Naked PUT or CALL options carries unlimited risk. Adverse market movement will cause trades to be tested when the underlying stock price go bellow the PUT options strike price, or above the CALL options strike price.Naked PUT or CALL options carries unlimited risk. Adverse market movement will cause trades to be tested when the underlying stock price go bellow the PUT options strike price, or above the CALL options strike price.
If we leave the PUT or CALL options ITM until expiry, then the system will exercise the contracts. System will deduct money from our account to buy 100 shares of the underlying asset at strike price of PUT options or system will deduct money from our account to buy 100 shares at market price and sell to buyer at strick price of CALL options.
For PUT options seller, the cost of 100 shares from assignment is higher than market price. We can only be profitable if stock price goes above our cost. We can still sell coverred CALL to reduce overall costs.
For CALL options seller, the 100 shares is sold at price lower than market price. Seller does not hold anything. It is a loss.
To avoid options getting exercised, we can roll options before experation to a future date and collect more premium (to reduce cost at the same time). This way, we have a chance to close the options at minimum losses or even with some profits. Here is what I did for one of my trades.
1. 26-Feb-2020
The price of SPCE dropped from $34.04 (25-Feb-2020) to $28.75. I assumed that the price might dropped enough, it will drop slightly and go up after that. So I opened a naked PUT options (SPCE 03/13/20 PUT 23.00 @ 0.82) during market hour. SPCE dropped below my strike price the next day. It rebounded after that but dropped again few days later.
2. 09-Mar-2020
SPCE was below $20. If I close the PUT options at $4.44 on that day, then I will loss $444-$82 = $362. I do not to be assigned 100 shares of SPCE as it was $300+ below strike price. So I rolled to another week. Bought SPCE 03/13/20 PUT 23.00 @ 4.44 and Sold SPCE 03/20/20 PUT 23.00 @ 5.00. Additional premium $500-$444 = $56 collected.
3. 13-Mar-2020
SPCE dropped even lower around $14. Rolled to further data again.Bought SPCE 03/20/20 PUT 23.00 @ 9.60 and Sold SPCE 03/27/20 PUT 23.00 @ 9.81. Additional premium $981-$960 = $21 collected.
4. 23-Mar-2020
SPCE was at even lower price around $10 - $11. Rolled to further data again. This time I rolled monthly options as I see SPCE need more time to recover.Bought SPCE 03/27/20 PUT 23.00 @ 11.22 and Sold SPCE 04/17/20 PUT 23.00 @ 11.65. Additional premium $1165-$1122 = $43 collected.
5. 14-Apr-2020
SPCE rebounded near $20 but still below strike price. Three days left until expiration. I tried to roll another one week to weekly options to see if SPCE can go above $23.Bought SPCE 04/17/20 PUT 23.00 @ 5.77 and Sold SPCE 04/24/20 PUT 23.00 @ 6.17. Additional premium $617-$577 = $40 collected.
6. 20-Apr-2020
SPCE not making any progress and four days left to expiration. Rolled another one week.Bought SPCE 04/24/20 PUT 23.00 @ 4.31 and Sold SPCE 05/01/20 PUT 23.00 @ 4.81. Additional premium $481-$431 = $50 collected.
7&8. 01-May-2020
SPCE was now sideways and still not making progress. Last day for PUT options. Rolled to monthly options. Stock price was below $18, so in addition, I sold a naked CALL.Bought SPCE 05/01/20 PUT 23.00 @ 6.95, Sold SPCE 05/15/20 PUT 23.00 @ 7.65. Sold SPCE 06/19/2020 CALL 23.00 @ 0.85. Addtional premium $765-$695+$95 = $165 collected.
9. 07-May-2020
SPCE price went higher around $19. The CALL options was now at a loss. SPCE might further going higher and I might have to deal with tested CALL options later. I decided to cut loss on CALL and continue to roll PUT options.Bought SPCE 05/15/20 PUT 23.00 @ 6.19, Sold SPCE 06/19/20 PUT 23.00 @ 7.42. Bought SPCE 06/19/2020 CALL 23.00 @ 1.29. Paid $742-$619-$129 = -$6 for the mistake.
10. 29-May-2020
Stock price still sideways. 20 days to expiration. This time I decided to roll for monthly options.Bought SPCE 06/19/20 PUT 23.00 @ 6.70, Sold SPCE 07/17/20 PUT 23.00 @ 7.35. Addtional premium $735-$670 = $65 collected.
