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Buy back or roll covered calls and sold put options close to being exercised?

Discussion in 'Derivatives' started by freebird54, Sep 7, 2016.

  1. freebird54

    freebird54 Well-Known Member

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    Now we have low volatility and thus lower premiums rather roll out and up for a small credit on the same day why not buy back and then sell another option on a day when the premium may be higher?
     
  2. minwa

    minwa Well-Known Offender

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    Buying back short options causes a debit, especially if they are close to being exercised.

    Waiting to sell on another day with higher premium - are you sure volatility is definitely going up soon ? Soon enough to outweigh the time decay between now and then ? If you knew for certain which day volatility is going up than currently then there are much better trades than selling covered calls.

    It's like waiting for a stock to get cheaper to buy - you may never get it for years or ever if they keep rallying.
     
  3. Virge666

    Virge666 Active Member

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    What Deltas are we talking here ?

    which stock to which option ?
     
  4. freebird54

    freebird54 Well-Known Member

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    Currently sold puts on MPL,IPL,TCL for this month expiry

    Nov RIO

    Sold calls For nov/dec expiry CWN,NCM,RIO

    I always like to leave an order on to buy back when I have a reasonable profit [Say over 50%] and this can happen when I am away so I can miss the roll opportunity

    Use IB so low brokerage
     
  5. Virge666

    Virge666 Active Member

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    These are going to hurt a bit come monday depending on the strikes... with the vol spike as well. But i am guessing you have done well with this for the last 6 months to easiliy cover this.

    Also depends how many and if you wouldn't mind owning the stock...

    Quick Q - Why did you sell puts so far away ? I find 30-45 days to be a good sweetspot for selling theta. then you can roll to the later months if you need more time...
     
  6. freebird54

    freebird54 Well-Known Member

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    I agree Dec too far normally but I am overseas oct and some of nov.

    I am always wary for a dow like now and this will be interesting - cancelled all buy back orders of course

    Strikes This month expiry TCL 12.21 -roll or buy back monday? IPL 3.00, MPL 2.90

    Have cash to buy but IB interest charged is so low may leave cash earning more elsewhere, aware of currency risk of course.

    Thanks for your input
     
  7. Virge666

    Virge666 Active Member

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    Are the above puts or calls... i would roll the puts and just ignore the calls. Unless you dont mind owning more stock... (rolling depending on slippage of course.)

    but that kills the buying power to be put somewhere else. As for IPL and MPL - they are $2 stocks, not really worth the risk and slippage to sell either puts or calls, not to mention the lack of liquidity. Risk vs Reward vs slippage vs the $2 you gave IB.

    That's my 2 cents FWIW.
     
  8. freebird54

    freebird54 Well-Known Member

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    Above are all Puts - ignored calls and cancelled buy back orders on them yesterday to hopefully do it at a lower level today

    Good comment re. IPL and MPL but I like to get an income of a few hundred $$ often, and I am a little ahead

    For about 15 years I mainly sell cash covered puts and covered calls - always worked out better than buying puts/calls

    TCL roll to dec 11.50 - there is a 23c div dec
     
  9. Virge666

    Virge666 Active Member

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    Good stuff mate - nicely played
     
  10. freebird54

    freebird54 Well-Known Member

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    Market makers were not there for the roll with IB on TCL so I did it in 2 legs Buying back and doing the Jan 11.50 for a small net cost

    I also bought back some calls for about half the premium I got.

    Quite happy to be exercised on the IPL and MBP small cap Puts
     
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