If I flat out sell my MSTU shares to get some money for a new purchase lets say, I will collect 12k but realize a loss of 10k...and can write it off as a capital loss. However if I sell 20 puts $5 itm I will receive 10k. That way I am collecting 10k just the same, but not taking a loss. I'm also lowering my average price...win win right? It's like I'm taking my future profits now instead of later. Or I could do both and essentially close the position at break even. avg cost: 25,959.97 market: 12,600 Sell shares = 13k loss Sell puts = 10k gain Total: -3k loss So I would collect 12,600 in cash, and 10k in premium = 22,600 I'm basically out of the position at even, but still hold the potential to make money should I keep the shares during the recovery.
What happens when it drops much more? It closed below the basings, have to consider continuing downtrend.
We are already at $6.....how much more can it drop? Anyway, this is about buying time. I have zero doubt bitcoin/MSTU will recover by spring atleast enough to get out at even, which would mean that I profited all the premium. My true break even if I include premium collected is $8.64. If I collect another 10k then it will drop to $8.14.
Just taking profits now that I would get if I bought at $6 and sold at $11 later...just need the money now more than later. Yes my avg is 12.80 so getting assigned at 11 would reduce my cost.
Not really, you are just adding heavily to a loss. The credit isn't yours till exp. And if it expires with the stock at 5$? You would be in drawdown of the 12k, plus the 10k... It makes no sense. It's an illusion. Then why would you need more capital? Are you all in? Wouldn't the margin req absorb that credit back?
If I sell @ $5 itm I am essentially buying at $6 $11 strike = $5 premium. That's it. The only difference is I am taking my profits now versus later. Scenario #1 I buy 2000 shares @ $6 and sell at $11 = $5 in profits x 2000 = 10k. Scenario #2 I sell 20 puts $5 itm and collect 10k. I get assigned @ $11, I then sell at $11 in the future. First scenario I get paid later...second scenario I get paid now.
You can do the inverse of this if your position is up, by selling deep itm calls to lock in profits while you wait for dividends or something...