(05-17-2020, 09:44 AM)NilesMike Wrote:I actually expected you wouldn't care for this. I don't like some of your trades either.(05-16-2020, 05:49 PM)fenders53 Wrote: And here is another trick that you might find handy at very specific times.....
You are assigned stock XYZ and it's say $26 and you are in at $28 basis. The short-term story changed and you are down some and you are now very bearish on the stock. The closest call is at $30. 15%+ out of the money and the premium is very weak. You immediately sell the shares and then sell a put at $25 which has a good premium as it's close to the money. You now have some downside protection without bailing on the stock and conceding the loss. I did this quite a few times in early MAR when the virus hit. It was pretty clear which stocks were heading lower. This is NOT something I do with my core DGI holdings. Just the income game stocks, which I own very few of in this economy.
I'm not following this Fenders.
Put stock @28, now trading @26. Sell the shares? Trade over, a loser.
Sell a new put @25? New trade. May be a winner or a loser. Irrelevant to the earlier put that was assigned.
I have a couple of friends who do significant amount of "defending" a trade. Rolling down and out etc. There are no repairs to be made. Each trade stands alone, the only connection is the ticker symbol.
I want to be clear, Rolling locks in a loss on original trade and places a new trade on the same underlying, there is no repairing of the earlier position.
I think we are both good with that.During the last two downturns fall 2018 and Mar 2020 I got steam rolled pretty hard on my specs. Not that it matters but I was holding about 40 stocks I was comfortable holding long term and about a half dozen where the story had changed. I dumped some trash immediately. Two I kept were DAL and DOW. I didn't actually consider them spec at the time, but not true LT core holdings either for reasons I probably don't need to explain. Anyway, I didn't now where the bottom was but option premiums were sky high. I did find my escape and dumped them a bit higher, after I sniped about five puts and calls on each in a matter of month. I was getting several percent back in a matter of 2 or 3 days at the time. Half my overall port recovery since March is option income. I have plenty of dividend income but my options crush my Divs most months. I have plenty of LT stocks that are still way down but I can't sell calls on them anytime soon or I'll regret it eventually. I pretty sure I got hit worse than most here as I had the perfectly horrible port for the Covid. Not sure I could have done it on purpose. Anyway, I roll puts and calls forward ALOT when the market turns against me. It's a hassle but it's worked out far more often than it hasn't. I just checked and the reality is I am dead even with SPY the past 20 months. That's not a fail I guess but it's not inspiring after the considerable effort into something I could have done with my mutual funds. I've replaced capital loss with income.
Back to John's options. He has more specs than I would consider having in play at once. (If his port is the same as he shared a few months ago.) He better learn to dance with options soon. He is going to have to pick his spots to sell calls and get out of positions that are exercised. You can't just wake up the Monday after you got assigned and auto-sell calls at whatever price. That just won't work out over time.