I did 5 OTM Covered calls on NVDA $122 Strike Expiring this Friday, for $0.56 per contract. The stock broke resistance and flew. 90% of the time, I win these, but with this surge I am now very uncertain. We have 3 days left. I'm am trying to come up with a plan to recoup the money with a high chance of success within 2 weeks. Maybe with a cash secured put, where I can ride it with the stock going up and collect the extrinsic value which will be at least = to the loss from the covered option.
Posted by Snoo_60933
14 Comments
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Check out u/esinvests he has a YouTube channel all about options – Outlier Trading I’m sure he has one on this and if not will answer your questions
What did you do exactly? You have 500 shares of NVIDEA or did you sold naked calls? And now you have to deliver 500 shares of NVIDEA by this friday?
Recoup what money?
You can let your shares get called away and you’ll make $3,000 (600 x 5) since your cost basis is 116 and you are obligated to sell at 122. If you are still bullish until the following week, you can roll to Oct 4, 126 calls for a credit. If it is above that price by expiration, you will make $5,000 (1,000 x 5).
Based on your post history and grasp of covered calls, I doubt you “win” 90% of the time.
You can’t recoup your money because you haven’t lost anything – you’re up (.56 x 100 x 5) in call premium + (~5 x 500) in underlying appreciation for >$2780 in total gain. You will lose out on any underlying gains above $122, but you were bearish to begin with so I wouldn’t say being up nearly 3k when the stock moved dramatically against your expectation to be a bad thing lol.
Roll them. Buy back the calls at a loss, but sell new calls farther out at a higher strike for a net profit. It’s basically a punt. Your brokerage probably has a “roll” transaction that puts it all in one transaction. Make sure you end up with a net credit.
If your cost basis is 116, all you need to worry about is capital gains tax.
You can absolutely sell some puts to increase your delta while the CCs happen, especially if youre bullish now. This will obviously increase your exposure to NVDAs price.
Welcome to covered calls where people think it’s free money until you learn that market makers ain’t handing out freebies. So there are 3 options:
Do nothing and hope nvda doesn’t hit 122 or 122.56 to be exact. If it goes over 122, just get your shares called away and buy them back on Monday. Since you did this a few times before, I would count the previous credit that you took in as part of the break even as well. Nvda can do anything in 3 days but it’s likely you still came out ahead if you have been collecting credit for a while. Do this if you are bearish for the next 3 days.
Roll your call out to a later expiration date at a high strike price. If you are near term bullish, you can roll your short call out to another call that has less delta so technically the roll will be a positive delta trade where you get more positive delta but you trade theta burn which should be running fastest with your current short call. You can adjust how much positive delta you want to add by playing with the strike and expiration of what you roll to. Do this if you are moderately bullish in the next 3 days.
Lastly, you can roll calls up this expiration by paying a little bit of that .56 that you took in back. For example you can move from 122 to 123 for probably less than .4 a contract so give up some credit but be less likely to get called away and don’t add any duration to your sold call so you can resell next week for more credit. Do this if you are very bullish for the next three days.
Bonus: sell puts finance rolling calls up. If you are extremely bullish then the put side is free money so might as well take that money and roll your calls up. This assumes you are extremely bullish for the next three days and you have the buying power for it.
You went wrong when you thought there’s free lunch in the market. If you sold cc on nvda in the last 5 years, you would have drastically underperformed. You can click some buttons or pray ms market let you off the hook this time but if you like a stock, just hold and don’t touch it.
The September 27th 122 strike cc is $1.53. You were paid $0.56 so you are down $0.97. You have 5 contracts. Who cares?
Your basis is 116. 122/116 is 5.2%. Actually 122.56/116 is 5.7%.
When did you enter the trade? A week ago? You made money. Take profit.
So let’s look at rolling out.
The October 4th 122 strike is $3.05. You would gain another 3.05-1.53 or 1.52
The October 11th 122 strike is $4.15. You would gain another 4.15-1.53 or 2.62.
The October 18th 122 strike is $5.13. You would gain another 5.13-1.53 or 3.60.
You have a million choices.
Stagger your cc strikes and DTE.
Maybe let 2 expire and roll the other 3 out. You can’t go broke taking profit.
Stop being greedy. You yolod and increased your account by 10% in a few days and now ur upset ur not getting more.
That type of greed will blow up your account eventually. 2% daily growth will 100x ur account in a year. Stop swinging for the fences or ur gonna strike out.
i shake my head every day at the people here trading options and just dont understand them. How the OP thinks he lost money is beyond me. If they close it for a loss, they are still making money on the underlying. don’t play with fire if you dont understand the ramifications (or even understand what the outcome means). You haven’t lost a dime buddy – better than all the huge loss porn we see here every day.
You can either let them be exercised at 122 and take the premium along with profits or buy back your contracts at a higher price then you sold them while holding for potentially higher gains.