Avoid Locking in Losses When Rolling Options
Вставка
- Опубліковано 25 лип 2024
- Subscribe to our Second Channel: @tastylivetrending
Check out more options and trading videos at www.tastylive.com!
======== tastylive.com ========
tastylive is a real financial network, producing hours of live programming every day. Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade. With over 120 original segments, and over 25 personalities, we’ll help you take your trading to the next level, whether you are new to trading or a seasoned veteran.
Follow us on Twitter: tastyliveshow
Check out our Instagram: tastyliveshow
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read all applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure(www.theocc.com/company-inform...) and the Futures and Exchange Traded Options Risk Disclosure Statement(assets.tastyworks.com/product....
Past performance is not indicative of future results. Performance is not presented net of all commissions, fees, and expenses. Multi-leg option strategies incur higher transaction costs than single leg trades as they involve multiple commission charges. Examples provided are for illustrative, informational, and educational purposes only and are not intended to be reflective of results you can expect to achieve. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request.
tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.
tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with tastylive whereby tastytrade pays compensation to tastylive to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of tastylive by tastytrade. tastytrade and tastylive are separate, but affiliated, entities with their own products and services. tastylive is the direct parent company of tastytrade.
Scenario 1 (which you described). is to be assigned for your Put and start selling Calls after that. $9500 will be converted to volatile stocks. Available cash - $250
Another scenario is to close your Put when mkt price is approaching 95 (at 20 DTE). And sell new Put with lower strike price and may be further out in time (45 DTE). Overall profit should be btw 0-200, but still profit. And you still have solid $9500 cash.
Thanks for the video, but would appreciate ideas on rolling over strangles or iron condors. You suggested .16 delta for a 45 DTE trade. Should I keep rolling over to a fresh trade with same delta or the same strike.
At the risk of being a bit “picky”, writing a call below the break even price only locks in a loss if the stock reverses course and rises again above your strike price. So writing a call below your break even can, but does not necessarily, “lock in” a loss.
Great now I know what to do if I get assigned, to recover my losses by taking the opposite side close to ATM. Thanks Mike!
Helpful guide, thanks alot
I think another good point is if the stock goes down too much... say in your example down to 85 or 90 and you're only getting a couple cents credit is it really worth it? I have had the scenario where the stock shoots way up after I sell the super cheap call and wish I didn't. now I'm more inclined to wait until the stock moves up a bit to sell a CC at a decent credit. does this make sense and is this the choice you would make?
Yes - it makes no sense to lock in a loss, especially when the premium isn't there.
excellent !!!!!!!!!! THANK YOU !!
Well explained, thanks alot
okay, I think this explains why I lost money when I rolled my put today; I thought that I would profit because I was collecting more credit than debit, however, because my breakeven on my initial put was 243 and I bought to close it at 242, I locked in a loss of 100 dollars ... at least I think this is what happened. If my new put that I rolled proves to be profitable, it can offset this loss, but I am still starting from a loss. Pretty sure this is what happened. Thank you for the info.
i guess Im asking randomly but does anyone know of a way to get back into an instagram account..?
I stupidly lost the password. I would love any tips you can give me!
Let's say I've made short naked put and got $1. My stop loss should be $3 then. One week before expiration I decided to roll it for $0.20 credit, so I collected $1.20 till now. Should my stop loss be set at $3.60 now?
thank you
I wondered what was the opposite strategy to a covered call. Meaning if you owned shares and the stock price dropped. I used protective puts however the cost basis was high. I then applied collars to lower my breakeven but only did them in spreads of 5 to 10 points. I gotta see this video again to fully understans it. Does it mean emitting a put is a better protection than buying a put when you own the shares?
Hi Carlos, check out some more videos/descriptions on common options trading strategies: www.tastytrade.com/tt/learn
tastytrade gracias! Im going to be trading again soon. I work a lot with excel for my spreads and telechart for my charts. Hope you guys are doing well....im a bit shaky about going back in. But thanks to your videos and others...im a lot more knowledgeable nowadays.
amazing video
my tiger trade does not allow me to sell call even though i ve a 100 shares, i just dont understand why is it ?
Quick question
when your down on ur spread and therefore your account goes down .... When you roll you accept the loss. So, your account will be lower than what it was prior to putting on the trade? So you have rolled the spread for a credit and it is working out ... do you go back to ur original account size once you gain all the credit from
Your rolled position? or ur still down?
