I put in Net Credit. I ended up using the market order. Thank you for your help. You have a great weekend!
So you keep referring to getting the same strike price when you roll out the options, but when I look at current strike prices, they're all higher than my original strike price as the stocks are increasing in value. So, how can we roll our put forward when we can't obtain the same strike price?
Hey Don, thank you for your question and support! If the strike you sold is not available for a future roll, then you could still roll it you'd just have to choose a higher strike price (if you were comfortable with that higher level) to roll it out in. Generally, you should still be able to do that in one order.
@@StockandOptionMyLifeOfLearning Thanks - not in my case usually as we're doing some options on more volatile stocks but understood. Hopefully you guys can address all possible circumstances in future videos. But very helpful info for sure!
If an option still has sufficient extrinsic or time value premium in it, it most likely will not be exercised. Here’s a video that will help explain that: th-cam.com/video/RrWEqdmUYOI/w-d-xo.htmlsi=wyqHlkuJUZ6C8HcO
Thank you for your question and support! If you can give me a timestamp for which part of the video you're referring to you I'll be glad to answer your question. The ones that I currently use are the Greeks with Interactive brokers and then on ETrade, they have several option tools that I use including: options income finder and options analyzer.
Cool thank you! That is an option analysis tool that ETrade has which you can use for free if you have an account with them. I'm not sure if it's free to non customers or not.
Cant u just choose a stock u really like and u would have bought anyway and start selling puts until u get assigned? And then u start selling covered calls?
Thanks for your question and support! Absolutely, if you feel comfortable then that's definitely a way that some traders trade options. We have several hundred stocks that we are willing to trade in because we feel like they are fundamentally strong, and then we prefer to wait until they've experienced some amount of decline or are resting at or close to support before we make a trade. But you could definitely do as you described and if you're OK with being the options assigned to you, which it sounds like you are, then you're just riding on Cash Flow. We prefer see that it's sitting at or fairly close to some sort of support but that's just our preference.
Make sure you understand the Risk before following this strategy. You have unlimited risk if the trade goes against you. You can significantly limit this risk by selling Credit Put Spreads instead. Also the deeper ITM Option you are selling - the more likely the Buyer will exercise it and then it will be assigned to you. Typically - a buyer will not exercise it if a significant Extrinsic Value is left (Lot of Days to Expiration) - but they still can - so set a target for yourself to get out of the position much earlier than the expiration date. If you can't be bothered to learn Risk Management or have the discipline for it - just trade Debit Spreads or Calls that have limited Risk. In addition - you can just accumulate shares and use them as collateral to sell Covered Calls to hedge against any downside swing in your common Stock Position.
Thank you Harris for your comments and support! Doing spreads provides a trader with downside protection. If a stock moves against you, and the position goes DITM, it can be very challenging to roll the position for a credit if not impossible. As you mentioned, if a position moves against you, but still has sufficient extrinsic value, it should not be exercised. As the extrinsic amount gets smaller, your odds get higher that it will be exercised. Understand that a covered call and short put option have the same risk (if it’s a dividend stock the one exception would be that you get a bit more cash from dividends) profile. If a stock goes to $0, a trader would have the same loss (except dividends if it’s a dividend paying stock) being short a put or in a covered call position.
one question on the rollout over and out on the ticker LAZ, where you did DITM with strike price $37 expiring on Dec. Am i correct to say, even at Day 0, the market price still remains say around $35, we can still close the option with little or no loses?
Hey Martin as long as the stock price hasn't changed, then you should be able to close it out for a little or no loss. You would obviously want to do that with a limit order because the spread between the ask and bid can be fairly wide. But if I'm understanding your question correctly, if you sold an option but decided to buy it back that same day, and the price hadn't changed, you should be able to buy it back for about you paid for it. You'll probably lose a little bit due to slippage but it shouldn't be too bad if you're patient and use a limit order.
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Rolling a losing trade into an entirely different (higher quality) stock is genius. I don’t know why I have never thought of this. ❤
I routinely roll my losers. I usually let my winners expire worthless!! You make a compelling case to roll winners as well to get more bang for the buck in terms of buying power! 🙏
Thank you for sharing!
By the way, also congrats on the idea of setting price level alerts on corresponding calls. I was always looking to trigger alarms on extrinsic value but missed the obvious.
Your content is amazing and very informative
Thank you
Nice explanation! I never knew that rolling the options could actually make losing trades profitable
Thank you for your support!
i Love selling PUT option
I use puts to lower my cost basis and then hold the stock for 5+ years.
Thumbs up: Rolling my EV covered calls bi-weekly ... and deep ITM LEAP calls involves a lot of variables for me ...
taxes (which for my EV stocks is difficult to juxtapose (iirc),
incremental Theta to 20-30% vs. your 5-10% ("milking")
Stock price hopefully 'hyper-low' (if simply buying-back),
Low implied volatility (if simply buying back) ... since EV stock IV fluctuation is great.
Deciding if it's worth 'a wait' to re-sell covered calls ... i.e., for stock prices to elevate first
I'm afraid of alerts but trust my wife to help me see the variables everyday.
Utmost blessings!
Thank you so much for your comments and support!
I wasn't financial free until my 40’s and I’m still in my 40’s, bought my third house already, earn on a monthly through passive income, and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing in the financial market is a grand choice I made. Great video! Thanks for sharing!
Very inspiring! I love this.
Thank you for sharing
Hey Randy, this video is nothing short of awesome. I have puts in ABBV an O that turned greatly against me and with the knowledge you passed here i'm sure i will be able to turn them around into winners. You are hands down the best into teaching this trading strategy.
Hey Bart thank you so much for that! It really means a lot to me. 😊 it’s comments like yours that pushme to keep making videos for you guys.
The core of his strategy, ie theta decay, is not presented accurately. The farther out the expiration, the LOWER the theta
Your statement is actually a NOT correct. If an option is DITM or far OTM, many times, theta will be higher for farther dated options than for near expiration options.
@@StockandOptionMyLifeOfLearning that’s really interesting. Thank you for the quick response to address my confusion.
Do you have any current examples of stock/strikes I could look at to see this? Thx 🙏🏼
Pretty much most options that are DITM or OTM typically tend to be that way. When they are ATM or closer to ATM the theta will be higher for near term expirations but as they get farther and farther away from ATM, that typically changes.
After today’s huge beating in the market. I am definitely going to use your advice thank you very much.
Thank you for your support!
Great production. Thank you.
Thank you for your support!
I have been rolling out a cash secure put because the stock price tanked and it is deep in the money. I roll out the put option to a further date in order to still collect premium. I hope price will rebound and go higher than the strike so the contract can become worthless
Thank you for sharing and for your support! That's one of the strategies we use when a stock moves against us also. I hope it works out for you.
If you haven't seen it already, here is a video I made about several positions that went against us during the March 2020 crash and how we handled them: th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
@@StockandOptionMyLifeOfLearning Thank you for the vid!! It is very helpful!!
Thank you. Very useful. I Will be checking the diferent time frames on a position that I have that is DITM.
Sounds good Chris. Thank you for your support!
good info, thanks for sharing. I would note however the volume for the BIP example was too few IMHO...as demonstrated by the spread prices on the $50 Puts.
Thank you for sharing your thoughts on it. If you're not OK trading in low open interest stocks, then I agree, it's probably not a good stock to trade options in.
