8 Jan- give you the condensed ending to this, as posted:
exited this today. will add to blog this weekend. was 222ish after President speech. adjusted for 2+months from losing put sale. came away total of .40 loss. alot of work but showed that i can significantly reduce a loss if stock overshoots my short strike. $HD
had this "position" since Nov with several adjustments. got to the point where I was near a total breakeven but with several weeks to go until opex. my buying power would be tied up for the rest of month to get a scratch/small win or more likely I would expect a continued up move requiring another adjustment. went ahead and took the small loss to free up the buying power to redeploy somewhere. earnings for multiple stocks im trading will be at end of month so want to have ammo for any put sales there instead of jacking with this one still. all in all im pleased at how I was able to manage the adjustments vs just taking a loss on the intial short put sale. likely only reenter this stock on a good earnings selloff (like last time).. on to the next one
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3 Jan - as posted on twitter:
with $HD at 217-218 and threatening the Jan24 215put, went ahead and rolled everything to Feb20 to get more credit. rolled to Feb 215put for $1.75 credit, rolled the Jan24 225/230 credit call spread to Feb225/230 for .64 credit. gives me wider profit range up or down
I had resold the Jan24 225/230 call spread at .81 on the up move on 2 Jan so gained another .61 in possible credit. earnings are feb 25 so rolled this 'position" to the regular Feb opex same strikes, taking in $2.39 credit for the roll. widens out the breakevens. looked at going down on the puts and higher on the calls but opted to get the juicer premium. mental math puts the breakeven at 210ish downside and no upside risk since ive taken in more credit over the weeks /months to cover the width of the call spread. would like to be out of this prior to earnings to use the buying power elsewhere. revisit in a couple weeks.
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31 dec - making progress to leave this "position" in the green. had the Jan24 215 short put and Jan24 225/230 call credit spread as of this morning. with stock near 216-217ish took the opportunity to close out the call spread for .20 gain. stock had been 220+ few days ago and was expecting to have to defend a test of the call strikes. quick math need the put to expire near worthless to exit for a profit so will keep holding for the moment. strategy was if stock bounced back to near 220 I would resell the call spread for higher premium further lowering my breakeven. that order did not fill. so just the naked put for the moment. have alert set for 220 breach . im ready to get this one off the books but does make for a good learning point of how you can keep adjusting that short put.
12 dec - did another roll out and down for the short put. from the Jan 3 217.50 to the Jan24 215 for .05 debit
4 dec- alright meow... the Dec13 short put is underwater, stock sold off a bit like most stocks. the Dec6 call spread from below will go out worthless. Stock was 214ish today so took the opportunity to roll the short put down and out to gain some more time and lower the strike. best case you roll down and out for flat or a slight credit so I went out far enough to get close. so rolled to the Jan3 217.50 put.. (buy back the Dec13 220 put / sell the Jan3 217.50 put). this roll was for .45 debit. on top of this I added a call credit spread same opex (225/230) for .66 credit. so the credit spread pays for the roll down in short put strike. playing for a move back up to the 217.50-225 range at Jan03 opex. Point being I want to exit this position with some type of profit to preserve the mental capital of not having a loss. would be small loss without adjustments if stock is above 230 at opex, but will adjust somehow if that occurs
25nov- post on twitter that rolled the short put to Dec13 for credit:
I havent entered a risk reversal or call spread risk reversal in ages so here are my thoughts about the Home Depot call spread risk reversal from today. Stock was down at the open and i sold a Dec6 220 put for $1.30 , the spread was wide and bouncing around so i put in the limit order about 25cents above the midpoint and got filled in about 60seconds. should have thrown out a higher price initially looks like. regardless the stock was around 229 at that point(green arrow). IV went up a bit because of the down move, 17days till opex and delta was 23 at time of fill. was initially going to enter this as a standard cash secured put. my strike selection for the put i wanted to be under the 222ish area from early Oct.
after lunch the stock was down a few more bucks. assumption im making is that at some point up until opex of Dec 6 that the stock reverses a bit, pending comments from Lowes earnings on nov20 of course, and there is that gap from todays down move needing to be filled also. so using the mental $1.30 premium from the put sale earlier I bought the same opex Dec6 call spread of 227.50/232.50 for $1.70 debit (red arrow). so all 3 legs of this position was for .40debit.
My max profit will be if at opex the stock is at 232.50 or higher, max loss is the .40 debit. below 220 without any adjustments to the short put I would be forced to buy the stock at 220(being put the stock). its unlikely I will hold this until expiration but mark to market should show gains if the stock starts moving up. but have 17days to see how it plays out only risking the .40debit from 220-227.90.
note: since I am short the put I have to have that buying power to buy the stock at 220. best case will close out the short put if stock moves up to free up that buying power and let the call spread run.
when entering risk reversal type trades I generally start them out as a call spread risk reversal in order to not have to pay out much premium.
If youre going to do all 3 legs of this on the same order which is normal im sure, always use a limit order. the spread will probably be wide so take a shot at the midpoint price, you might get a lucky fill. adjust the limit price 5cents at a time if midpoint doesn't fill. easy to get a crappy price on those wide bid/asks
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