Would you close this DOTM short put?

[a529612]

Short AAPL Oct 150 Put @ 4.4. Now it's worth only 0.4. So I have 4 pts of paper profit. Would you close this position and roll forward to Nov 150 Put or hold it till it expires worthless for 0.4? Thanks!

 

[atticus]

You're seriously considering remaining short for forty cents?

 

[a529612]

Are you saying the pros would have closed and moved on to a new position?

 

[atticus]

Yes.

 

[a529612]

In general, how do you analyze a position like this mathematically to see if you should hold it or close it? Thanks!

 

[MTE]

Quote from a529612:

In general, how do you analyze a position like this mathematically to see if you should hold it or close it? Thanks!

Here's the mathematical analysis. The option has slightly less than 2 weeks to expiry. You have achieved 90% of the max profit. Now you are risking at least 9 to make 1. Does that look like a good trade!?

 

[daddy'sboy]

Quote from a529612:

Short AAPL Oct 150 Put @ 4.4. Now it's worth only 0.4. So I have 4 pts of paper profit. Would you close this position and roll forward to Nov 150 Put or hold it till it expires worthless for 0.4? Thanks!

Paper profit? This is a paper trade?
If you really want to hang on until the bitter end then at least buy the lower/higher strike put to make yourself a spread and lock in most of your profit. Otherwise take the advice already proffered.
One more thing. A naked short put is a very high risk strategy and you're now risking having substantial losses for a tiny ($40) profit. I get the impression, from your posts, you like these high risk/low reward scenarios. May I humbly suggest that you ask yourself why you have that mindset - it may cost you dearly in the future.
Cheers
db

 

[IV_Trader]

Quote from MTE:

Here's the mathematical analysis. The option has slightly less than 2 weeks to expiry. You have achieved 90% of the max profit. Now you are risking at least 9 to make 1. Does that look like a good trade!?

Hate to disagree with you on this one , MTE.An exit (entry) has an odds and probs of a new stand alone trade ( maybe even 1:1 ?).

 

[MTE]

Quote from IV_Trader:

Hate to disagree with you on this one , MTE.An exit (entry) has an odds and probs of a new stand alone trade ( maybe even 1:1 ?).

That's true, IV_Trader!

 

[spindr0]

Short AAPL Oct 150 Put @ 4.4. Now it's worth only 0.4. So I have 4 pts of paper profit. Would you close this position and roll forward to Nov 150 Put or hold it till it expires worthless for 0.4?

I think that on a stand alone trade, most people would take 90% of the profit now versus risking that amount for 10% more profit and would move on to a better opportunity.

But in terms of staying with AAPL because you're bullish, for your consideration:

The Nov Oct 150p @ $3.65 that you're considering rolling to has a delta of approximately -.21 and the current short Oct 150p has a delta of -.07

That means that your decision to roll makes (or costs) you about 14 cts per point move in AAPL. Not a huge mistake one way or the other.

Contrary to what one might guess, if AAPL drops, you do better on the roll (higher credit) because the Nov 150p has a higher delta.

What would I do? I haven't a clue!
But after this stellar explanation, you should know!