04-14-2019, 07:59 AM
(04-14-2019, 03:50 AM)crimsonghost747 Wrote: Quick question on rolling forward
I imagine the tactic is slightly different for calls and puts.
But say you have a covered call that looks to be expiring in the money. You just buy it back and sell one for the next week/month/whatever at the same strike? Or do you also mess around with changing the strike to adjust? Timeframe? I guess you guys regularly sell monthly options? I would be mainly interested in using these on a weekly basis, still worth it or not?
With puts I guess it's a pretty decent way to avoid getting assigned? Have you ever been in a situation though that you need to sell a put with a higher strike in order to get enough premium to make it worth it?
I'll try to make the answer brief. Let me know if I am not clear. The short answer is yes, sometimes and maybe.
-puts and calls are pretty much require the same strategy, just the inverse in SP movement of course.
-sometimes I am rolling forward at the same strike, often I can roll it in my direction some. With higher bet stocks the time value is high and I can almost always change the next strike.
-timeframe completely determined by individual situation. How much time do I think I need for a good chance stock will reverse? For a put, Is the stock still in free fall, or does it appear to be consolidating after a protracted decline?
-For a stock like AAPL, I've sold a cover call and the stock has run up fast. My call is deep in the money. Maybe I sold it initially at $2 I'll buy it back now for 12 and sell a new one further out for only 9 or 10. If I can move the strike 5 higher I might be willing to be down 1 for now. Maybe I have to do this again next month? With time, I have repeatedly held my shares and it moved the right eventually. I am on defense at this point. I have moved my strikes much higher on AAPL and HD calls. If I give up now, I am selling my stock at a much hgher price.
I'll use made up numbers but here is how I have entered most of my pharma stocks like this.....
Sell puts on ABT for months and it finally falls in the money. Maybe I roll it forward one more time and get an entry another a few points cheaper. Or maybe the stock is saying a nice div in a week so I just take my new shares and move on. In my perfect world the stock swings higher and I can sell a cover call if I want to. I try to always account for x dividend dates when I open any position. I accepted assignment in DEC and after it ran I started selling calls. Had to roll my calls forward once on ABT but it;s sitting pretty as a play over all.
Same process with MET. I do own 200 shares but I've collected about 10 monthly premiums. The SP is right where it was 6 months ago. I've sold about 10 options and collected dividends. Put premiums are high enough to cover a missed dividend if that is how it plays out. I did roll puts nce during the late 2018 market down draft. Certain stocks are just made for this income strategy.
And yes rolling weeklies could work, but be prepared to have to go out a month because you will likely need to sell more time if you are upside down. If the option is sitting on near zero time value you are at risk of early exercise. Rare in my experience, but it definitely happens. I've had shares stolen right before x-dividend at least twice. I make that harder to happen now by choosing expiration date wisely. Push your luck on a dividend monster like T and you'll lose your shares, or get your put assigned shortly after the x-div date.