@@StockandOptionMyLifeOfLearning I'm very mechanical in my underlying selection, Randy. I want tight spread, highly liquid options as one criteria i use.
You may have covered this concept in other videos, but it would be helpful if you spoke of the margin requirements. Very important information.
Thank you for pointing that out! That is a very important consideration. I have a video I made on margin. If you or anyone else would like to check it out here’s that link: th-cam.com/video/XU9LF5KmtJ8/w-d-xo.html
i am mostly a value and dividend investor but i am trying to learn options. i am very conservative.
Thanks for sharing. These type of option trade lessons could have cost thounds of dollars in the market!
Thank you so much for your support Feng! 😊
Thanks for the videos Randy you are great. May I ask how you set an options alert?
Thank you for that Jim. 😊 In Interactive brokers, if you go to your option position and right click, it’ll then give you an option that you can set an alert. Or you can go to your option chain and right click on whichever option you want to set the alert on. Then at the far right where you see the bell, you click on that and create your alert.
In ETrade I don’t know of a way you can set an alert on an option but like with most brokers, there is a section to set an alert on the price of a stock.
Always great explanations my friend!! 👏👏👏
Hi, very valuable info, and boy do I need to use these techniques. Great revision for me. Thank you....
Thank you very much for your comment and support! It means a lot.
Hi Randy, first of all i must congratulate and thank you for making and sharing this great video to all of us. This really simplifies alot and after learning from the video, at least we know we are doing the right thing. I have a couple of questions and hope you can shed some insights to it:-
1) Deep in the Money Vertical Put Spread - Will we the Option seller be assigned if we roll this DITM Options to a much further dates later? Meaning will the Option Buyer have the right to opt for assignment before the expiry dates? If the answer is YES (they can opt for assignment) then what the purpose of Rolling?
2) For Selling Call Spread - If the Options is ITM and dividend is up and coming soon, can we roll it to a further dates (and not subject to the dividend) or should be just close it at avoid the dividend assignment totally?
3) Stop Loss or Profit Taker mechanism - Is there any way we can set Stop Loss or Profit Taker to prevent extreme losses or cap our profits in the Options Spreads? I am also using IBKR and trying to learn if this can be done.. Have you any video on this to share?
Looking forward to your guidance and revert. Thanks again and please keep up with the great work! There should be more people like you out there who is so generous in sharing! Cheers
Thank you for your support!
Here are my responses:
1) as long as there's still enough time value in the put option you sold, it most likely will not be assigned. If it's an American style option, then the owner of the option always has the right to assign it whenever they want. However, it would not financially make sense to assign an option unless there wasn't much time value left in it. You also want to keep an eye on any dividends if we're talking about call options. This video will help explain assignments better: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
2) if you have sold a call option in a dividend company, and you don't want the call option assigned, you want to make sure that the time value portion of the call option is at least how much the dividend will be or greater when you get close to the ex dividend date. Otherwise, your odds of having the call option assigned go way up due to a strategy called dividend capture. I talk in depth about that in these videos: th-cam.com/video/bP-IdURvHRc/w-d-xo.html and th-cam.com/video/cwoqR5fNHkA/w-d-xo.html Also, here's a video I made on rolling covered call options: th-cam.com/video/7s4iakIyDNQ/w-d-xo.html
3) you can set limit orders on IBKR. That limit order can be set so that once you reach a certain profit target the order will fill. You can also set alerts for when options reach a certain value and when a stock reaches a certain price. When it comes to stop loss, you can also set all kinds of orders you just want to dig into the different types of orders that IBKR allows for. It includes everything you could think of. I do not believe I have made any videos on stop loss or profit-taking mechanisms.
New subscriber and really think your info is great!!!!
Thank you so much for that and for your support! 😊 It really means a lot!
So you can basically have a roll order in the market at all times with a limit that would give you, for example, a similar or higher return per month for the additional duration than what you got for the initial CSP? Sounds like a great strategy, especially since watching IV at different strikes and DTEs continuously is just not feasible. The only thing that you need to pay attention to, is not to roll your strike after an earnings day. Very cool idea!
Thank you for that and for your support!
Cool techniques man, not into put options myself, but good to know for sure!
Glad you enjoyed!
Very nice video, thanks for making it!
Thank you for your support! 😊
Also, does the theta time value count on weekends, or other days the market is closed?
Theta is eaten away every day. What I’ve noticed though is that generally, say on a Friday afternoon, the theta or more noticeably the time value portion of an option, will decrease somewhat because of the coming market closure for two days.
Gotta thank you, great video, exactly what I need to know now 🙏👍👍👍
Thank you for that and for your support!
Detailed info , thanks alot
Thank you so much for your support!
Another great video.
How do you feel about rolling an option forward weekly, while adjusting the strike price by a nominal amount ($0.50 - $1.00 strike) closer to ATM. I right now I feel like this could work when I sell a put option and the stock crashes. Do you have thoughts on this?
Sure. I made a video on that exact subject. Here’s that link: th-cam.com/video/1Bl69YJ04cM/w-d-xo.html
Cash secured puts
Great channel man!
Thank you for your support!
What option analysis tool / calculator is this? Looks a lot more useful than the others I've been working with.
Can you give me the timestamp you referring to so I can make sure to give you an accurate answer please?
Sell options during high IV. You collect more theta.
Terrific video - thank you! I also sell Puts, but certainly cannot manage a portfolio like yours. I like to use ETFs like IWM. I don’t mind being assigned and selling calls; rolling also a valuable option! I need to explore my Etrade platform more for those tools you were using. Thanks again - new subscriber!
Thank you for your comment and support! There are some nice option and stock trading tools on ETrade under the "Market & Ideas" tab and then go under "Options".
I did this, but no longer roll in 1 step...i wait for a red day after i close...then it's much more likely to be green soon and instantly add value
That sounds like a great plan Mark. Thank you for sharing and for your support!
I don't understand can you please elaborate?
@@markopavic9473 ..Good Day ! Selling a put option at a red bear stock moment, when Implied Volatility and premiums are higher, and when the share price is very near to its support price on its graph, the great likelihood is that the stock price would bounce up soon and your put option would be happy. Thus, selling that put at that red market time is very likely profitable
That is a great strategy!
Here is the video series where I show what happened that month. There's one video per month: th-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html
Great video, one note about rolling deep ITM puts is that once every quarter you usually get a spike in volatility due to earnings reports, so if you are stuck in a deep ITM put, you might as well roll it till after earnings, you collect more premium and sometimes stock jumps and gets you out of the money
Good tip!
Great instruction! Thank you so much. I recently had a put move against me so its very deep ITM today. One of those crypto mining stocks. You cover how to handle rolling a deep ITM PUT and touch on "if the moving averages ... underlying stock" have not changed. The mining stock is 30% down and at all time low, is it too risky to roll this PUT? Do any of your videos discuss if your underlying assumptions on the stocks direction change how to handle a short PUT strategy? Cheers, great video best and only one I have found on TH-cam!
Thank you so much for that! I really appreciate it!
If the fundamentals of a company have changed so that I no longer feel comfortable owning it, at that point, I’ll liquidate the position no matter if I have a loss or not. That’s my personal rule. I don’t so much worry about the direction of the stock because we’re able to generate cash flow by, if it’s a dividend stock collecting dividends and also selling covered call options.
