If you open a position and, for example sell a put, and the price decreases immediately… do you guys wait until expiration to see if it recovers or do you just exit and take the hit and move on
What broker is going to let you sell a put? Open an account and get back to us.
Terrible_Champion298 on
Lots of variables in that question, post a position. But the assumption so far is your short put went ITM soon after you opened.
LetMeAskPls on
I think it really matters what your plan is. You obviously know your entry point, what was your plan for the exit point? How many days till expiration? What strategy and what is the probability of profit?
If I’m doing a 45 Date trade that has a 90% probability of success and the price goes down, I don’t really care. I have 44 days to go and based on my pop I should be good.
HeroicTanuki on
Do you have a catalyst or something on the horizon that you are expecting will drive the position ITM? If so, why sell early and take the loss? Stick to your strategy unless something novel changes your available information.
Did you open the position with no strategy in mind (ie. gambling)? Sometimes I will open a position on a feeling (like expecting a downturn after a large run up) and it doesn’t materialize. I usually exit those positions around 15% loss. I’ve missed gains this way but I’ve also avoided some big losses too. It’s all about your personal risk tolerance and making educated assumptions.
flynrider58 on
Buy it back and take my profit.
SDirickson on
Or, if you’re using a CSP as an attempt to acquire a security you like for the long term but at a lower-than-current price, you say “cool” and hope for it to go a bit lower.
RadarDataL8R on
I just roll it at the same strike price until it either recovers or I decide to take assignment. Still very good premium for ITM puts. If there isn’t enough premium in rolling then I will slowly roll down and out until there is.
That’s assuming nothing has fundamentally changed with the stock itself.
squareplates on
I roll it forward in time and down in price (if possible) for credit.
This gives the stock more time recover and collects additional premium. The more time left on it, the less the risk of assignment.
8 Comments
What broker is going to let you sell a put? Open an account and get back to us.
Lots of variables in that question, post a position. But the assumption so far is your short put went ITM soon after you opened.
I think it really matters what your plan is. You obviously know your entry point, what was your plan for the exit point? How many days till expiration? What strategy and what is the probability of profit?
If I’m doing a 45 Date trade that has a 90% probability of success and the price goes down, I don’t really care. I have 44 days to go and based on my pop I should be good.
Do you have a catalyst or something on the horizon that you are expecting will drive the position ITM? If so, why sell early and take the loss? Stick to your strategy unless something novel changes your available information.
Did you open the position with no strategy in mind (ie. gambling)? Sometimes I will open a position on a feeling (like expecting a downturn after a large run up) and it doesn’t materialize. I usually exit those positions around 15% loss. I’ve missed gains this way but I’ve also avoided some big losses too. It’s all about your personal risk tolerance and making educated assumptions.
Buy it back and take my profit.
Or, if you’re using a CSP as an attempt to acquire a security you like for the long term but at a lower-than-current price, you say “cool” and hope for it to go a bit lower.
I just roll it at the same strike price until it either recovers or I decide to take assignment. Still very good premium for ITM puts. If there isn’t enough premium in rolling then I will slowly roll down and out until there is.
That’s assuming nothing has fundamentally changed with the stock itself.
I roll it forward in time and down in price (if possible) for credit.
This gives the stock more time recover and collects additional premium. The more time left on it, the less the risk of assignment.