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RIOT 19,20,22 +1,-3,+2 Credit $0.45 Expiry below $19 = $.45 profit Expiry at $20 = $1.45 profit Expiry at $21 = $0.55 loss Expiry above $22 = $2.55 loss Thought I would layout the OP's RIOT position for easy visualization.
I'm setting a GTC order at 25% of max profit. If I'm exercised on one of the short calls I can exercise my long call at 19 to off set it and then am left with 2 short bear credit spreads. If exercised on more I can buy in the stock and and should be left with a small profit. As long as it stays OTM not a risk but the early exercise risk is a concern for this type of weekly trade but a risk that is manageable to keep any loss within the original parameters of the trade.
It would be a 20-22 call spread in this case. Generally i would exit and don't mind paying a penny or two above full carry to do it as it saves the assignment fees from my broker. At this point the trade would be at max loss but a max loss no higher than the original set up in the trade keeping it defined risk.
If you buy the 21 22. Call spread,you RR shifts dramatically.. You woukd be in the 19/20/21 1x3x2.... I always buy in the embedded short verticals..at the right price
Very good point. I made the choice to set this up initially as a broken wing fly to collect to be able to enter at a credit and have a small profit should the stock trade away from the hoped for pinning strike. Another option in advance of Friday as a management tool would be to give up some of that credit collected and roll the 22 calls down to a 21 and would then have the risk profile of the traditional balanced butterfly (19-20-21). Something I might consider.