[Investor237]

OK. Thank you

[Investor237]

What I meant by more than 1 reverse iron condor is exactly what you described…10 put debit spreads and 10 call debit spreads = 10 reverse iron condors…i.e. more than 1.

You answered my question. Thank you.

[Investor237]

Thank you!

I see that you managed to earn a high return due to the fact that you put on more than 1 reverse iron condor prior to earnings. However, with a single iron condor (the first one that you closed), it seems that the return is much lower.

[Investor237]

Ok. I look forward to seeing it and see if it helps me answer my question.

Where can I see the update to the NFLX trade?

Thank you

[Investor237]

No problem.

Based on you posting more trades today, I gather that you are feeling better. That is great!

[Investor237]

Some changes in the repair have not been indicated. The initial repair was to sell Apr 14, 2022 150, 130 and 120 puts. Those short puts expired last week. How were those puts managed. Did you roll them? If yes, to what strike(s) and what expiry(ies). If not, did you buy them back for a loss?

[Investor237]

I can save Teddi some time on this one.

Several of us members have asked Teddi that question in the past. When “closing the contract for $0.10 or less” it refers to the amount paid to buy back the short put. The long put is left to expire. Alternatively the long put can be sold if it’s value is greater than the cost of the commission, or it can be held onto, and should the underlying trend down, can sometimes be sold for a greater amount.

But when Teddi says that an offer is placed to close the position for $0.10 (or whichever amount) it refers to the cost of buying back the short put only.

Hope that helps.

[Investor237]

Thank you.

[Investor237]

Thank you for the highlighting the important bullet points of your approach.

[Investor237]

What if the current sell-off is not temporary but rather the start of a bear market? The stock could continue plunging, but with the short puts being far out in time…they are harder to roll down to keep up with a plunging market. How do you deal with that scenario?

[Investor237]

I look forward to reading it and understand the reason for allocating funds to such a low-yield trade.

[Investor237]

I closed early because you suggested to take advantage of a bounce to close profitable positions (even small profits) in order to raise cash so that one can take advance of higher premiums if the market continues to decline.

Thursday was a bounce that brought positions that were ITM on Wednesday back to OTM. On Thursday I had no way of knowing if Friday was going to be another up day or another strong down day. If Friday had been a strong downday, my positions would have been ITM, and would have needed rescuing.

I had no fear of assignment, and I was not overextended. My fear was that if my short options were ITM on expiration day, I would have difficulty rolling profitably, and would have to allocate more cash to the rescue and that cash might be tied up for an unknown duration. If excessive cash is tied up in rescuing positions, that means less cash to take advantage of other opportunities.

My worry is always the same: Difficulty rolling down profitably without having to commit ever increasing amounts of capital that would be tied up for long durations.

[Investor237]

In the bounce yesterday, I closed many positions. Some for very little profit. Some for a loss (fearing that another decline was coming and that I better close now for a “smaller” loss, and then roll it out during the next decline). Then today the market rallies again. I would have been better off not closing my positions yesterday.

[Investor237]

I don’t recall seeing a day when they (INTC or MU) could have been closed early, but obviously that was an oversight on my part (or perhaps greed).

In any case, it doesn’t matter, as the focus of my inquiry was learning how to rescue positions profitably. No, I was not nervous about being assigned shares. There was more than 1 week left, and I can always roll. My worry is about not being able to rescue the position profitably.

When reading your articles, rolling seems straightforward, but when it happens in real-time, the option premiums often don’t allow the kind of rolls described in your articles. INTC was a perfect exemple. Rolling the 55 put profitably was very difficult based on the option prices that I showed you, unless going far out in time. But by going far out in time, it gives the stock more time to decline further (major support is down in the $45 area). So, evidently, there is an aspect of rolling profitably that I am not grasping.

In your reply, you said that the was still a week left before rolling would be needed. This brings up an interesting question, that I have noticed many participants struggle with in multiple posts on the forum: WHEN TO ROLL???

Many of your articles suggest rolling as soon as the short strike is ITM (if one does not wish to own the stock). But with INTC below the short strike of 55, you are saying that there is still a week left before needing to roll.

I understand that there was no risk of assignment, but if the decline in INTC had continued and the short strike of $55 became deeper ITM, it becomes harder and harder to roll down. Any roll would still be ITM, and probably not profitable.

When you are short an option with time left before expiry (2 weeks, 1 month, etc), when do you start the rescue? Do you begin the rescue when the stock crosses below the short strike, or do you wait until expiration week, hoping that the stock bounces back?

[Investor237]

OK. Thank you.

[Investor237]

Perfect. Thank you. Please do not use today’s prices in your response, as today’s data was not available to the trader/investor yesterday. Yesterday, a trader had no way of knowing whether today would be up or down. Today could easily have been another sharp down day.

[Investor237]

Hi Teddi,

Have you had a chance to write up your ideas/suggestions regarding the issues discussed (increased margin requirements during rescue, etc) in regards to this trade (MA), and the other two (PYPL, VZ)?

[Investor237]

Interesting answer. Keep us updated if/when you do a rescue.

[Investor237]

Hi cakndrew,

Great returns! Congratulations!

If one (or more) of your positions goes against you, how do you plan to manage it? I don’t think that you will be able to have a profitable roll and still keep a $5 spread.

Your Excel spreadsheet shows that you are using about $168K of margin on a $172K account. That doesn’t leave much room for rescues. How do you handle rescues?

[Investor237]

Also, as most stocks have advanced significantly in the past few months, I find that support levels are hard to find…they are so far away from the current price that it is impossible to get a reasonable premium at those support levels. Home Depot is a great example of this…it has had a straight climb from $250 to $320. Difficult to find a support level when there has been no pullback.

Obviously there are other stocks available, but I find that a larger share of stocks have had straight climbs, making finding support levels difficult lately.

[Investor237]

I noticed the same thing. I would get great premiums by selling weekly trades on a stock, then all of a sudden the weekly premiums dropped significantly.

[Investor237]

Hi Teddi,

I didn’t say that all your trades were out to May 21, I just noticed that a higher percentage of your trades were further out.

If I understood your reply correctly, you look for support levels first, then go out far enough to get decent premiums at those support levels. That’s what I thought. I just wanted to confirm that I was correctly understanding the reason for going out 1 month.

Thank you.

[Investor237]

Hi jamie2025, I did not get assigned on naked calls. I covered them, because the price rose above the strike. I was following recommendations on this website that say that one should cover a naked call if the stock rises above the strike price + premium received.

[Investor237]

Hi jamie2025,

I know that I don’t NEED to hold options until expiry. However, I find that the greatest decrease in the short option’s premium (and therefore the greatest profit to me, the seller) is during expiry week.

What is the benefit of selling options expiring in 2 weeks and closing after 1 week for 50% profit vs selling options expiring in 1 week and holding until expiry and keeping 100% profit?

[Investor237]

jamie2025,

I am thinking the opposite. The shorter the trade, the less time the stock has to move against my position. If it does move, the position can be rolled out to the following week. But if the initial position is 1 month out, then rolling out, keeps the position open for much longer…giving the stock (or even the entire market) more time to move against the position.

It would help me to understand how my thinking is wrong, and how a longer duration position works in the trader’s favor rather than against him.

[Author]

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