A trade went bad, kind of... :-)

[earth_imperator]

@zghorner, thx for the analysis, I'll study and reply later.

I just wanted to say this: above, I think you wrongly assumed that this is a naked short trade.
But it's not! It's just a CashSecured Put, ie. ShortPut plus reserving the cash for the strike minus the credit. In my case (CashAcct), the net cash requirement is Strike - Credit, ie. 7.50 - 4.95 = 2.55, for a credit of 4.95, meaning a profit of up to 194%. I think this is (or was ) not that a bad deal, IMHO.

 

[zghorner]

@zghorner, thx for the analysis, I'll study and reply later.

I just wanted to say this: above, I think you wrongly assumed that this is a naked short trade.
But it's not! It's just a CashSecured Put, ie. ShortPut plus reserving the cash for the strike minus the credit. In my case (CashAcct), the net cash requirement is Strike - Credit, ie. 7.50 - 4.95 = 2.55, for a credit of 4.95, meaning a profit of up to 194%. I think this is (or was ) not that a bad deal, IMHO.

you are right I did assume. The trade is absolutely not a disaster and your only being down 10% is proof of that...it is good that you have the cash to cover...and it kind of sounds like to believe in the future of this company and wouldn't mind holding the shares???

But the fact remains that you were wrong on the trade. And IMO one should never let a trade turn into an investment, those two realms should be separated. My advice (which should be taken lightly as I am no options expert), would be to cut it free and eat the 10% as the cost of tuition then reevaluate and try again.

 

[earth_imperator]

gotcha. so in this case, yea you obviously should have had a hedge even though IV hasn't increased (the only time I would argue not to is if perhaps you wanted to actually acquire the shares). But one smart thing you did (probably the smartest thing you can do when selling options), was wait until IV was high to sell...

I've a scanner for finding trade candidates, though I haven't found the optimal settings for it yet.

View attachment 290996

on a second look, on your purchase date IV for Jan options (green line) was 190%...so not THAT much higher than now...still better than the opposite situation.

Sorry to correct myself again: the IV at opening on Jul-5 was 230 (for Spot=5.62, Put, DTE=199.5, Strike=7.50). Currently it's about 180, ie. this is of course good for such a short trade.
Here's the trade in a simple graphical analysis tool: https://optioncreator.com/stxdgxe
Current Spot is about 2.85, DTE=170.

So the question is, do you expect IV to drop enough moving forward to make holding a loser worth it? Doubt.

The IV is that abnormally high b/c of the uncertainty. If the uncertainty eases than the IV should drop to below 100, IMO. And since the stock fell b/c of bad news due to the delay in the production, but now the company goes on with the production plan, so then I would expect that the stock should rise again. IMHO.

 

[destriero]

Short-sold some weeks ago FFIE 7.5 Put ATM. After a week or so USpot fell badly to 2.00 ,
and today rose about 25% to 2.50. IV was and still is high (about 190).
Funny, I'm still only just 10% down with this position, says broker's software, and that's correct according to B/A calcs.
Should I somehow try to "rescue" this position (doubling down, or extending it to a spread etc.)?
Or should I take the said 10% unrealized loss and close it now?
Or should I rather just wait till expiry, hoping for some better days?
ExpDate is Jan-2022 (about 171 calendar days left).
Here the 6M chart, I opened the pos at the peak of the underlying (yeah, bad timing, was thinking it breaks-out... ).
Any constructive advice?

View attachment 290906

No, you were not down only 10%.

 

[earth_imperator]

My scanner suggests the following ShortPut trade. Is he/she/it right?
Legend: K=Strike, S=Spot, S0 means: if at expiry Spot stays the same.
Most important thing (PL%) is made bold:

CLNN DTE=226.40(2023-03-17-Fr) S=3.4950 (-0.99 %) @BE=1.0247 (-70.68%) @S0(PL=143.98% max=143.98% PLann=321.21% maxAnn=321.21%) K=2.50 IV=250 ....

If one can short-sell it for 1,50 or so. Bid=1.35 Ask=1.75 (at broker TDA).
Above PL calc is based on CostBasis = Strike - InitialPremium

 

[earth_imperator]

@destriero wrote: "No, you were not down only 10%."

Since the volume is very small (ie. not that liquid), the B/A spread is wide, so it depends on what you take as basis for your PL calc.
Using current quotes of Bid=4.95 Ask=5.60 --> taking the MidPrice=5.275 as basis, my calc gives this result:
Paid=2.5500 PL=-0.3250 PLpct=-12.7451 PrChg=PL=-0.3250 PrChgPct=-6.5657
Ie. current PL=-12.74% and PremiumChgSinceBegin=-6.56% (w/o rounding)
CostBasis = Strike - InitialPremium, ie. the "Paid" above: 7.50 - 4.95 = 2.55 [ie. using a CashAcct, not MarginAcct]
Of course "Paid" means the cash requirement collateral (similar to margin requirement).

 

[earth_imperator]

My scanner suggests the following ShortPut trade. Is he/she/it right?
Legend: K=Strike, S=Spot, S0 means: if at expiry Spot stays the same.
Most important thing (PL%) is made bold:

CLNN DTE=226.40(2023-03-17-Fr) S=3.4950 (-0.99 %) @BE=1.0247 (-70.68%) @S0(PL=143.98% max=143.98% PLann=321.21% maxAnn=321.21%) K=2.50 IV=250 ....

If one can short-sell it for 1,50 or so. Bid=1.35 Ask=1.75 (at broker TDA).
Above PL calc is based on CostBasis = Strike - InitialPremium

In above calcs the scanner uses as Premium MidPrice=1.4750 as basis for its PL calcs.
This is the MidPrice of Bid=1.40 and Ask=1.55 when it got the data about 88 minutes before market close. Since then the Bid changed to 1.35 and Ask to 1.75, s.a.

ATTN: next week or so the company reports its quarterly earnings...
B/c of this fact the trade could perhaps be risky...