(10-08-2020, 06:21 PM)NilesMike Wrote: I'll be gentle.Good info.
First, if you HAD to make an oil play and use options, USO would have been a way better choice. Nickel wide bid/ask tons more volume and strikes every dollar.
Second, the $30 premium was too low IMO for oil. Even T pays better. With such a low premium, you hardly get a chance to take it off early and make any money.
Third, as a defense, the most I would do, in the words of fellow Chicagoan Dan Sheridan, is buy a stinkin' put if it's running down on you. Might have taken a small loss or even made money in your example.
Fourth, when a trade no longer accommodates your original thesis, IT'S OVER.
You are not alone in your process, far from it. my late friend used to defend every single position so that no underlying got the best of him. Waste of time and tied up capital, but he wouldn't change.
Lastly, I know we like the action, engagement, excitement whatever of these positions but in all honesty it would probably be better to sell put spreads on expensive index products. a RUT put spread 1560/1540 has 2.10 credit. If it goes nowhere or even up or down a smidge on Monday you can take it off and keep a buck
I only played USO once. As luck would have it, right into the craziness of sub zero monthly oil contracts. By some miracle I made money and cashed in mere days before it got stupid. TBH, I didn't know what the hell was really going on. My biggest problem with oil is my inability to understand what actually drives the price. My thesis is it's headed towards being a dying industry in my lifetime so I don't have the motivation to get truly informed. So small trades and it's just gambling I suppose.
How stressed would you be if you got in a little deep in KO and it dipped $5 suddenly? Probably the same as me, I wouldn't lose a minutes sleep. I'll wait a few months if necessary and sell covered calls against it until I die lol.
I heeded your advice and don't defend every position to the death. If I know the stock, I can roll it forward a month with a high success rate. It bounces a little and it;s good again. One point I may have not made. I need some more premium, or a drop in strike to entice me to roll it. If I can't get that, it's time to cut my losses as I am just tying up capital I could sell a new put against. The dollar value of the position matters too. The RDS put is a good example. I dipped in to my cash position $3K to let it ride. My cash yields peanuts now. A year ago it would be returning 2% risk free. Todays rate reality matters some. And I am rarely rolling more than 2% of my port value.
Probably sounds like I am justifying bad initial decisions, but my rationality is usually thoughtful. A year from now I will have a stronger opinion on the subject. For now it's just don't defend a position without a reasonable expectation it corrects itself soon. I am probably defending one position per week since I sell a lot of options for just a few weeks. I just rolled a TLT option forward today. Dropped the strike a bit and a little new premium. Certainly not as good as a new TLT position but still beating a dividend premium.