Rolling naked put

arm0211 said:
looking for inputs on the strategy of selling weekly puts that become ITM.

When rolling naked puts, do you tend to wait til the Friday if expiration to decide to roll or if the position become ITM early in the week and there is little extrinsic value do you decide to roll early/mid week since you're not necessarily being paid to have the position open anymore and the price of the option is almost all intrinsic.
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What sort of exit strategy do you have?

I would use a mechanical one.
  • Exit all trades at expiry - do not micromanage.
 
arm0211 said:
seems like the responses are more of an opinion piece rather than addressing the question..
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Here's an example to demonstrate your dilemma. IBM closed at $152.50 today. Assume that the closing quotes are accurate and that you trade at the market (though a roll spread order should do a bit better).

Suppose you are short the 3/29 $152.50 put which closed at 94 cents (ask price for BTC). It's ATM and will expire tomorrow. Perhaps IBM stays above $152.50 and you'll get to keep it. Perhaps not.

Let's pretend you could transact right before the close at these quotes. You could roll your short put out a week now in which case you'd get a credit of $1.16

Now suppose 1 minute later IBM dropped $2.50 and your put is now $2.50 ITM (with no change in IV). The $155 put would simulate this. Now, the roll is on worth a credit of 76 cents ($3.45 - $.94).

As you can see, the further your put gets ITM, the less the credit will be, hence the reason for rolling before that happens. And FWIW, if your put got $5 ITM, the credit would be only 20 cents, hardly worth the effort.

So if you have em, roll em... or if you prefer, close em. But don't let them get well into the money.

3/29

152.50p 0.87 x 0.94
155.00p 2.46 x 2.69

4/06

152.50p 2.10 x 2.19
155.00p 3.45 x 3.65
 
spindr0 said:
Here's an example to demonstrate your dilemma. IBM closed at $152.50 today. Assume that the closing quotes are accurate and that you trade at the market (though a roll spread order should do a bit better).

Suppose you are short the 3/29 $152.50 put which closed at 94 cents (ask price for BTC). It's ATM and will expire tomorrow. Perhaps IBM stays above $152.50 and you'll get to keep it. Perhaps not.

Let's pretend you could transact right before the close at these quotes. You could roll your short put out a week now in which case you'd get a credit of $1.16

Now suppose 1 minute later IBM dropped $2.50 and your put is now $2.50 ITM (with no change in IV). The $155 put would simulate this. Now, the roll is on worth a credit of 76 cents ($3.45 - $.94).

As you can see, the further your put gets ITM, the less the credit will be, hence the reason for rolling before that happens. And FWIW, if your put got $5 ITM, the credit would be only 20 cents, hardly worth the effort.

So if you have em, roll em... or if you prefer, close em. But don't let them get well into the money.

3/29

152.50p 0.87 x 0.94
155.00p 2.46 x 2.69

4/06

152.50p 2.10 x 2.19
155.00p 3.45 x 3.65
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That's what is known as Micromanaging. When an option strategy/example is littered with:

  • Assume
  • Suppose
  • Perhaps
  • Perhaps not
  • Let's pretend
  • Now suppose
  • But
  • If
  • So if
  • Or if

It's time to rethink what you would like to accomplish.
 
OptionsOptionsOptions said:
That's what is known as Micromanaging. When an option strategy/example is littered with:

It's time to rethink what you would like to accomplish.
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I always wondered what happened to the Rocky Balboa School Of Trading
-- who's motto was "A strong chin will wear out the other guy."

If we're collecting the major tenets, it's
1) Time doesn't matter.
2) Rolling doesn't matter.
3) Money doesn't matter. (I'm guessing.)
 
spindr0 said:
"But you gotta stop some of those left hands." ~Joe Gould

You see any getting past my head?" ~Jim Braddock

Same training academy?
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:D
Okay.
I spewed.
Lunch.
Right on the monitor.
JEEZ.
Cleaning up now.
Worth it, though.
Still laughing.
:)
 
No prob! My friend, old Mr Partridge, is always telling me “Well, you know this is a bull market!" :D

Nah, what I'm really saying is that I tried doing the regular monthly NP/CC thing years ago (and monthly index Condors and Cov Calls on dividend stocks and LEAPS, etc, etc). And just like the BXM, you do better than the indices in a bear market, while doing worse in a bull market. Might as well just dollar cost average into the SP500. Which isn't a bad method if you have a steady income and lots and lots of time. It easily made me a million dollars, but it took 30 years. :)

All this doesn't answer the OP's question, you did that, but I just hoped to spur on the idea of looking for something better. Good trading to all.

ps I remember ol' Spin from the Yahoo Options board, years and years ago...


spindr0 said:
So basically, what you're telling me is that all I need to do is to find someone who can tell me if we're in a bull or a bear market???

:D
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spindr0 said:
Here's an example to demonstrate your dilemma. IBM closed at $152.50 today. Assume that the closing quotes are accurate and that you trade at the market (though a roll spread order should do a bit better).

Suppose you are short the 3/29 $152.50 put which closed at 94 cents (ask price for BTC). It's ATM and will expire tomorrow. Perhaps IBM stays above $152.50 and you'll get to keep it. Perhaps not.

Let's pretend you could transact right before the close at these quotes. You could roll your short put out a week now in which case you'd get a credit of $1.16

Now suppose 1 minute later IBM dropped $2.50 and your put is now $2.50 ITM (with no change in IV). The $155 put would simulate this. Now, the roll is on worth a credit of 76 cents ($3.45 - $.94).

As you can see, the further your put gets ITM, the less the credit will be, hence the reason for rolling before that happens. And FWIW, if your put got $5 ITM, the credit would be only 20 cents, hardly worth the effort.

So if you have em, roll em... or if you prefer, close em. But don't let them get well into the money.

3/29

152.50p 0.87 x 0.94
155.00p 2.46 x 2.69

4/06

152.50p 2.10 x 2.19
155.00p 3.45 x 3.65
More...
what does em abbreviation stand for?
 
Misc to et al:

1) Not that it's really very 'impotent' but I'm surprised that no one chewed out my ass for the bad math. It should have read:

Now suppose 1 minute later IBM dropped $2.50 and your put is now $2.50 ITM (with no change in IV). The $155 put would simulate this. Now, the roll is on worth a credit of 76 cents ($3.45 - $2.69).


2) What does 'em' mean as in roll em? Really? As in 'em being short for 'them' ? Roll 'em. Smoke 'em.

3) And I have deep gratitude for that Yahoo monkey who had me hyper vigilantly tuned into the market in late 2007 and that awareness set me up for a nice 2008 and 2009. When month after month short put positions are being assigned, it's a hell of a tell.
 
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