Managing delta on naked short put

At what delta will make you very uncomfortable with the naked put position when it is moving against you? I'm taking a beating right now with the Nov 170 AAPL Put and it may expire ITM next week.

Thanks!

 

I don't really see this as a delta issue. If the stock isn't doing what you expected, or it no longer looks like it will do what you expected, you should close or adjust the position.

If you thought your AAPL option was going to expire OTM and you still think it will recover to OTM, hold on to it. If something fundamental about the company has changed, and you are no longer bullish on it, roll down or get out. If the drop was severe enough that you think November isn't enough time for it to recover (i.e. it threw off your timing but not your overall outlook), maybe rolling out a month is the right answer.

TLDR version: It's about the stock, not the option.

 

Selling naked put is very risky. To reduce the risk or to make the risk reward ratio attractive, I will cut loss when the premium doubles (i.e. to make the risk:reward ratio = 1). Of course, it depends on your market outlook, and no. of days till expiration.

 

Id try to do something when the gamma factory is working overtime to produce delta against you.

I had an old IC 129/131/145/147 put on. When DJX dropped below 133 i bought a butterfly shifting it into 127/129/145/147. I spent about $30 / contract for that, eating all the profit and some ($22 credit).

But it feels better now..


Maybe you put a vertical and roll it, or close half the position.
Just dont take a big loss.. :eek:

Good luck to you!

 

Yesterday it was deeply in the green...

 

This begs the question why adjust then? Just close out and move on!

 

Well, roll costed $600 close would have been $850-$950.

How do you usually do it?

 

Ok, but what's your risk/reward now? My guess is, not very good.

So, are you telling me you couldn't find a trade with a better risk/reward than the roll!?

 

That margin is locked now until next thursday and aint bringing any money in, you are very right about that.

At the time when it was going bad i really didnt think about that the money could have worked better somewhere else.

But hey we all make mistakes right?

 

Is this AAPL Nov 170 Put is getting overpriced or what? It's ATM or slightly ITM but worth 5.XX with just 1 week to go?