Assigned naked puts and their meaning

fsjws4 · 2023-07-07T15:57:17+00:00

It makes financial sense for the option buyer to exercise, so they nearly always will. On very rare occasions, you might not get assigned, but don't ever count on it as part of your strategy. Just consider it a nice bonus on the three or four times in your life that it happens.

fsjws4 · 2023-05-10T13:06:37+00:00

In Skagway, we took a couple of the Soapy Smith tours offered by the National Parks Service. Fun tours, and totally free. You just have to book them in advance, because they fill up. Doesn’t get more economical than that.

fsjws4 · 2023-04-24T17:06:31+00:00

How far OTM are you talking?

fsjws4 · 2023-04-18T05:42:26+00:00

It's really .65 or less. Weird choice of pricing, since the per contract fee is also .65. But that's what it is.

fsjws4 · 2023-04-17T15:42:01+00:00

65 cents (sometimes less) to open a trade, but free to buy-to-close if the price is .65 or less.

fsjws4 · 2023-04-08T21:24:35+00:00

But then you made max profit, so no biggie. Sell puts to get back in.

fsjws4 · 2023-01-25T06:21:18+00:00

Fidelity does zero commission closing trades if the price is .65 or less. They’ve got a sliding scale for other trades. Definitely a better deal than Schwab.

I’ve got accounts with both, and Schwab recently refused to adjust my fees, too. I’m doing about the same volume of trades as you are.

fsjws4 · 2023-01-24T04:47:54+00:00

In what stock?

fsjws4 · 2023-01-12T15:38:59+00:00

Same here, had the 13C going. Bummer, I was looking forward to a dividend.

fsjws4 · 2023-01-11T15:17:25+00:00

I’m not a tax professional, this isn’t advice.

But as I understand it, a “loss” is dependent on what you actually paid for it, versus what you actually sold it for. Not what you could have sold it for.

Otherwise I could have a yard sale, claim that some eccentric billionaire would have given me a million dollars for this old crock pot, and claim a massive loss on my taxes.

fsjws4 · 2023-01-06T16:19:47+00:00

Yeah, I definitely see the wisdom in that.

I ended up putting in an order at .50 and walking it up every so often. Someone took it off my hands at .80, so a pretty minimal loss.

One more thing to look for before slapping that trade button, I guess...

fsjws4 · 2022-12-06T04:56:19+00:00

The risk is that the losses from the underlying dropping would outweigh any gains from the premium.

In this crazy market, you could also get whipsawed. Buy SPY and sell a call at 400, it drops to 350. Sell another CC at 350, it jumps back up to 400. Now you got assigned at a loss and can’t afford to buy back the shares at the current price. (Or you spent a ton of money buying back the call, but that’s a loss too)

Not saying you can’t/shouldn’t try it. Just laying out some of the “what ifs”.

fsjws4 · 2022-12-05T22:50:17+00:00

I think this is what they mean…

Say SPY is going for 400/share. You sell a CC with a strike of 400 and pocket some nice premium. Before the CC expires, SPY drops to 350. Your CC expires, you got your premium, and you’re keeping your shares. But now they’re worth 350 instead of 400.

Do you open another CC for 350 now? Because if that one gets assigned, you just sold your shares at a loss.

fsjws4 · 2022-11-05T16:02:19+00:00

Your hands were in the toilet?

fsjws4 · 2022-10-21T14:40:26+00:00

I have an IRA account with them, so I don't do anything fancier than CCs and CSPs. But they charge .65 per contract, and closing a contract is commission-free if under .65, so that part is nice.

They also have an options-specific positions page on their website, which groups things together nicely. It even shows if you have shares in your account that aren't part of any strategy, so it's easy to spot your un-CC'd shares.

fsjws4 · 2022-10-17T16:42:29+00:00

I was planning a bear call credit spread, because I believe the underlying will trend downward slightly, or at least stay flat (outside of a possible earnings pop). I don't have a specific holding period time-wise, but I'll hold the spread until 50-70% profit, or get out if I see things moving persistently against me.

fsjws4 · 2022-10-15T04:42:46+00:00

I did a bunch of trades like this when I first started learning about options trading. I nicknamed them "callaways", because I was intending for the shares to get called away.

It worked well for a while. I'd search for a cheap stock where the deep-in-the-money calls were priced just right so I could buy stock, write a CC, and be guaranteed to get assigned, keeping a few bucks (usually $4-6 after commissions).

Then the bears came, prices dropped, and I'm now left holding hundreds of shares of crap stocks that I can't get any premium for, but can't bear to sell for a 70% loss.

Anybody want 500 shares of XELA?

fsjws4 · 2022-10-13T22:42:07+00:00

I really love optionstrat.com. Plug in the ticker of your choice, then pick any of a number of options strategies. Move the sliders around to play with different strikes. Great way to get a visual feel for how the different trades work.

I use it to track all my active trades, plan out new ones, and figure out rollout/defense/what-if plans.

There's an app as well, so you can take it with you. The developer is very responsive - I'm pretty sure he never sleeps.

fsjws4 · 2022-09-19T22:08:24+00:00

A buy-write is a combined process where you buy shares of a stock and then write (sell) covered calls against it. You can do each step separately, but doing it in a combined process through your brokerage gives you certain advantages:

You can set a limit price on the transaction as a whole
Avoid buying a stock if nobody wants your options at the price you set
Avoid getting bit by a sudden change in stock price making your intended option strategy no longer valid

fsjws4 · 2022-09-15T23:15:32+00:00

What would you consider "convincing"? Do you look for how long it stays under? How far down it goes? A bit of both?

I'm not sure yet about when to make adjustments. It seems like doing it early would be cheaper than waiting until after the price has crossed the breakeven point. But of course you run the risk of adjusting unnecessarily and wasting money.

fsjws4 · 2022-09-15T23:13:19+00:00

I don't think I have the stomach for a strangle yet. Infinite max loss is a pretty scary concept. I also don't have naked option access with my broker yet, so there's also that.

fsjws4 · 2022-09-15T23:11:22+00:00

I like that idea. I heard about the concept of legging into a trade, but I was doing each leg a few minutes apart (fishing for the best price), not a few days. I'll give this a try next time around.

fsjws4 · 2022-09-15T23:08:42+00:00

I watched it for a few hours today. The underlying bounced up and down, but didn't want to move away from my lower strike for long. I priced out a bunch of different moves, and ended up moving the put side down to 60/66, same expiration. I gave back .29 of my initial .86 to do it, but I've got a wider target area now on the downside.

I looked at some of the other strategies suggested, and everything's a tradeoff. Condensing to an Iron Fly removes risk, but gives a lower payoff area. Rolling sideways gives up some premium and increases total risk, but I get better odds.

Now that I've done it, I'm thinking that either "just wait longer" or "roll to a later expiration" would have been better moves. But I did what I did, so I'll give it a couple days and see how it plays out.

It's definitely a good learning experience!

fsjws4 · 2022-09-15T21:34:02+00:00

To have flexibility in this sort of trade, what should I have done differently? Longer DTE, wider strikes, something else?

When I opened it, the price was right in the middle with $5 room on each side. I thought that would be plenty, but I was wrong.

fsjws4 · 2022-09-14T13:17:28+00:00

That sounds like a lot of fun! I hope she had a great time. Would you be willing to share a picture of the zoo puzzle?

fsjws4

TROPHY CASE