TLRY Options

[elt894]

It looks like the 65 and 70 calls are at intrinsic value, so you're not losing anything by exercising them. You're pretty much certain to get assigned in the next few days.

If the stock declines enough the calls will start trading above intrinsic value. To get a sense of how big a decline you need, just look at how high up the ladder the strikes are still trading at intrinsic value (assuming vol is unchanged through the decline).

Vol dropping will help your short puts.

 

[qwerty156]

@elt894 and @FSU

Ended up getting assigned on the deep ITM short calls this morning as y'all had predicted. My broker (RobinHood) allowed me to exercise the closer to strike calls to offset the margin call. Apart from a margin call scare, no harm done.

As for the trade, I lost about ~$400 to bad execution, and will get most of it back on my short puts as the stock has ripped higher, althought my gains on the short puts are dissapointing tbh, as IV has also continued to increase (currently above 205% for the 100 puts!!).

Might roll into higher strikes and re-establish my position once the margin call clears.

 

[TrustyJules]

Thats the issue the IV put is totally out of kilter and making it quite dangerous to hold the short side on any of these trades.

 

[qwerty156]

Yeah, that was part of the trade - short the ultra high IV puts and hedge with bear call credit spreads. Just a little unsetlling to wake up to a 60k margin call on a 9k account. Might give it another shot with higher strike calls with some extrinsic value left.

 

[TrustyJules]

I would not recommend it - following other sites almost all the people that went for it got burned.

 

[qwerty156]

I would not recommend it - following other sites almost all the people that went for it got burned.

Apart from the risk of getting assigned the call if it goes too deep ITM, what else is the risk on this? As I understand it, I have a limited risk on credit call spreads

 

[vegamedic]

Apart from the risk of getting assigned the call if it goes too deep ITM, what else is the risk on this?

you got a 60k margin call doing the exact same thing yesterday, yeah?

 

[Reformed Trader]

I never want to get a margin call, but if I did want to take the risk, I would probably want to trade a massively profitable strategy like leveraging up deep out-of-the-money short strangles on the S&P 500. That would generate reasonably sized, steady returns for YEARS (until - one day - it doesn't).

https://www.cxoadvisory.com/1415/equity-options/is-40-per-month-shorting-index-puts-a-fair-return/

 

[TrustyJules]

Just running to the airport so only a short remark, those who got burned mainly had the call side assigned against them. One guy reported it cost 5000$ to carry one weekend 3200 short shares given the crazy borrowing rates. You are then left with the put side where the extrinsic values are way out of kilter and which you need to hold to expiration because if you liquidate it you will pay more than the value of the width. This effectively leaves you holding a put spread even if you got out of the call spread (for example by exercising your own). The putspread has a different risk profile than an iron fly.

 

[qwerty156]

Just running to the airport so only a short remark, those who got burned mainly had the call side assigned against them. One guy reported it cost 5000$ to carry one weekend 3200 short shares given the crazy borrowing rates. You are then left with the put side where the extrinsic values are way out of kilter and which you need to hold to expiration because if you liquidate it you will pay more than the value of the width. This effectively leaves you holding a put spread even if you got out of the call spread (for example by exercising your own). The putspread has a different risk profile than an iron fly.

Fair enough, a weekend exercise would have ruined my weekend. Whats the risk of getting called on calls which are closer to ITM (say shorting ~20% below calls) and rolling onto higher strikes as it keeps moving up? The spreads are pretty high on this to trade often though, especially with so many legs.