11. 01-Jul-2020
Stock price still sideways.More than two weeks to expiration. Rolled to another month.Bought SPCE 07/17/20 PUT 23.00 @ 7.85, Sold SPCE 08/21/20 PUT 23.00 @ 8.60. Addtional premium $860-$785 = $75 collected.
12. 31-Jul-2020
SPCE closed higher than $23 on expiration date in July. However I had rolled the options to Aug. I did not closed the options after 17-Jul because I thought stock price will go higher. But it went back below $23 very soon. So rolled another month again.Bought SPCE 08/21/20 PUT 23.00 @ 2.57, Sold SPCE 09/18/20 PUT 23.00 @ 3.82. Addtional premium $382-$257 = $125 collected.
13. 04-Aug-2020
SPCE showed lower high with bearish candle - downtrend signal. I decided to sell a naked CALL at stike price $29.Sold SPCE 09/18/20 CALL 29.00 @ 0.91. Addtional premium $91 collected.
14. 03-Sep-2020
SPCE went bearish further. Rolled for another month.Bought SPCE 09/18/20 PUT 23.00 @ 6.27, Sold SPCE 10/16/20 PUT 23.00 @ 7.07. Addtional premium $707-$627 = $80 collected.
15. 19-Sep-2020
SPCE 09/18/20 CALL 29.00 expired worthless as stock price below $18. So I kept all the money for this options.
16. 02-Ocr-2020
SPCE was around $20, still below strike price. Rolled to monthly again.Bought SPCE 10/16/20 PUT 23.00 @ 3.75, Sold SPCE 11/20/20 PUT 23.00 @ 5.30. Addtional premium $530-$375 = $155 collected.
17. 05-Nov-2020
SPCE was around $20, still below strike price. Rolled to monthly again.Bought SPCE 11/20/20 PUT 23.00 @ 5.19, Sold SPCE 12/18/20 PUT 23.00 @ 5.89. Addtional premium $589-$519 = $70 collected.
18. 16-Dec-2020
SPCE was very bullish from mid Nov and was once hit $35, then later gap down to around $25.I had rolled this options so many times. Instead of let it expire worthless in another two days, I decided not to take the risk and close the position.Bought SPCE 12/18/20 PUT 23.00 @ 0.10. Paid $10 to exit.
| 12/16/20 11:46:13pm | Trade SPCE | Bought 1 SPCE 12/18/20 Put 23.00 @ 0.10 | -$10.00 | $0.14 |
| 11/05/20 11:00:27pm | Trade SPCE | Sold 1 SPCE 12/18/20 Put 23.00 @ 5.89 | $589.00 | $0.16 |
| 11/05/20 11:00:27pm | Trade SPCE | Bought 1 SPCE 11/20/20 Put 23.00 @ 5.19 | -$519.00 | $0.14 |
| 10/02/20 12:42:56am | Trade SPCE | Sold 1 SPCE 11/20/20 Put 23.00 @ 5.30 | $530.00 | $0.16 |
| 10/02/20 12:42:56am | Trade SPCE | Bought 1 SPCE 10/16/20 Put 23.00 @ 3.75 | -$375.00 | $0.14 |
| 9/19/20 4:00:00am | Receive Deliver SPCE | Removal of 1 SPCE 09/18/20 Call 29.00 due to expiration. | $0.00 | $0.00 |
| 9/03/20 2:28:55am | Trade SPCE | Sold 1 SPCE 10/16/20 Put 23.00 @ 7.07 | $707.00 | $0.16 |
| 9/03/20 2:28:55am | Trade SPCE | Bought 1 SPCE 09/18/20 Put 23.00 @ 6.27 | -$627.00 | $0.14 |
| 8/04/20 9:42:41pm | Trade SPCE | Sold 1 SPCE 09/18/20 Call 29.00 @ 0.91 | $91.00 | $0.15 |
| 7/31/20 10:57:29pm | Trade SPCE | Bought 1 SPCE 08/21/20 Put 23.00 @ 2.57 | -$257.00 | $0.14 |
| 7/31/20 10:57:29pm | Trade SPCE | Sold 1 SPCE 09/18/20 Put 23.00 @ 3.82 | $382.00 | $0.15 |
| 7/01/20 12:24:35am | Trade SPCE | Bought 1 SPCE 07/17/20 Put 23.00 @ 7.85 | -$785.00 | $0.14 |
| 7/01/20 12:24:35am | Trade SPCE | Sold 1 SPCE 08/21/20 Put 23.00 @ 8.60 | $860.00 | $0.16 |