Other traders may have a personal rule that if the direction changes they are out but since I trade in companies that I believe will be around 20, 30, even 50 years from now, it doesn’t bother me too much if their direction changes. The way that we go about collecting cash will just change until they switch directions to a bullish trend.
You might also found this video helpful if you still feel comfortable owning the company but want to try and repair the position: th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
My core position is TSLA and I’m selling puts on other stocks that I believe in
Thank you for sharing!
Hi Randy! If you’re rolling options does that mean you’re also subject to the wash sale rule and the losses are disallowed on your taxes since you bought to close and sold to open within the 30days?
I am not an accountant, but from the conversation I had with my accountant, wash sales don’t apply to options either to your benefit nor detriment. Each one is viewed individually. But I would encourage you to check with your accountant to make sure because I have found that even between accountants, opinions can vary.
@@StockandOptionMyLifeOfLearning Yes, thank you! Im going to ask a CPA for advice!
When I ran into this on my taxes, it does not appear that wash sale rules apply because the first option (the shorter expiration date option) is treated as a different security from the second option (the longer expiration date option).
Essentially as long as the strike price or expiration on the options are different, they're treated like completely different securities (
Just like trading two different stocks).
Wash sale rules also don't apply for the buying and selling of the first option. Whatever price you bought to close at is treated as the cost basis, and the original sell to open is your gross profit. The IRS just sees it as you opened the position on the date you sold and closed it on the date you bought, and never touched that particular option again. If you for some reason sold and bought that same exact option again, then I think you might run into wash sale issues.
How are you figuring annualized returns? Is it based on the total cash (or margin, for some of us) required to secure the puts?
I figure annualized return as follows: option premium, divided by number of days until expiration times 365 days to annualize it divided by capital at risk or if you want to figure your return on margin requirement then the amount of required margin.
Can you do a video on rolling a deep ITM Put Credit Spreads ? I am having a hard time with it. In order to roll a Put Credit Spread and still be profitable, I had to increase the spread width, but that increases the collateral too. Though I did it, I feel that's not a good idea. How can I salvage a Put Credit Spread going against me ?
Thank you for your suggestion and support! I'll try and go into detail on rolling DITM put credit spreads in the future. If you haven't seen them already, I've done a couple more videos on rolling naked put options including: th-cam.com/video/cNdDt6l0saY/w-d-xo.html & th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
Does rolling over covered calls or puts (in the money) never trigger wash sales?
For example, can you roll over a weekly covered call or put (that's in the money) to the next week and not trigger a wash sale (so long as the roll over is at a profit)? Or do you have to roll forward at least a month?
I apologize I do not know the answer to that question. I would encourage you to check with your local tax professionals to make sure you get an accurate answer. Each country and even states laws can be different.
Always learn a lot from your videos. I have a question though as im really new to trading especially options, can i used a different strike price when rolling the put options deep in the money if i there's no same strike price available that is month or more away from my current expiration. Thank you so much
Thank you so much for your support! I'm glad you're finding them helpful.
Yes you can always use a different strike price to roll a position. I have one right now that's that exact same situation. We are short the $77.5 put and there's no $77.5 for the December expiration. Just keep an eye on whether it'll be a debit or credit when you roll it, if that matters to you.
Thank you for the video. May I ask what program you’re using for the alerts? I’ve only come across price alerts for the underlying, not for the option prices. Thank you!
Thanks for your question. I use the trading platform for Interactive Brokers. You go to Trader Workstation and then Option Chains. From there you can set alerts on any strike price you want. I'm not sure if this feature is available on other trading platforms. I also use E*Trade, and I don't think they have a feature available to set alerts on option chains.
Thank you for your support!
Hello Randy, Rafael here... reviewing your video, what would be your rule if you have Earnings coming soon to a option that has not to much time left. Let's say, I opened CSP KSS then KSS went gap down, rolled out and ITM, now recovered some of losses, but there is Earnings coming. Keep rolling the CSP even with Earnings close ? Thank you in advance.
Hey Rafael, generally I like to avoid earnings if possible but in certain situations and with certain stocks, I feel comfortable trading through earnings. I think this video will answer your questions: th-cam.com/video/yO10aF8TcVg/w-d-xo.html
Great video, that’s exactly what I do all the time, thank you , let’s keep collecting all that easy money 💰
Thank you for sharing and for your support!
Nice video ! Good job . My strategy is to sell put credit spread, with long leg very deep out the money for max safety.
Thank you for sharing and for your support! It means a lot! 😊
with the first example why wouldn't you just let the contracts expire OTM and then short the contract at a later expiration date? why do you buy to close if its going to expire worthless anyways and you get the premium?
Great question! Thank you for your support. I could have done as you described but I have multiple reasons to close options early. If you haven't seen it already, you might like to check out this video in which I discuss the reasons why I close options early: th-cam.com/video/Nqr1DWWOkQI/w-d-xo.html
Now that I'm retired I'm forced to continue funding my IRA selling put options. I USEUALLY sell options 1 to 3 weeks out and use the premium to purchase shares in my preferred stock. I would love to sell ITM put LEAP options for higher premiums but I don't know how to do it safely.
Thank you so much for sharing 👏 and for your support! I made a video on selling LEAPS put options. If you haven't seen it and would like to check it out, here's the link: th-cam.com/video/E47DYu6DLkI/w-d-xo.html
Thank you For the video, What is reason of rolling over to a put option with same strike price which is ITM which can be assigned even after rolling over, why we are not taking OTM when we roll over. I am new to options , my apologies if my question is not technically correct, Thank You very much for the video!!
Thank you for your questions and support! If the technicals and fundamentals have not changed then I don’t mind rolling an ITM put option. This is true especially if I expect the stock to come back towards my strike price.
In a situation where the technicals have broken down on the chart, and my short put option is in the money, then I will try to roll the strike price down. If I do that though, I always like to do that for a credit or at worst break even, so sometimes I have to roll it several months out in time as well as down.
As far as being concerned with the option being assigned to you, as long as there’s sufficient time value left in it, even if it is ITM you generally will not have the option assigned. Assignment risk greatly increases when the time value is pretty much all gone. Does that answer your questions?
@@StockandOptionMyLifeOfLearning Thank you very much Helpful!
I have a question I was thinking about when retired to withdraw my money from my 457 plan to my brokerage accountt to do the wheel opinion
Using my upgraded version of the wheel has always generating really good cash flow for me over the years. If you’re new to it and looking to put life savings into it, I would really encourage you to throughly learn it before using real money.
You can learn a lot about the way we trade on this channel by going though my videos. You might also consider doing my online course: mylifeoflearning-randy.mykajabi.com/offers/EgeavtWJ
And then also consider following my real live trades in which I share why I did each trade, including the ones that goes against us and how we repair them: www.patreon.com/mylifeoflearning
Education is key and then I would encourage you to practice trading with play money before using real money.
Here is a video series that shows our cash flows that might help give you an idea of how we trade and the cash flow/return we’ve generated: Option Trading Monthly Cash Flows (our UPGRADED Wheel Options Strategy returns)
th-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html
Great Informative video. I also do that and 5-8 positions in my portfolio all the time. But i do weekly options. advise me if the monthly options are better then weekly
Thank you for that and for your support! That's the subject of the video I just released yesterday. Here's the link if you'd like to check it out: th-cam.com/video/1Bl69YJ04cM/w-d-xo.html
@@StockandOptionMyLifeOfLearning Thank you for your reply.
