Better alternative to an outright put

[ironchef]

I agree that there is a time to close out the position as a mitigating control. I guess the reason I wouldn’t want to do that in this scenario is because it would result in a loss. Whereas, there is a possibility that price stays the same or moves upward and I would have a gain. But, I would be willing to sacrifice my gain potential to guarantee there is not a loss, with full downside protection.
Hope that makes sense. To recap. This is a CC position that was sold in the money for a small premium, and the price has dropped towards strike. So their is now more time value on the short call, that if I purchased it back would result in a loss. And as mentioned, if stock price stays put or moves northward, would have the gain. Short time frame as well.

If you don't spend additional cost, it is cost free, if you have no downside risk, it is risk free. In a nutshell you are looking for a risk free cost free way to profit from your CC?

 

[dickey7]

If you don't spend additional cost, it is cost free, if you have no downside risk, it is risk free. In a nutshell you are looking for a risk free cost free way to profit from your CC?

Trying to neutralize the position risk at lower cost than outright put.... was thinking if act before price gets to strike, I could sacrifice potential CC premium to get lower cost “insurance”.

 

[Baozi]

Trying to neutralize the position risk at lower cost than outright put.... was thinking if act before price gets to strike, I could sacrifice potential CC premium to get lower cost “insurance”.

The problem is that you have already decided that you want to buy that put, so no matter how much sensible advice you receive, you won't change your mind.

The only way you could pull this off is by legging into a trade where you were initially correct on direction, so you already got some profit, the puts likely dropped in value and you can afford to buy them while preserving a part of your gains. At that point however, it would still make more sense to close the trade rather than to buy a put.

 

[ironchef]

The problem is that you have already decided that you want to buy that put, so no matter how much sensible advice you receive, you won't change your mind.

The only way you could pull this off is by legging into a trade where you were initially correct on direction, so you already got some profit, the puts likely dropped in value and you can afford to buy them while preserving a part of your gains. At that point however, it would still make more sense to close the trade rather than to buy a put.

Doing that with covered call does not make sense as your gain is limited. Own a call outright and you run up a huge gain makes more sense.