| 5/29/20 9:44:24pm | Trade SPCE | Bought 1 SPCE 06/19/20 Put 23.00 @ 6.70 | -$670.00 | $0.14 |
| 5/29/20 9:44:24pm | Trade SPCE | Sold 1 SPCE 07/17/20 Put 23.00 @ 7.35 | $735.00 | $0.16 |
| 5/07/20 12:54:05am | Trade SPCE | Bought 1 SPCE 06/19/20 Call 23.00 @ 1.29 | -$129.00 | $0.14 |
| 5/07/20 12:45:43am | Trade SPCE | Bought 1 SPCE 05/15/20 Put 23.00 @ 6.19 | -$619.00 | $0.14 |
| 5/07/20 12:45:43am | Trade SPCE | Sold 1 SPCE 06/19/20 Put 23.00 @ 7.42 | $742.00 | $0.16 |
| 5/02/20 12:30:28am | Trade SPCE | Bought 1 SPCE 05/01/20 Put 23.00 @ 6.95 | -$695.00 | $0.14 |
| 5/02/20 12:30:28am | Trade SPCE | Sold 1 SPCE 05/15/20 Put 23.00 @ 7.65 | $765.00 | $0.16 |
| 5/01/20 11:56:49pm | Trade SPCE | Sold 1 SPCE 06/19/20 Call 23.00 @ 0.95 | $95.00 | $0.15 |
| 4/20/20 10:59:55pm | Trade SPCE | Sold 1 SPCE 05/01/20 Put 23.00 @ 4.81 | $481.00 | $0.16 |
| 4/20/20 10:59:55pm | Trade SPCE | Bought 1 SPCE 04/24/20 Put 23.00 @ 4.31 | -$431.00 | $0.14 |
| 4/14/20 10:13:07pm | Trade SPCE | Sold 1 SPCE 04/24/20 Put 23.00 @ 6.17 | $617.00 | $0.16 |
| 4/14/20 10:13:07pm | Trade SPCE | Bought 1 SPCE 04/17/20 Put 23.00 @ 5.77 | -$577.00 | $0.14 |
| 3/23/20 9:59:25pm | Trade SPCE | Sold 1 SPCE 04/17/20 Put 23.00 @ 11.65 | $1,165.00 | $0.17 |
| 3/23/20 9:59:25pm | Trade SPCE | Bought 1 SPCE 03/27/20 Put 23.00 @ 11.22 | -$1,122.00 | $0.14 |
| 3/14/20 12:08:04am | Trade SPCE | Sold 1 SPCE 03/27/20 Put 23.00 @ 9.81 | $981.00 | $0.17 |
| 3/14/20 12:08:04am | Trade SPCE | Bought 1 SPCE 03/20/20 Put 23.00 @ 9.60 | -$960.00 | $0.14 |
| 3/09/20 10:55:04pm | Trade SPCE | Sold 1 SPCE 03/20/20 Put 23.00 @ 5.00 | $500.00 | $0.16 |
| 3/09/20 10:55:04pm | Trade SPCE | Bought 1 SPCE 03/13/20 Put 23.00 @ 4.44 | -$444.00 | $0.14 |
| 2/27/20 12:16:03am | Trade SPCE | Sold 1 SPCE 03/13/20 Put 23.00 @ 0.82 | $82.00 | $0.15 |
| $1,102.00 | $4.64 |
As you can see, after rolling for so many rounds and finally get the options back to OTM, total premium collected was $1102.00 (excluded fees).
Note:
1. If stock price goes to different direction of naked options, we can roll the position to further date to collect more premium.
2. If options back to OTM after many rounds, we can choose to close the position at minimum losses.
3. Always need to monitor Buying Power Reduction to ensure we can still perform other types of trade.
Comments
After analysing your options trade of SPCE entire year from this screen, I detected a mistake from your side on 1st July 2020 that you may have wrongly typed the opposite. It should have been like this: -
Bought SPCE 07/17/20 PUT 23.00 @ 7.85, Sold SPCE 08/21/20 PUT 23.00 @ 8.60 which you pocketed additional premium of $75. Am I correct?
I may not have traded options as long as you do but I also have another strategy which is called Diagonal Spread Call whereby you will make money every month regardless whether the stock price goes above or below the strike price. Learnt this method through a paid course online.
Perhaps I will share more once you respond to my message here. Perhaps get in touch personally over the phone or meet up for a drink.
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