Puts deep in the money

Discussion in 'Options' started by helphelp, Aug 3, 2012.

  1. helphelp


    I would like help please with a trade I made selling puts.

    I sold $90 puts (at a price of $9.00) exp Sept 2012 and they are now deep in the money currently trading at $53. When I sold the puts they were trading at $130

    I realise I have these 2 choices
    a) buy back the options
    b) accept the shares

    However if someone can advise how to ease the pain of either of these and recommend a strategy for future put selling trades to provide some downside protection it would be MUCH appreciated

  2. I had the same problem with VXX puts I wrote. When I wrote them the etf was at 25$ and the puts were written at exercise price 22$. A few days later the etf was at 17$. I wrote naked calls (weekly expiry) to lower my purchase price per share. I got out with a loss, but now the etf is at 12$.
  3. TskTsk


    If you're comfortable owning the shares at the put price, then do that and write calls against them
  4. 1) What was your exit strategy? :confused:
    2) I assume that you assumed that the position would never go against you. :D :p
    3) Write the following dictum on a chalkboard, 1000 times, while wearing a dunce cap......." I will not short-sell put options without a well-defined exit strategy that takes into account the possibility of loss". :cool:
    4) You have to learn from the "pain" the idiot you are for letting a small loss grow into being a large loss. :mad: :eek:
  5. In order to give you an intelligent response you need to tell us what the stock was.
    I'd need to do a technical and fundamental anaysis before i tell you whether i would buy the stock and anticipate a recovery,... or if I think you should get out now while you can.
    What was the stock???

    BTW, Have you ever done any bullish put spreads in the past?

    I'm guessing you pulled a DanShirley type trade.
    That being sell puts on stocks trading at or near their all time highs.
    Am i correct?
    Are you DanShirley?
    If you are going to sell puts near their all time highs you should consider doing spreads.
    What was the stock?
    Was it NFLX?
    If it is NFLX, you can consider selling calls in the 72.5 - $77.5 area, as it looks like upside resistance around $80
  6. <<< I'm guessing you pulled a DanShirley type trade.
    That being sell puts on stocks trading at or near their all time highs.
    Am i correct?
    Are you DanShirley? >>>

    Right after I posted that, Dan Shirley posted his latest bullish trade suggestion on KFT stock.
    Naturally KFT is currently trading at it's all time high.

    BTW, if I'm correct and the stock you sold the puts on was NFLX, then you are obviously NOT DanShirley, as he would have initiated the trade when it traded over $300.
  7. As I stated previously, you can sell calls in the $72 - 77.5 on NFLX making some cash while you sit with it. There is some upside resistance in that area, per the 6 month chart.
    My only concern about NFLX is, if it drops below the $40 - $45 area, I don't know where it stops.
    The next support area for NFLX is in the $45 - 50 area.
    I have a $45 put on it myself.
    I would not be surprised to see it test that area.
    I have no idea if it will hold there.

    One other thing to consider. While I'm NOT suggesting it as this is risky,... if you are pretty sure you will be owing NFLX at $90, you can sell a naked call on it now, at a strike below $80, if you like the current premium for Dec, Jan or whatever.
    When the stock gets put to you, it will become a covered call.
    But its a risky trade, if the stock bounces back above $90 in the next several weeks.
  8. helphelp


    Thanks for the input so far, yes NFLX it is
  9. Thats gotta be a netflix trade.. that is definitly the range it was trading in.. and thats definitly the price its trading at now ... i have some options for you..

    1. sell as many naked calls as your account will allow..
    2. buy back the spread and take the remaining money you have left in your account and sell a bull put credit spread near the money for your entire account.
    3. go long with calls in weekly options on your entire account.
    4. give me all your money..
    5. short the vix by selling as many calls and buying as many puts both out of the money near expiration.
    6. call a top in Apple and buy puts in the weeklys for your entire account..
    7. put all your money in a ETF that tracks a spot with near term futures contracts..
    8. sell large amounts of credit spreads near expiration
    9. spread your money out thinly amoungst all of these strategies on the basis of harry markowitz's efficient market hypothesis.

    or my last recommendation..

    Read 50 to 100 books on trading options and fundamental analysis before ever trading a short put every again. learn programming in visual basic.. start collecting data on the stocks that you trade... learn to analyize data in a automated and continual fashion in ways that off the shelf indicators do not allow.. then.. invest very very small amounts of money in relation to your total capital.. put the rest of your capital in a riskless or realitively riskly asset .. like treasury bonds for a triple A rated company.. or just keep the powder dry.. Do not increase your position size untill you have been extremely sucessful for six months... if this is to boring for you.. stop trading all together..
  10. hey putty man.. didn't i recommend you buying a protective put when you sold short puts n netflix? i remember you saying that you did.. even though you normally never spread.. or was that a different stock
    #10     Aug 5, 2012