I have been doing weekly options as it offers better premiums and higher decay, which results in higher rate of return.
@@sudhirmadan4299 I agree that weekly options offer better premiums. I often can buy to close for a 70% profit by Wednesday, so I can sell another option that week. I calculate the premium divided by the days to expiration to determine the Profit per day. 95 times out of 100.... 4 weekly premiums add up to more than 1 monthly premium.
Knowledge IS power, only IF you apply that knowledge.
Other than time value alerts, would it be ok to set delta alerts as well? I feel when a certain delta is approached, it would be easier to manage because you won't allow an underlying to go DITM. What do you think? Love the channel!
Thank you so much for that and for your support! I think that would be a great idea especially if you use Delta. I'm not aware of a way to set an alert with Delta but if you could do that, I think it sounds like a really good idea.
I trade the wheel and for me is the best strategy, but when the market falls you must be patient…Collecting premiums is important
Thank you for sharing
Hello, nice video, how do you manage the CSP once rolled, when do you close it? Thank you
Hey Luis thank you for your questions and support! I made several videos about your questions. If you haven't seen them already and would like to check them out, here are the links: th-cam.com/video/Nqr1DWWOkQI/w-d-xo.html and you might also like th-cam.com/video/YZr7CJ7rM5U/w-d-xo.html and th-cam.com/video/cNdDt6l0saY/w-d-xo.html
I think those might answer your questions, if not, please let me know.
hi Randy - New Sub here. I have a deep in the money put credit spread on NVDA 6/24 175/170. Was thinking of selling to close one leg and rolling the other leg out one month. Hopefully get a credit on both legs - thoughts?
Hey Matt credit spreads can be tough when they go against you. It really depends on your financial situation, goal with the position, and what you think NVDA will do in the future. Here's a video series I made on repairing positions that have gone against you if you'd like to check it out: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
And here's a video series I made on trading in spreads: th-cam.com/play/PL3j38I2YtGw272tus6umU_zxFdwnJ8E0c.html
Awesome! Brilliant !
Thank you so much for that and for your support! 😊 It really means a lot to me.
If i buy to close my naked put with a loose and i sell to open a further out.. Will i be hit with a wash sell , not be able to deduct the loosing trade ? I have a baba lost further out in 2024.. Thanks
I apologize Jimmy I cannot answer that was certainty. That's a question to ask a tax advisor.
Randy you said you roll 85% of your puts to the following month.What if you rolled your puts 4-6 months out instead of monthly.you would capture more premium?
Hey James thank you for your question and support! If you rolled them out 4-6 months instead of 1-2 months, you would receive more cash in your pocket up front, however it's been my experience that unless the option is very far OTM or DITM, your return won't be as good for those longer farther dated options as it would for a nearer term option. But I think that's a great strategy, especially if you didn't want to do as much trading and or wanted to get a larger pile of cash upfront in exchange for a longer commitment.
5:00 theta is always greater for nearer expiration dates (assuming same strike price). You said the opposite. I’m confused
Actually your comment is not correct. Theta is not always greater for nearer expiration dated options. If an option is DITM or pretty far OTM, many times, it's theta will be greater than that same strike price option that has a lower DTE.
Awesome videos. Thanks. When is the right time to roll over a DITM which has over 35 days left in exp - is it the last day of exp or when extrinsic value remaining is
Thank you for your question and support! If I have sold an option that has gone deep in the money and I want to roll it, I first look at the technicals to help me decide if I think there's a possibility that the stock will come back to my strike (over the next 35 days in your example). If I think that's a possibility, then I will place a limit order at a price that I'd be happy getting and let it sit out there until probably the week of expiration if I don't mind the stock being assigned in hopes that it will get filled at a great price. If however you do not want the option assigned, then you should definitely look to roll the option when it has 10% or less extrinsic value. Does that answer your question?
@@StockandOptionMyLifeOfLearning thanks.
So if your deep in the money (unless I am missing something), shouldn't they be getting assigned before you have a chance to buy back?
Thanks for the question and your support! Generally, short options are only assigned if there's not much time value left in them. As long as there is a decent amount of time value left in them then, the person that bought the option is better off selling the option instead of getting it assigned.
The one exception, is if the stock is about to go ex dividend and you were doing covered calls. On several occasions, there will appear to be not much time value left in the covered call option, however when you calculate in the potential dividend, it makes it attractive for someone to call your stock away from you to capture that dividend. I hope that helps!
Quick Question. Can you roll out a short put option time and strike indefinitely if you don’t want to get assigned a stock that’s underwater? Thx
Theoretically you can roll a put option out indefinitely. It's easier to do if it's a naked put option as compared to a credit spread if the stock were to go against you in a big way. As long as there's time value left in the near term option, it should not be assigned. It's only when a put option loses pretty much all of its time value that your risk of assignment goes way up.
Great video, I see that you like to roll the deep in the money puts, can you tell me if you prefer that over taking the stock and selling 30 day calls at the price you were put the stock until maybe you get a pop in the stock to sell calls higher?
Thanks for you support and the question Lee.
That's always a fun decision to make. Generally what I look at is the return I get by rolling the put option, compared to the return I would get if the stock is going ex-dividend over the next month or two, coupled with the premium from selling the call option. I'm generally able to get better premium by rolling the put option, however if the stock is going ex-dividend and I don't think it would be called away from me before that date, I definitely consider letting the stock be put into my account and selling a call option against it while collecting the dividend.
Does that answer your question?
@@StockandOptionMyLifeOfLearning Yes, thank you.
@@StockandOptionMyLifeOfLearning Just rewatched the video, so even if the 50 put is deep in the money (stock trading 45)the calls tell you that in essence it's the best time to roll the put out in time. Isn't it true that you are buying back a losing trade and hoping for the next option to make up for the loss and then some? Am I missing something?
You are buying back a losing trade but since you should be able to get a credit when you roll the position, you're improving your overall position in that stock. Theoretically you can continue to do that as long as the stock is not put to you, which will enable you to continually improve your position. You might also look at the possibility of when you buy to close the $50 put, go out two or three months and see if you can roll the strike price down to $47.50 and still pocket a credit. Many times I'm able to do that as well. Does that answer your questions?
@@StockandOptionMyLifeOfLearning Got it, thanks so much.
Have been a day trader for past 2 years and now trading options
Thank you for sharing and for your support! Please let me know how it progresses for you.
Thks for sharing, had a deep ITM put option that i sold and with just 1 day to expiry the stock price was still capitulating way below strike price, going into deep ITM.
I had to close the position as i don't wish to get assigned by expiry.
The speed in which the stock price dropped and the fast increasing premium price that went up way beyond the initial premium that i was paid when i sold the Put, affected my trading psychic and made me uncomfortable in rolling down at the same/lower strike price.
Yes, even though by rolling down at the same/slightly lower strike price means I'm getting paid an higher amount than even the deep ITM premium that i have to pay to close, but seeing the stock price capitulating and premium rising so fast, it's just too much to stomach.
Did you had this experience before and how to overcome it?
