In my strategy, I sellputsthencalls - I sell to open cash secured puts (occasionally naked puts) & then covered calls. Recently, I uncharacteristically did buy a call to open. And it did force me to consider your above question after you bought a put that quickly made you 80%. I bought a call versus XLE, the energy ETF. In my sellputsthencalls strategy versus XLE, I made 2 critical errors in which I lost money. So I bought a long term XLE call to catch up, & importantly, to protect my sellputsthencalls strategy against strong XLE appreciation. I was bullish on oil & the energy stocks. The XLE call became profitable, but not enough to cover my earlier loss. But time until expiration was running out. So I sold the XLE call well before expiration to capture the available profit, even though I was bullish on XLE. (You're never wrong to take a profit.) Continuing with my bullishness, I then bought another XLE call with an expiration date that was 1 year longer. About 10 months before that call's expiration, all of my loss from the 2 critical errors was covered, plus I was able to grab a few more dollars beyond my loss. So I sold my call & put it behind me.
My 2018 primer, Selling Options...Simply Called and Simply Put, targets 3 groups: investors that are new to option trading, Series 7 exam students, and stockbrokers who passed Series 7 but lack good understanding of option trading (for 8 years, I was one of them). But this blog is helpful to investors and stockbrokers with all levels of option trading experience. My posts offer a pithy, first person style that I have used since 1995 to lessen their option trading angst.
Wednesday, May 17, 2023
I bought a put, it's up 80%, expires in 4 months...sell it or hold longer?
An option newcomer asked the question in the above title. My answer:
Labels:
covered calls,
in the money,
long calls,
long puts,
put selling
Location:
Lewes, DE 19958, USA
Subscribe to:
Posts (Atom)