Short AAPL Oct 150 Put @ 4.4. Now it's worth only 0.4. So I have 4 pts of paper profit. Would you close this position and roll forward to Nov 150 Put or hold it till it expires worthless for 0.4? Thanks!
In general, how do you analyze a position like this mathematically to see if you should hold it or close it? Thanks!
Here's the mathematical analysis. The option has slightly less than 2 weeks to expiry. You have achieved 90% of the max profit. Now you are risking at least 9 to make 1. Does that look like a good trade!?
Paper profit? This is a paper trade? If you really want to hang on until the bitter end then at least buy the lower/higher strike put to make yourself a spread and lock in most of your profit. Otherwise take the advice already proffered. One more thing. A naked short put is a very high risk strategy and you're now risking having substantial losses for a tiny ($40) profit. I get the impression, from your posts, you like these high risk/low reward scenarios. May I humbly suggest that you ask yourself why you have that mindset - it may cost you dearly in the future. Cheers db
Hate to disagree with you on this one , MTE.An exit (entry) has an odds and probs of a new stand alone trade ( maybe even 1:1 ?).
I think that on a stand alone trade, most people would take 90% of the profit now versus risking that amount for 10% more profit and would move on to a better opportunity. But in terms of staying with AAPL because you're bullish, for your consideration: The Nov Oct 150p @ $3.65 that you're considering rolling to has a delta of approximately -.21 and the current short Oct 150p has a delta of -.07 That means that your decision to roll makes (or costs) you about 14 cts per point move in AAPL. Not a huge mistake one way or the other. Contrary to what one might guess, if AAPL drops, you do better on the roll (higher credit) because the Nov 150p has a higher delta. What would I do? I haven't a clue! But after this stellar explanation, you should know!