Thank you for sharing that! That has definitely happened to me before. That’s one reason why if an option I’ve sold is OTM and doesn’t have much time value in it, I almost always close it out early, either by rolling it out or closing it out and putting that capital to work a new position. Here’s a video I made on that subject if you’d like to check it out: th-cam.com/video/Nqr1DWWOkQI/w-d-xo.html
The other thing to always keep in the back of your mind is that expiration day can cause stocks to do weird things. As the options that are still open get settled, it can cause stocks to move aggressively in one direction or the other. That does not always happen, but sometimes it does.
That’s why sometimes, if a position has gone against me, I’ll actually wait until expiration day, if I can’t get a good enough roll order before that, just to see if that happens.
can options be exercised early?
If they are American style options, which most American stocks and a lot of ETFs are, then they can be exercised early.
However, if they are European style options, like SPX and are RUT, then they are not assigned early. They are what’s called, cash settled at expiration.
Here’s a video that will help: th-cam.com/video/RrWEqdmUYOI/w-d-xo.htmlsi=IfIEPF4ObSFi9aSc
Great video. How do I set extrinsic value alerts? And how to figure extrinsic value amount? Seems like your using the bid/ask spread to do this? Very interested, Thanks
Thank you for that. Yes if the option is OTM then the current value of the option will all be extrinsic, if it's ITM then a quick and easy way to get the estimated value of the option is to look at the corresponding (call if you have sold puts and vice versa) options value. It wont give you an exact extrinsic value but it will be close enough to let you know if you should look into it more. That's just an easy way to give you a quick estimate of it.
In my Interactive Brokers trading platform, I set alerts on the call and put options at all the strike prices I have sold options at so that when they get to my set amount, I’m alerted. By setting it on both the call and put options, you’re covering your bases if the option goes ITM or not. I show an example of that, I believe in my last Monthly Cash Flow video, if you’d like to check it out. Does that answer your question?
My Life of Learning thanks for explaining. Makes sense. I am going to try it and I’ll check out your other video for another example. Thank you
So you roll out OTM options instead of closing the position? Normally people just close their OTM positions or let them expire and just enter a new position. Usually you roll out ITM positions.
Thanks for your question. If nothing has changed fundamentally with the company and I can get a sufficient return, then I will roll options no matter if they are OTM, ITM or ATM. Of if I can’t get a sufficient return and I don’t have anything lined up to replace the position, then I will let it expire while I look for a replacement.
Does that answer your question?
Thanks for your support!
@@StockandOptionMyLifeOfLearning Yes it does. Thank you. I've been thinking about rolling positions that are OTM but the premium is usually too small since in many cases the strike is way OTM.
Yes I know exactly what you mean. When there isn't enough premium, then I definitely close it out or let it expire and trade a new position. I actively watch over 160 stocks for that exact reason, so I always have something else to trade that will produce good returns.
Hi thank you for your information. Is there any downside to rolling more than once? Is it better to close and reopen a new position or does it just depend?
Thank you for your question and support! It is situational specific, sometimes it will even change day to day. Generally speaking though, there's no downside to how many times you roll. I don't like to roll until most of the time value premium is gone. I usually like to roll as 1 order. The exception is if there's not enough return by rolling a position. In that case, we will close out the short put and look to sell to open an option in a completely new stock.
My Life of Learning thank you sir!
Assuming i did a sell put, strike price is $670, premium is $10, expiration is 30 days. At Day 15, the market price drop to $650 but the buyer did not exercise. The following day the price shoots up to above $670 and was consistently above strike price till expiration.
After expiration, will the stock be assigned to myself?
Hey Martin thanks for that your question and of course your support! If your example stock did drop to $650, as long as you had some time premium left in that option then as you mentioned, it would be a mistake for the owner of the option to exercise it because they would do better by just selling the option for the increased profit.
The only time you have to consider being assigned is during the exact time when the stock's price is in the money on the option you sold. Once a stock's price is out of the money, you no longer have to worry about it being assigned to you. Even if it was in the money previously, once it's out of the money, you're good to go with zero potential of it being assigned unless it were to go back in the money.
@@StockandOptionMyLifeOfLearning thank you so much!
Hi Randy, Thanks for the terrific videos. I learned a lot from them. I have a question about rolling sell put option. After selecting Roll of my Sell Put option in my Etrade account, it has a Price Type with the market, net credit, net debit and even selections. I wonder if your trading platform has those selections and which one should we choose.
Thank you for your question and support! I use Interactive brokers for my my main option trading account, however I also use ETrade for my retirement account as well as a couple other accounts. So I am familiar with the terminology on ETrade. I would never choose market because you can get a really bad fill price due to wide bid/ask spreads and slippage. When I roll options I always try to do it for a net credit or net cash into my pocket even if it's just a few pennies per share so net credit is the one I choose the most.
If you're willing to pay out-of-pocket per share when you roll a position, than you would choose net debit. If you chose "even" then your rolling the position for no cash into or out of your pocket except for you will have to pay for the cost of the commission. I hope that helps!
@@StockandOptionMyLifeOfLearning Thank you, Randy! Your explanation helps a lot. You have a great day!
Great video! For the deep ITM short put positions, I am currently rolling them over during the last hour before market close on the expiration day. I am testing this strategy to see its pros and cons. Before using this strategy, I usually rolled them over immediately when the short put positions were in the money; however, I found that it took much longer time to get back the loss of the previous position. Not sure what is the risk of the new strategy and will test it out.
Thank you for sharing and for your support! It'll be interesting to see how your test works out. You might also keep an eye on the bid ask spread as you get closer to the end of expiration day. From my experience, it can get more difficult to get those filled at good prices than earlier in the day or the previous several days before expiration day.
I agree with you that as soon as a stock moves ITM, it may not be the best idea to roll it because often times, it will rebound and go back ATM or OTM. Also since the stock has been dropping, there's probably a little bit of extra volatility priced into that option. As the stock settles that will dissipate. We like to close our short option positions when there's 10% - 20% time value premium left in them.
@@StockandOptionMyLifeOfLearning Thank you for your quick response. I will pay attention to the change of the bid ask spread. Your insights are very helpful. Thank you very much for sharing!
How to repair sold put,which is losing a 40% or so.
I made a video series dedicated to repairing positions. Here’s that link if you’d like to check those videos out: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
Thank you for doing this video! I just subscribed and hope you don't mind a few questions :)
When you first sell a put, how far OTM ( ever ITM?) do you ideally like to be?
Do you like to change the strike price up or down to a more ideal level when you roll out your option?
Lastly, do you prefer to do this type of trade with high or low volatility stocks?
Thank you so much!
Hey Devin thank you for your questions and support! When I first sell a put option, I prefer to sell OTM if there's enough return, however if there's not enough return then I will sell put options ATM. I almost never go ITM. Generally I like to sell those put options at strike prices that are right at or just below support.
As the stock moves around, if it moves down then I am open to rolling the short put option down. If it moves up, in certain situations, I am willing to move it up. Here's a video I made where I talk more in depth about that: th-cam.com/video/cNdDt6l0saY/w-d-xo.html
I prefer to do put option trades with lower to mid volatility stocks. However I like to sell put options in those types of stocks after they have just experienced some sort of decline. That generally means there's a little more volatility priced into the option than normal.
@@StockandOptionMyLifeOfLearning Thank you for getting back to me so quickly! I just watched a handful of your videos and am about to watch a few more. You do a great job of explaining these strategies. I really appreciate it!
