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:

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.  

SPY closed @ $412.20, but its $412 covered call was not assigned against me.

Yesterday, option expiration Friday, 4/21/23, my 100 shares of SPY closed @ $412.20.  I was pleased because I wanted my 4/21/23 SPY $412 covered call to be assigned, forcing me to sell my 100 SPY @ $412.  But today I saw that it wasn't assigned.  It expired worthless & I still own the 100 SPY @ $412.20 - actually, a 20 cent benefit to me.

When I worked in the industry, & this happened to my clients, they might protest, "My covered call closed in the money by 20 cents but I wasn't forced to sell my stock.  Did your broker/dealer (Fidelity, until my retirement) stiff me?" 

We often say with the above SPY covered call, "If SPY closes on expiration date above $412, your $412 covered call will be assigned, forcing you to sell your SPY @ exactly $412." That's a "pretty fair rule" of covered call selling.

But to be more accurate, for this $412 covered call to be assigned against a seller like me, a buyer of the 4/21/23 SPY $412 call has to exercise his right to buy SPY @ exactly $412.  Then, the Options Clearing Corporation randomly assigns this exercise to a broker/dealer like Fidelity that has this covered call among its clientele.  Then the broker/dealer like Fidelity randomly assigns it to a client that has sold this covered call, like me.  If any of these $412 calls were exercised yesterday by the owner of the call, I was never randomly picked for an assignment. 

Yesterday, SPY traded above & below $412 all day.  At 3:51pm ET, it was at $411.93, but then closed at $412.20.  During the day, a buyer of this $412 call might have asked himself, "Why would I exercise my call to buy SPY @ $412 when I can simply buy it in the market when it's trading at $411.50?"

When I sell a SPY $412 covered call, I'm creating a contract.  Because I received a premium, I accepted an obligation to sell my SPY @ $412 if the call option is exercised AND assigned to me. 

ETFs vs individual stocks #2.

I looked at a blog for the first time today & liked the post on covered calls versus DOW 30 stocks.  (Blue Collar Investor - covered calls, DJIA).  I even added BCI to my blog's reading list.  In my IRA, I sell the monthly cash secured puts against broad based ETFs to help me buy, & then, after assignment to buy the ETF, I sell the monthly covered calls to help me to sell it.  I've considered using individual stocks, & even reviewed the BCI post's idea at today's market close.  I did the arithmetic with DIA ($248.70), the ETF that invests in the DJIA's 30 stocks, & with WMT ($102.42) - Walmart - one of the DJIA's stocks.  To maintain apples to apples, both equities have a current dividend yield of about 2.1%; & I selected the 11/16/18 puts & calls that were about 2.5% out of the money.  I calculated what I call the premium yield - for puts, I divide the premium's BID by the strike price (the amount of cash reserved); for calls, I divide the premium's BID by the equity's market value.  Using the time until expiration - 17 days - I annualized the premium yield.  For selling puts, DIA's annualized premium yield was 25%, WMT's was 39%.  For selling calls, DIA's was 18%, WMT's was 36%.  I'm sure I'll re-visit the individual stock idea for my IRA, but how do you feel about covered calls (cash secured puts) versus ETFs?

Covered call premiums to complement the dividend.

Did you ever hear an investor saying, "although my stock is getting beat up, at least I'm being paid its dividend as I hold it, waiting for it to recover?" I'm applying that rationale to my recent IRA investment in SPY, the ETF that holds the stocks of the S&P 500.  Via a put assignment on 10/19/18, I paid $288.05 a share (strike price minus the sold put's premium).  SPY closed today at $263.69.  When I sold the put, I knew that SPY was high, but I try not to guess its direction.  I just want to own it, because I need equity allocation.  And I'm not going to sell it at this low price.  At least I'm being paid its dividend as I hold it, waiting for it to recover.  Its dividend's current yield is around 1.9%, which amounts to about $5 a year, or 42 cents a month (it pays quarterly).  To be honest, the dividend is hardly great consolation versus my nearly $25 loss.  But, applying my consistent option selling strategy, I've also sold covered calls against my SPY since 10/19/18.  On 10/22/18, with SPY already down to $275.26, I sold the 11/16/18, $280.50 call & received a $2.33 premium.  As the October debacle continued, with SPY trading at $264.97 today, I applied a covered call roll strategy to my SPY position.  I like calling it a repair strategy, & more appropriately so.  I was able to buy back the 11/16/18, $280.50 call (which I sold on 10/22/18 for $2.33) for a $0.51 premium & I immediately sold the 11/16/18, $273.50 call for a $1.93 premium.  I earned a $1.42 premium credit with my SPY repair strategy.  In covered call premiums, I've garnered $3.75, which is 1.3% of my $288.05 net cost for SPY.  If I don't earn any more covered call premiums on my SPY through 11/16/18, my annualized premium yield is over 15% (1.3% X 12 months).  That's a nice complement to the SPY dividend's 1.9% current yield!  (Suppose SPY exceeds $273.50 in advance of the 11/16/18 close; any ideas?)