Puts deep in the money

Discussion in 'Options' started by helphelp, Aug 4, 2012.

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  1. helphelp



    I would like help please with the choices I face if I have puts that are deep in the money

    When the puts were first sold the stock was trading at $130 and is now trading around $50. I sold $90 puts (at a price of $9.00) exp Sept 2012.

    I realise I have these 2 (expensive) choices
    a) buy back the options
    b) accept the shares and sell calls to recover some of the cost

    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. I acknowledge that I should not sell puts on shares I am not ready and willing to own!

  2. Looking foward, are you familiar with a bull put spread strategy?
    It is a way to limit your losses when a stock drops a large %.
    You are basically buying stock insurance.
    You get to decide how much you are willing to spend for the insurance, and how much downside protection you think you need.

    In the case of NFLX, you could have limited your downside to any strike below your $90 strike.... in increments of $2.5.
    The closer to $90, the more expensive it would be to protect. The further away from 90, the cheaper the insurance would be to buy.
    It's usually a good idea to buy the put protection when you invest in volatile stocks,.... particularly if you will be holding them through an earning cycle.

    HOWEVER,... there are some "ifs, ands and buts", you should be aware of, before you consider using this spread type of strategy.
    Personally, I like the strategy on an "individual stock selection basis", rather than as a general use for all stocks.
    Because if it is not used intelligently, it can result in a severe and somewhat unexpected drop in your account value, over what may turn out to have been a temporary and recoverable stock drop.
    But others prefer to use it for all stocks.
    Really depends on what type of stocks you invest in, and how good a stock price picker you are.
    But you should definately study the principles behind the strategy.
    Especially if all your stocks are high BETA's and are as volatile as NFLX.
  3. 08-05-12 06:17 AM

    So you are short puts that are deep in the money on NFLX:

    You are in deep dudu... but you know that.

    I would never give you personal trading advice in an on-line chat room and you should never seek or accept such advice.

    Not only is it unethical for anyone to give such advice it can be illegal.

    Giving trading advice to individuals without a licence to do so is of questionable legal status... The only thing that makes it 'questionable' instead of definitely illegal is the lack of compensation. You can get away with it if you are not paid, but there have been cases pursued and new law is always being laid down.

    It's one thing to spout off about the market in general and describe ones own trades... but another thing to offer to give advice to an individual based on his particular circumstances without a lot of legal ramifications... especially if one lacks a licence to do so. Only an idiot would do this.

    There was a recent incident on another trading board where the resident guru was making under-the-table deals. He wasn't arrested (in my opinion he could have been) but was banned from the board.

    Just because the yahoos on this board have big mouths and gigantic ego needs doesn't mean you should listen to them... and that includes me.

    If you need a financial advisor get one... with a license.
  4. Horseshit. Not true. If I am not licensed financial advisor and don't hold myself out as one, I can pretty much say whatever the fuck I want.
  5. You can say whatever you want to the world in general, but you cannot give INDIVIDUAL financial advice without a license.

    e.g. buy this, sell that.

    It's illegal

    I'll ty to look up the statutes before the weekend is out. Better yet do it yourself.
  6. DanShirley, you really need to stop making a fool of yourself.
    Now put down the drugs and back away slowly.
    Very slowly..... good boy.
  7. I am not the fool advising everyone and pretending to knowledge I don't have.

    Are you a licensed financial advisor??

    What are you doing giving individual financial advice??

    Are you qualified?

    Do you know the law??
  8. No.
    But I did sleep at a Holiday Inn last night.
    Now,..... like I said, put down the drugs and back away slowly.
    Good boy.
    Now go post some more pretty pictures of big buildings.
  9. "No.
    But I did sleep at a Holiday Inn last night"

    Is that supposed to be funny??
  10. gmst


    You are not a fool, not at all. But your information is wrong in this case while you want to come across as an expert. So, yes you should back off.
    #10     Aug 5, 2012
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