Thank you for that Devin. I really appreciate it!
Example, we have 10 buy put spy expire after 1 months, and can we sell put same position after 1 week?thanks
I'm not sure I understand 100% what you're asking but it sounds like you're asking if you have bought 10 SPY put options that expire over a month from now, can you sell that same strike price with a one week expiration? Hopefully that's what you're asking. If so then you should be able to use the 10 put option contracts that you bought to cover you on the shorter term ones that you sold.
Or the other way I can interpret your question is, if you bought 10 SPY put contracts that expire in a month can you sell those same 10 put options after a week? The answer to that question would be yes. You should be able to sell that position anytime after you buy it.
Hopefully one of those two answers your question, if not please restructure it for me and I'd be glad to address it. Thanks for your question and support!
Hi Randy, excellent teacher, as you're rolling puts how come you picked the call bid/ask spreads to calculate return?
Thank you for that Antoine and for your support! What I was trying to show is that if you're short an in the money put, since the call option is out of the money, the call option's value comes from time premium not intrinsic value. So you could calculate approximately, not exactly, but approximately, how much time value you would get by rolling that corresponding put option. It's not penny for penny but it's generally pretty close and it's a way to quickly, at a glance, see how much time premium you would receive by rolling that put option. Does that answer your question?
@@StockandOptionMyLifeOfLearning Thanks!
@@StockandOptionMyLifeOfLearning so what your saying you get the time value left on the current month plus the time value of the next month plus itm value also. is this correct. Also aren't you better off just rolling to a stock with the best premium as long as it meets all requirements.
Thanks for your question and support! Can you give me a time stamp for your question please?
HOW DO I SELL A CALL OR PUT OPTION WITH CASH ACCOUNT? it says restricted use.
If you’re approved to trade options, and you have enough cash in the account, you should be able to sell options.
Smooth smart legit
Thank you for your support CJ! 😊
Hi Randy, when you roll over a position does that mean you close the current put position and open a new position? Because I’m your patreon images it shows diagonal spread & reverse calendar. I got confused :) and thanks for all the videos.
Hey Sarkis thanks for the question. Yes that’s correct. When I refer to rolling a short put position, that involves buying a short put back to close it out and selling to open a new short put with a later expiration date. Depending on the situation I may roll the new short put strike price up, down or keep the same strike price. Does that answer your question?
Thank you for your support!
@@StockandOptionMyLifeOfLearning thanks for your quick reply. One more question, how do you allocate you each position as % wise on the portfolio? As I saw mentioning few times have maxed out certain stock position in your portfolio. Are you following up 5% rule for each company?
Great question! Say for example, you have a $100,000 account and you sell 1 contract of $100 put options, if that was assigned to you then it would cost $10,000 to buy that stock. That would be 10% of your account. That would be too much in one position for me. I like to have at most 5% but prefer 1-3% in any one position. So to answer your last question, yes, that's 5% for each company. That's harder to do with a smaller account but I think it's definitely a good goal to aim for as soon as possible.
This can also be done by using spreads but you want to be careful to not have 100% of your account at risk in 1 direction with spreads because if the overall market goes against your dominant direction bias, it could wipe out your account.
For more details, if you haven't already, check out the video on Small Account Option trading: th-cam.com/video/0j6qvqna9aE/w-d-xo.html and Option Spread Trading: th-cam.com/video/JS2GkXvRFwI/w-d-xo.html
@@StockandOptionMyLifeOfLearning 3% that’s the goal. But from your videos your selling put and covered calls which are all one direction which is bullish as the trend is up. What happens when a crash like in March happens 35% decline. Basically you will be assigned all those sell puts on high price? Trying to understand the worse case scenario of your strategy that can happen.
3% sound good. When the market crashes then yes you will probably be assigned some shares. But you should also be able to roll some of the puts options out and down because volatility will be elevated.
Generally the market doesn't drop as fast as it did in March, but let's just assume that huge drops are the new normal. When that happens, volatility goes through the roof! So you were able to use that volatility to either roll those short put options down and out or if the stock is put in your account then you can sell call options against that stock. Since I mainly trade dividend paying stocks, I'm also able to begin collecting dividends.
If you watch how much time value premium you have left in the short put positions and roll them before they become worthless then your odds of them being assigned to you are quite a bit lower. You're going to have some puts assigned, especially if they go deep in the money. That's one reason why I like trading what I consider solid, stable stocks because they don't tend to decline quite as much and we know that even in a recession they're not going to zero. They may get cut in half but it's highly unlikely that they will go bankrupt.
If you're doing credit spreads then that's why I always say it's a good idea to have a very small percentage of your account at risk any one point in time. Do a trade, when it becomes nearly worthless close it out and replace it with another one. I never think it's a good idea for credit spread traders or even debit spread traders to be all in. I believe spread traders should only risk a very small portion of their account at any one point in time because of they are one directional, and the market goes against them, they're wiped out.
What's the downside of rolling an option?
Thanks for your question and support Michelle! There really aren't many downsides. The only ones that come to mind are that your capital is still tied up. If you roll a position that doesn't generate sufficient return that could be a downside. I generally don't roll a position that doesn't generate my required minimum return. There are however positives such as lowing your cost basis and generating more cash flow into your pocket.
@@StockandOptionMyLifeOfLearning When you're rolling an option, does buying back the option still cut into your profits before you open a new position?
Thank you for your question and support! Typically I do those roll orders as one order. If you do it simultaneously, like I typically do, then you're just looking at the net amount. You do have to spend money to buy the option back that you're closing out but simultaneously you're selling a new one, so you get the money back immediately. Does that answer your question?
@@StockandOptionMyLifeOfLearning Yes. Thank you!
Today I rolled a DITM put option on TWTR. Bought to close the Jan. 28 $38 strike at a significant loss but sold to open the March 4 $33 strike. The stock was trading at around $34.70. How do you determine what strike to choose going further out in time? What the best criteria to look at when choosing that Strike to roll on to? Was that a mistake choosing the strike price that was slightly below the current share trading price? Isn't it worse to choose a strike price above the current stock trading price? I was wondering why almost immediately my position was showing a - negative loss. If I chose the same strike ($38) further out in time, wouldn't I need to see the share price above that strike or I could potentially get assigned or I'd have to roll it out again? Thank you. Please help.
If you believe the stock might continue going down, the goal should be to roll the strike price down and out so that the new put option is OTM.
However if you believe that a stock is starting to stabilize and may stay where it’s at for a while, then you might consider rolling it out and down so that it’s ATM or close to it.
If you think the stock has stabilized and quite possibly will go up in value, you might consider selling it ITM.
Here’s another video I made on that subject if you’d like to check it out: th-cam.com/video/cNdDt6l0saY/w-d-xo.html
Here’s also a couple videos that talk through some of the techniques I use to fix a put that has gone against us: th-cam.com/video/RVp9yTFrnoI/w-d-xo.html and th-cam.com/video/6dtbDnpfuGM/w-d-xo.html
@@StockandOptionMyLifeOfLearning Thanks so much for all your responses! I will definitely watch them several times. Some how I've got to try to reduce my losses, it's not like it's killing me to lose, I just want to eventually be able to reduce the blow of significant losses. My timing was the worst about 6 weeks ago trying to sell puts on anything was a major fail, I figured wrong that all that hoopola about raising rates was pretty much baked in. I did fairly well selling puts in 2021 but did get blown out by being assigned NKLA, I'll go down with the ship on all my shares on that one perhaps. There are advantages to being able to write off your losses obviously , as you know. I refuse to go down without a fight, and there are very few stocks currently that I would be willing to take assignment on. So I've got to somehow learn to make the proper adjustments. Thank you again!