You get it back.
@ 5:27 wouldn't the put option get exercised automatically? I didn't know we had till expiration date to make a decision if it is ITM
early assignment is rare
Just because the price went below your strike does not mean you would automatically get assigned. It can happen, but depending on how long until expiration its unlikely. If youve got more than a few days till expiration it's unlikely youd get assigned.
“early assignment is rare” - It all depends on your definition of “rare”. In my experience early assignment happens “occasionally” (more than rarely). Just sayin’.
What is the name of the Led Zeppelin song at the beginning of this video?
Am I able to roll my covered call so that I can avoid actually selling my shares?
Sure - here's a segment on this:
www.tastytrade.com/tt/shows/trade-managers/episodes/avoiding-assignment-in-covered-calls-12-12-2018
@B 105N, yes, but ask yourself this first. Why did I sell a covered call on a stock I wanted to keep? Why did I choose the strike price I picked? Did I choose wisely? Choosing a strike atm will give you more premium, but you increase the odds of going itm and you loose the chance to participate in gains if the stock rises a lot before expiry. Choosing a strike further otm will give you less premium, but you benefit more from stock price increases.
It sounds like you are suffering from sellers remorse because the stock is up above your strike, a lot, and you feel like you are leaving money on the table. I've been there. I had a stock called away BEFORE expiry, two days before the dividend Ex-date. My lesson learned was, "Don't sell covered calls near dividend Ex-dates". Live and learn.
Experience is what you get when you didn't get what you wanted. If your covered call is deep itm, it probably does not make financial sense to roll to a way further out expiration date to break even. Some things to consider: Have you a lot of equity in the stock? Have you owned it for less that a year and will have to pay the higher tax rate for short term gains? If so, then it might make sense to roll to a further up strike with a further out expiry. But you are still at risk of being in the same situation 45 days or 60 days from now when your new covered call goes itm again. On the bright side, you will have participated in more capital gains to pay taxes on. 8)
Make better choices.
$91 CC makes sense if it the stock price continues to fall!
yes if enough premium to breakeven
All this cost basis stuff makes me want to stop trading for fear of tax implications. Why can't I use profit or
loss from my brokerage statement at years end?
You can - tastyworks allows you to plug into many of the popular tax filing services and you can just import data - cost basis in this example is to determine where you break even at the end of the trade.
How can you collect only $1 at strike 91 and stock is at 95%? That is $4 intrinsic plus some extrinsic.
$95 not 95%.
$1 at 91 is in reference to the OTM premium - if the option was ITM it would be at least $4.00 due to the intrinsic value.
nice video.. have many questions any mail I'd to reach u
You can shoot us an email at support@tastytrade.com and we'll be happy to help!
I consider myself an expert because i was running this exact strategy (3 scenarios) in my mind during my long travel yesterday 😎😎
You need to offset your long travel with a 95 short travel for protection. 😜
Why dont u just sell short(weekly) puts and when u get assigned,u start selling a leap covered call(1 or 2 months) 2 or 3 dollars more of the price u payed earlier?
With a stock u wanna buy anyway and u dont mind keeping in the long term,in case the share price goes down, preferably with a monthly dividend?
So u make money selling weekly short puts(premium)
If u get assigned,u buy at discount price and then u sell a leap call
AutomaGiclly, you hit the mail on the head. Write puts against dividend stocks that you want to own anyway.
Mike knows his stuff but I think he makes things more complicated. :-)
Agree
How To Avoid Locking In Losses When Rolling Options Trades? When did you roll it? Are you saying when you short a put you are automatically long the stock so then you can sell calls? You lost me or this wasn't about rolling options at all.
No - this is a simulation where we sell a put and then become long the stock - at that point we can sell a call against the shares without adding any risk to the upside.
You didn't explain the process of rolling very well and it really was just about rolling a covered call. What about if you got a credit of $1 and you want to roll out to the next month, how do you the math of taking a debit to buy it back and then selling the next month out for a credit. That's what I was assumed this was about, but it wasn't. Nonetheless, for what it was it was well done.
You would just take the net credit of the transaction, which is presented on the trading platform. If you collect $0.20 credit for rolling, that means your new option is worth $0.20 more than the option you're closing. If you just keep track of the net credits, you don't need to keep track of the raw transactions per-se.
@@tastyliveshow would it matter if my new strike price to keep it rolling is different each week so that I will receive a credit and not debit?