closing short calls/puts @ 5cents

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darwin666

Suppose you have a bunch of short calls/puts.. which seem to be headed for expiring worthless.

I have heard tons of wisdom posts telling never to keep them open and as far as possible close them out , because you never know which one of them will turn against you.

I do agree with that logic.

however. say you sold the call 10-20 days back.. and u placed the GTC buy back order for 5 cents

and now it has fallen in your favor.. and only 2-3 days are left. and there is no way the stock can move.

then we can use our discretion and probably cancel the buy back order .

NO size fits all rule.. stocks which have no way to moving to cause the option to trouble you, i wud say save the 5 cents on them..
 
I guess no point in covering them if they are deep out of money. I think, the thumb rule is specially applicable to ETFs that can never gap down/up too much.

Options on individual stock may have surprise if there are some news about the company on OPEX evening.

- SU
 
Quote from darwin666:
----Suppose you have a bunch of short calls/puts.. which seem to be headed for expiring worthless.
----and there is no way the stock can move.
----we can use our discretion.....
----i wud say save the 5 cents on them..
More...
1) You're potentially "risking a lot to make a little".
2) By offsetting, you can "free up" money to trade something else that has more "juice" in it.
3) Let somebody else suck the marrow out of the bones. You can eat another piece of chicken instead. :cool:
 
Quote from nazzdack:

1) You're potentially "risking a lot to make a little".
2) By offsetting, you can "free up" money to trade something else that has more "juice" in it.
3) Let somebody else suck the marrow out of the bones. You can eat another piece of chicken instead. :cool:
More...



BUT i am comfortable eating the marrow.. as many times.. getting greedy and trying to get a PIECE of chicken turns me into the BAIT

the hunter get HUNTED.. ha ha
 
I have short calls on SPY at 119. SPY won't go to 119 in the next 2 days. I made a bunch of money on them and they're not worth the transaction cost to close.
 
Quote from stevegee58:

I have short calls on SPY at 119. SPY won't go to 119 in the next 2 days. I made a bunch of money on them and they're not worth the transaction cost to close.
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Exactly - this is a deep out of money CALL on ETF. I think, it was pretty safe to leave it open even if it was 113 CALL.
 
Quote from darwin666:

Suppose you have a bunch of short calls/puts.. which seem to be headed for expiring worthless.

I have heard tons of wisdom posts telling never to keep them open and as far as possible close them out , because you never know which one of them will turn against you.

I do agree with that logic.

however. say you sold the call 10-20 days back.. and u placed the GTC buy back order for 5 cents

and now it has fallen in your favor.. and only 2-3 days are left. and there is no way the stock can move.

then we can use our discretion and probably cancel the buy back order .

NO size fits all rule.. stocks which have no way to moving to cause the option to trouble you, i wud say save the 5 cents on them..
More...
There's no way stocks can move?
Of course they can, surprises happen.
You only need IV to shoot higher, despite a relatively weak move to get you into trouble.

Selling options has unlimited risk, so better buy back at 5 cents.
 
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