Thank you for sharing! I hope those videos help and things work out for you.
Hi, if the share price keep dropping for few months, should I roll it the same strike price or should I roll it ATM or deep ITM strike price.
Thank you for your question and support! It really depends on which direction you think the stock will head in. If I have sold a put option and the stock moves against that strike price and goes ITM, if I believe that the decline will continue then I will try to roll the strike price down when I roll it out in time.
However if you believe that it will stabilize and go back up above your short strike price or close to it by expiration, then on those positions I'm happy to roll it out in time at the same strike price. If you do not want it to be assigned to you, just want to make sure that there's still time value left in the option because when that gets close to zero, your likelihood of being assigned goes up quite a bit.
What do we look for to roll over call options?
If the stock is OTM, I first want to make sure that the return is sufficient. If the return is sufficient, I'm always trying to sell it for at least the price I bought the stock at. If I feel bullish on the stock then I also sell it at a strike price higher than where I bought the stock at. When I'm rolling a covered call or PMCC I'm also looking to roll it once the time value in the near term expiration is pretty much gone if I can get a good enough return. Here is a whole playlist I made dedicated to covered calls if you haven't seen it and would like to check it out: th-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html
I'm not sure if that answers your question, if not, please ask it in a different way and I'll be glad to respond.
@@StockandOptionMyLifeOfLearning how do we know when the time value is gone? Which greek do we check?
If the option is OTM then the time value is simply how much the option is worth. If it’s ITM then you could either do the math (options current value - how much it’s ITM and calculate the effect of any dividends) or for a quick estimate take the corresponding option (if you sold a put look at the value of the same strike price call) and calculate the effect of any dividends if it’s going ex-dividend during your expiration period.
For a little more details on the effect of dividends on options you might like to check out this video: th-cam.com/video/6AW3fw_bH2A/w-d-xo.html
@@StockandOptionMyLifeOfLearning Thank you
Great video! May I ask your opinion for one of my option trade?
I have a bull put spread on TSLA 19 Mar 21 800 -1/790 +1. Now it is deep ITM.
Is it still possible and advisable to roll it to later date, lets say 1 or 2 months later so that there is possible more time for the stock price to be OTM? Thanks!
Thank you for your support! TSLA has been on a wild ride. Looking at the technicals it looks like it definitely has the potential to come down to at least around $510 to $470. At that point it's just a matter of will it try and go back up or not.
Since it moved so fast in such a short period time, up and now down, it definitely has the potential to go back up but I think it could be hard-pressed to reach new highs in the near term. It looks like if you rolled that spread out to April you might be able to get a credit of around $0.60 per share or so. That might be a game worth playing to see if TSLA goes back up in the coming months, especially if you can keep rolling it for a credit and didn't mind your capital being tied up.
Just really keep an eye on the time value that you have left in that short option because you don't want it to get to $0, unless you're OK with it being assigned to you. If it starts approaching $0, at that point you need to roll it again. Right now the March 19th $800 puts still have around $1.60 per share of premium left in them.
I hope that helps! Let me know how it turns out.
@@StockandOptionMyLifeOfLearning really appreciate your input! Will the potential loss be higher with each option roll?
It really depends on where the stock is trading at. As long as you're rolling for a credit each time, then your overall position loss should get smaller and smaller. Hopefully over time TSLA will come back and those options will expire worthless or you'll be able to buy them back for next to nothing.
Generally I don't do very many bullish credit spreads, I sell naked put options and on occasion I'll do a bullish debit spread. But in your case, should be able to almost always roll those for a credit, or sometimes if the options go really deep in the money, you'll be able to roll them for a break even. Typically it doesn't cost you anything to roll out the same strike price. But since you're buying an option to turn it into a spread, it depends upon the price of the option you're buying as well.
The principal would still be the same. You might have to be patient getting your orders filled because sometimes when those options go deep in the money, the market makers aren't as flexible on pricing and you have to let your order sit out there for a while so you get filled at a fair price.
@@StockandOptionMyLifeOfLearning thank you. There is so much to learn.
Will slowly watch all your videos since 1 year ago.
It is a very large and diverse topic. That’s one reason why I got into option trading because I knew that if I spent the time, energy and effort learning it, I could probably make pretty good money using it because it was a more challenging topic to learn. But once you have it, it’s a lot of fun!
What happens to Wash Sale rule when we keep rolling our ITM CSPs to keep the hope alive from December to January to February for some credit (loss on BTC profit on STO) and eventually decide for an assignment. Please help. Thank you!
I have that exact question on my list for when I meet with my accountant here in a few weeks.
@@StockandOptionMyLifeOfLearning Thank you!
@@StockandOptionMyLifeOfLearning and @Tarun Jaiswal - if you are rolling from Dec to Jan, the Dec put is a completely different security than the Jan put - so there is no wash sale. You are thinking of just buying and selling XYZ repeatedly. If you sell XYZ 20 Dec put and buy XYZ 20 Jan put - they are completely different securities and the wash sale does not apply.
What can I do with my 2/19 PUT on CHL. I am having trouble rolling or closing it. Help
Hey Robert what's the strike price?
@@StockandOptionMyLifeOfLearning27.5
There is a good bit of open interest in that strike price, I’m showing 493 contracts, but Robert in a situation where I have an option and the market makers are making it difficult to roll it, I just set a limit order good till close and let it sit out there for a few days and generally if it’s a reasonable price, it’ll get filled. Does that help?
13:42 JHC how many positions open at a time? This is the portfolio i want when i grow up 🤣
Hey Simon thanks for the question and your support! I generally have 30-40 positions on at a time in my main options trading account. I like to keep position sizing around 1-3% of the account. My absolute max is 5% of the account per position.
Hi Randy, how is it that you still have the ability to roll a put option that is deep ITM without it being assigned? Is it soley theta value that keeps it from being exercised at this point. 10% ITM or $20 ITM makes me always question how come these options aren't being exercised. Thanks for your content!
Thank you for the great questions and your support! Yes you are correct. If there's is theta or time premium left in the short put, even if it's DITM, the owner of that option is better off selling the option then assigning the stock. If they assigned the stock, they would be giving up the theta left in that option.
When the short puts get down to < $0.10 or sometimes more, then the likelihood of them being assigned goes way up because typically, with the spread between the bid/ask there really isn't any time value or theta left.
Thank you for your response. That cleared it up for me perfectly! Thanks
Hi Randy. I rolled an expiration 26 days out on a losing CSP. My YTD P/L decreased by $1021. I rolled with a credit but my YTD profit decreased by $1021. Any insight why my YTD P/L decreased?
The only thing I can think of is that it reflected the loss on the position you closed out but did not reflect the cash you received from the new position. If the position moves back in your favor and it's a complete win for you, then at that point, maybe your overall P&L will reflect all the gains.
@@StockandOptionMyLifeOfLearning Thank you for replying. I am curious to see the outcome and I am hopeful that the stock moves upward by the new expiration. Thanks for your channel. I’m a big fan.
