Sold Deep OTM Puts that Became Deep ITM - let it assign or roll over?

B

beefcaketrade

Whats the better strategy here?

I sold some what was deep out of the money puts. The stock took a nose dive and now puts are deep in the money. I have hope it can rise back up in the future above the strike. Dont want to lose money on this. Whats the way forward?

[1] Should I buy the put back on opex friday and then sell the same put again at a later date. In effect rolling the put over?

[2] Should I just leave the put alone to have it get assigned on saturday. Meanwhile I go ahead and sell the same strike put on opex friday?

[3] An extension of point 2, instead, should I short the stock right away on opex friday knowing it will be assigned to me on saturday. And at the same time on opex friday, sell the same strike put?
 
I should add, the only reason I'd let it assign is because the spreads in closing the option wipes clean the time premium I sold earlier.

So the only way to get back the few dollars of time premium I've sold earlier and burnt through by this time, is to let it assign. But I want my 'lost capital' back by selling a later dated, what is now a deep out of the money put, at the same strike so it returns to original valuation and I can close the contract and earn the time premium there too.
 
Quote from beefcaketrade:



Dont want to lose money on this. Whats the way forward?
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Don't sell puts on stocks that drop. There is no such thing as a "repair" strategy. Hypothetically, you should not be in the trade if you would not consider shorting the put today, period. The worst traders are defined by their refusal to take the loss.
 
Quote from beefcaketrade:

Whats the better strategy here?

I sold some what was deep out of the money puts. The stock took a nose dive and now puts are deep in the money. I have hope it can rise back up in the future above the strike. Dont want to lose money on this. Whats the way forward?

[1] Should I buy the put back on opex friday and then sell the same put again at a later date. In effect rolling the put over?

[2] Should I just leave the put alone to have it get assigned on saturday. Meanwhile I go ahead and sell the same strike put on opex friday?

[3] An extension of point 2, instead, should I short the stock right away on opex friday knowing it will be assigned to me on saturday. And at the same time on opex friday, sell the same strike put?
More...


if you are playing poker and you can't figure out who is the patsy in the room then you are the patsy.

understand?
 
Quote from beefcaketrade:

Whats the better strategy here?

I sold some what was deep out of the money puts. The stock took a nose dive and now puts are deep in the money. I have hope it can rise back up in the future above the strike. Dont want to lose money on this. Whats the way forward?

[1] Should I buy the put back on opex friday and then sell the same put again at a later date. In effect rolling the put over?

[2] Should I just leave the put alone to have it get assigned on saturday. Meanwhile I go ahead and sell the same strike put on opex friday?

[3] An extension of point 2, instead, should I short the stock right away on opex friday knowing it will be assigned to me on saturday. And at the same time on opex friday, sell the same strike put?
More...

Playa's gonna play.
 
Well I'll take a bit of the other side of the comments :)

It really depends on WHY you sold the puts. Did you really like the company and would like to own it at the price you sold the puts? Do you still feel the company is a good bet? If the answer is yes to both questions then why not accept the stock? Sit on it for awhile if it goes up you can sell near the money calls monthly over time and probably make back your loss on the puts.

If you no longer think its a good price to own the stock then I would agree with the others...just get out.
 
Just gtfo of the trade. If or when you are losing massive amounts of money, you are losing your objectivity, then that's when trading is the most dangerous.
 
calm down guys, its not a disasterous stock or anything. Its also not ridiculously deep ITM (<-10%)

I'm just wondering what is the best way to capture the time value that I've earned.

I dont mind taking the stock. I just rather hold it in the form of a short put.

But the options have wide spreads. Wide enough that even on expiry I lose a lot of the time value. So I guess the only way to 'gain' the time value is to short at the close on opex friday. Then get assigned saturday for the cover and this way I get the time value back.

Meanwhile I want to sell the put again, so that when stock rises back to old levels and above the strike I capture the loss and retain some extra time value.

Is this an ok strat?
 
Quote from beefcaketrade:

Whats the better strategy here?

I sold some what was deep out of the money puts. The stock took a nose dive and now puts are deep in the money. I have hope it can rise back up in the future above the strike. Dont want to lose money on this. Whats the way forward?

[1] Should I buy the put back on opex friday and then sell the same put again at a later date. In effect rolling the put over?

[2] Should I just leave the put alone to have it get assigned on saturday. Meanwhile I go ahead and sell the same strike put on opex friday?

[3] An extension of point 2, instead, should I short the stock right away on opex friday knowing it will be assigned to me on saturday. And at the same time on opex friday, sell the same strike put?
More...

Is that you Put_Master?
 
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