I need help managing a bull put; I did not fully understand the trade.
- Thread starter klattermusen
- Start date
I LOVE options. It gives you lots of options (pun intended). It gives you lots of flexibility in trading the underlying, allows you to hedge and more opportunities to turn a loss into a profit or at least break even. And it's cheaper and saves you on margin.
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I know. I forgot that the OP is going to have the underlying with the assignment. If the OP doesn't get assigned though, if he still wants to trade the underlying, he can still sell a put but just buy a put also at the same time to do a spread. A call debit spread and a put credit spread is essentially the same. I just like to think from more of a direction perspective.
That's not my point. My point is keeping the long put open is not always the best idea because you said "keeping the long put is the whole idea of selling the spread". Sometimes you need to sell it right away if the underlying is not going down further after ex-div. If you don't or sell too late, you get double-fucked if the underlying actually goes back up after ex-div before expiration and goes back down further after Monday. There are still 3 days after ex-div until expiration. Anything can happen in these 3 days.
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Do what the others have told you, get
out of this as soon as you can and do
not get into any other contracts until
you understand what you are doing.
Don't deal with random stocks, it is
not worth it because you thought
it would be cheaper.
This stock doesn't look good because
it has only a 30¢ spread between low
and high. I don't see how you are
going to profit with it.
Options trading failure rate is high
because of situations like this, take
the time to learn before proceeding.
out of this as soon as you can and do
not get into any other contracts until
you understand what you are doing.
Don't deal with random stocks, it is
not worth it because you thought
it would be cheaper.
This stock doesn't look good because
it has only a 30¢ spread between low
and high. I don't see how you are
going to profit with it.
Options trading failure rate is high
because of situations like this, take
the time to learn before proceeding.
You are needlessly complicating things..Ignoring the substantial dividend,there's a reason the Op chose to sell a put SPREAD..keep it simple..
He sold a 1 point spread for .40 with a max risk of .60..
Now you are suggesting lifting a leg,"if the underlying isn't going down further". Seriously??Cmon bro..
Think for one second
.If the underlying goes back after the ex date,how in the world is he going to get double fucked??
The put spread is deep, he is LONG..
He gets fucked to the tune of .60 if the stock closes below 10...
End of story
He sold a 1 point spread for .40 with a max risk of .60..
Now you are suggesting lifting a leg,"if the underlying isn't going down further". Seriously??Cmon bro..
Think for one second
.If the underlying goes back after the ex date,how in the world is he going to get double fucked??
The put spread is deep, he is LONG..
He gets fucked to the tune of .60 if the stock closes below 10...
End of story
I'm with @taowave on this one. He bought the insurance because juntas are scary... look at the implied vols on either; ~3x greater than a "normal" histvol would forecast. He's not the only one who's scared.
What's done is done... LET IT RIDE!
https://finviz.com/quote.ashx?t=QA,PBR&p=d
Petroleo Brasileiro S.A. - Petrobras Chart above
Petroleo Brasileiro S.A. - Petrobras
https://finviz.com/futures_charts.ashx?t=QA&p=d1
crude oil
https://finviz.com/quote.ashx?t=UCO&p=d
UCO [NYSE] ProShares Ultra Bloomberg Crude Oil
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Oooh, so you're saying he's not meaning a regular fucking then and you said NO this is not that kind of option action if you know what I mean...
Both of you missed the point. The OP didn't buy that put. It came as part of the put spread.
Anyway that's not how I think when I do bull put spread. I do bull put spread because I speculate the underlying wouldn't go below the strike of the short put and then do the long leg as a hedge in case if the price falls through the short strike. I am sure the OP thought like too that without realizing it was going to go ex-div before the expiration date.
I wasn't complicating things. I am NOT suggesting lifting the long put leg NOW. I am saying AFTER the ex-div. There is nothing wrong with lifting a leg if the leg is no good and lifting it would lower the cost. Why still be stuck with the 60 cent risk when you can decrease it if you can lift the long leg when there is still some extrinsic value left even if it's OTM? Why let it expire worthless when you can do something about it. You said it yourself @taowave,
I like to cover all bases. Implied vol. is not the same as real vol. Implied vol. can be through the roof but it's the realized volatility that determines everything. That long put only has three days to go ITM after the ex-div if it hasn't gone DITM then. Within these three days, if the price doesn't go further down, there is no harm in lifting that long put leg when there is still some extrinsic value left. That's all I am saying.
Starting Monday, because OP believes that the underlying will go back up, if the OP has the underlying, he can buy a put or put debit spread (to save some money) to hedge.
If OP wants to do a pure options play, if it's me, I would do a bull put spread or a single call if the up move is REALLY strong with the potential price surpassing call strike + call premium.
This is what I would do.
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