Hi Randy, I have a couple of sell put options which are expiring this Friday and are deep in the money. The first one is FSLY expiring May 7, $66 strike price, sell to open put option. Today's closing price is $58.06. I'm thinking about rolling it to May 21 (3rd Friday of the month) at the same strike price of $66. Should I roll it tomorrow Thursday or wait until Friday? Is this the best way to do it on the strike price and expiration date? How would you do it if you were me? Appreciate your input and looking forward to your response. The second one is VIAC expiring May 7 too, $41 strike price. Today's close is $39.10. Thinking about rolling it the same way as the first one.
Thank you for your support and question! With FSLY that is not a stock that I track or trade so I really don't have an opinion on the company. I only trade in companies that I really believe are fundamentally strong. However to answer your question, it really boils down to what do you think the stock is going to do and if you're OK with it being assigned to you or not.
If you don't want it assigned to you, then you need to make sure that you have some amount of time value left in the option. Otherwise this close to expiration, you're a lot more likely to have it assigned if there's no time value left in the put option. FSLY appears to be at a support level. If it breaks through that support it will definitely head lower from here. If you'd like to protect against that, then you may consider rolling your short strike price down and out.
I generally don't do weeklies for variety of reasons. I'm working on a video right now about that because I get asked about it so much so please be on the lookout for that. However in this situation, if you do not want to be assigned, then you may consider rolling your strike price down and out. Monthlies tend to have higher volume, thus smaller bid ask spreads.
This is not my advice to you but if I was short that option, and still felt good about the company, I'd like to roll the strike price down because if FSLY does not hold support, were it closed last night, the next support isn't until around $49.
VIAC is one that we've been on the fence about trading. It is trying to find support around the $38 area. So far that has held on the second downward wave. If it does continue to hold, then you're probably all right rolling that short strike price out. Again I prefer monthlies. If it does break down through that $37 and $38 support area, then I would be trying to roll that short strike price put down and out. I hope they work out for you!
@@StockandOptionMyLifeOfLearning Thank you Randy for your response. Appreciate very much! FSLY went down big today. I tried to roll it to May 21 with a strike price of $55. What do you think the strike price and expiration date that I picked? I haven't done rolling before and have some questions. What do I have to enter if I were to select the Net Credit under the Price Type? It defaulted to Diagonal strategy. Is that the correct choice?
I think you're going to have to go a lot farther out than two weeks to get a roll order filled and when you are rolling the strike price down and trying to get a credit. As far as price type, it really depends on what broker you are using. Just make sure before you place the order that the action type with the legs are exactly what do you want to have happen. The order type that you're describing sounds correct but without seeing it I don't want to tell you 100%. Just make sure that each leg of the order is accomplishing what you want done (Buy to close or sell to open).
@@StockandOptionMyLifeOfLearning I tried the June 18 expiration, the strike price of $40, and used the Net Credit type on FSLY. Don't know why it didn't get filled. Maybe it had to do with the amount I put in Net Credit. I ended up using the market order. Thank you for your help. You have a great weekend!
So you keep referring to getting the same strike price when you roll out the options, but when I look at current strike prices, they're all higher than my original strike price as the stocks are increasing in value. So, how can we roll our put forward when we can't obtain the same strike price?
Hey Don, thank you for your question and support! If the strike you sold is not available for a future roll, then you could still roll it you'd just have to choose a higher strike price (if you were comfortable with that higher level) to roll it out in. Generally, you should still be able to do that in one order.
@@StockandOptionMyLifeOfLearning Thanks - not in my case usually as we're doing some options on more volatile stocks but understood. Hopefully you guys can address all possible circumstances in future videos. But very helpful info for sure!
Thank you for the suggestion Don! Could you tell me the exact position you're referring to so I can review it and try to work it into a future video?
How are your itm options not getting exercised?
If an option still has sufficient extrinsic or time value premium in it, it most likely will not be exercised. Here’s a video that will help explain that: th-cam.com/video/RrWEqdmUYOI/w-d-xo.htmlsi=wyqHlkuJUZ6C8HcO
I just checked... I have yet to own HOOD, but I'm up $370 on it... LOL...
Nice Andy! 👏 Thank you for sharing.
What is the option analysis tool you are using?
Thank you for your question and support! If you can give me a timestamp for which part of the video you're referring to you I'll be glad to answer your question. The ones that I currently use are the Greeks with Interactive brokers and then on ETrade, they have several option tools that I use including: options income finder and options analyzer.
@@StockandOptionMyLifeOfLearning Thank you for your quick response. Ard the 4:36 mark.
Cool thank you! That is an option analysis tool that ETrade has which you can use for free if you have an account with them. I'm not sure if it's free to non customers or not.
Cant u just choose a stock u really like and u would have bought anyway and start selling puts until u get assigned? And then u start selling covered calls?
Thanks for your question and support! Absolutely, if you feel comfortable then that's definitely a way that some traders trade options. We have several hundred stocks that we are willing to trade in because we feel like they are fundamentally strong, and then we prefer to wait until they've experienced some amount of decline or are resting at or close to support before we make a trade. But you could definitely do as you described and if you're OK with being the options assigned to you, which it sounds like you are, then you're just riding on Cash Flow. We prefer see that it's sitting at or fairly close to some sort of support but that's just our preference.
Make sure you understand the Risk before following this strategy. You have unlimited risk if the trade goes against you. You can significantly limit this risk by selling Credit Put Spreads instead. Also the deeper ITM Option you are selling - the more likely the Buyer will exercise it and then it will be assigned to you.
Typically - a buyer will not exercise it if a significant Extrinsic Value is left (Lot of Days to Expiration) - but they still can - so set a target for yourself to get out of the position much earlier than the expiration date.
If you can't be bothered to learn Risk Management or have the discipline for it - just trade Debit Spreads or Calls that have limited Risk. In addition - you can just accumulate shares and use them as collateral to sell Covered Calls to hedge against any downside swing in your common Stock Position.
Thank you Harris for your comments and support! Doing spreads provides a trader with downside protection. If a stock moves against you, and the position goes DITM, it can be very challenging to roll the position for a credit if not impossible.
As you mentioned, if a position moves against you, but still has sufficient extrinsic value, it should not be exercised. As the extrinsic amount gets smaller, your odds get higher that it will be exercised.
Understand that a covered call and short put option have the same risk (if it’s a dividend stock the one exception would be that you get a bit more cash from dividends) profile. If a stock goes to $0, a trader would have the same loss (except dividends if it’s a dividend paying stock) being short a put or in a covered call position.
one question on the rollout over and out on the ticker LAZ, where you did DITM with strike price $37 expiring on Dec.
Am i correct to say, even at Day 0, the market price still remains say around $35, we can still close the option with little or no loses?
Hey Martin as long as the stock price hasn't changed, then you should be able to close it out for a little or no loss. You would obviously want to do that with a limit order because the spread between the ask and bid can be fairly wide. But if I'm understanding your question correctly, if you sold an option but decided to buy it back that same day, and the price hadn't changed, you should be able to buy it back for about you paid for it. You'll probably lose a little bit due to slippage but it shouldn't be too bad if you're patient and use a limit order.
@@StockandOptionMyLifeOfLearning Thanks you so much for your advice.
I only intend to buy back near to Day 0, very unlikely on the same day.