Dealing with an ITM put with a wide B/A

sle · Jul 29, 2018

How wide was the call at the same strike?

Mugono · Aug 4, 2018

spindr0 said:
I have a multi-legged option/stock position. As part of it, I owned some ATM $90 ITM long calls that were at $4.20 x $4.70 with the stock at $86.20 . There's too much time premium remaining so exercising is a non starter.

The $85 puts had a reasonable B/A spread so I decided to roll the $90 puts down. As the stock dropped, for an hour I tried to split the bid on a spread order. Most of the time they accommodate but not today. I eventually got a decent fill but the problem is that the stock could have reversed at any time and taken away some of the gain. So the question is, what were my alternatives?

At the same time, the $90 call was $0.75 x $0.85 so at the market, the covered call had a potential profit of $4.55 so something in that vicinity should be a reasonable expectation for the sale of the put. But I couldn't get anywhere near it.

Given the above, with an inability to get out of the $90 put, I could have sold the synthetic $90 covered call and bought the $85 puts, achieving my roll and then either buy a few more $85 puts or shorting some stock to balance the delta.

Plan B would be to just KISS, leave everything alone and buy more shares to raise my delta back to my comfort level. I don't really want to tie up the cash but it's a choice.

Are there any other reasonable solutions for dealing with such a wide B/A spread? TIA.
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I’m a (seeing this) little late .

I note from above that the $90 strike had a 10 cent spread.

It would’ve been good to see what the $85 strike call was trading for. Buying the 85/90 call spread could’ve been an option? [providing the resulting spread was narrower than $0.5 cents to compensate for putting on an additional leg]

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Dealing with an ITM put with a wide B/A

sle

Mugono