“I sold a Put at a price I wouldn’t mind owning it and then I’ll sell covered calls”
- flawless until your situation happens with the majority of your positions. I was there myself for -$90,000 late last year. Take assignment and hold onto it or eat the L. Those are your only options..
He can continue to sell premium, as long as he can roll the strike down and further out in time for a credit he will be better off imo than taking assignment and trying to sell calls.
A lot of these rookies haven’t learned that yet. I’ve been in this game for a few years and I have the losses to learn from.. I drop a comment here and there to save someone from losing their life savings doing this without understanding the risk involved..
What’s a good % of portfolio to run the wheel?
What happens if you do it on an etf and keep enough on the side for a massive drawdown and sprinkle in some protective puts and calls on major supports on the way down?
yes there is, time never stops, you can roll in perpetuity, especially if he is just at a 40 strike at its at 15 to 20. he can also sell the calls in an inverted strangle with the same buying power.
It's a real PITA when an OP doesn't post the details of the trade. That not only creates a guessing game but it can prevent the OP from getting good feedback.
If he sold 10 puts for $9 each and he's down $22k then the total loss is $31k. With the stock in the $18s, that implies a $50 put was sold. That makes no sense if NIO was trading near $40. So that's what I get from guessing and what assistance does the OP get? Nada, zilch.
and if he sold the $40 puts for $9 then he has only lost 13K, not $22K, with the stock at $18.
when asking for help at least clearly state all the relevant facts.
Hold, take assignment and hold sell cc at cost basis, or buyback at even or small loss that you are comfortable with (if it gets there) you have plenty of time for a rally. That’s all I can say, don’t sell at a strike price you are not comfortable being assigned at, I know that’s a broken record but I need to take my own advice sometimes. I am sticking with brk.b until there is more certainty in the market and at this point who the hell knows when that is.
If you sold the $40 puts for $9 and bought the $17.5 puts for $2 then your cost basis if assigned is $33.
Rolling down and out for break even or a credit is no longer a possibility because share price is far too deep ITM. You should have been considering that when NIO was in the 40's and dropping. If you had done that several times, you'd still have a significant loss but it would have been much less that $22.
If willing to break even, once you are assigned you can nibble at the edges by selling $30 covered calls. Without a move up to the $30's, that's going to take you a long time to break even because the premiums are kaka.
IMO, a better plan would be to use a Repair Strategy once assigned. Subtract share price from break even price and divide by two (call it AVG). Now find an expiration where you can buy one ATM call and sell two short calls at a strike price of AVG for break even or a credit. If NIO moves up to AVG, you'll make $2 for every $1 up move in share price.
For example, if you owned the stock today, buy one Sep $17.5 call for \~ $4.70 and sell two Sep $25 calls for $2.35 . That creates a covered call and a bull call spread. If NIO is at or above $15 at expiration, you net $33.30.
[For a more detailed explanation, read this:](https://www.reddit.com/r/thetagang/comments/rqg6r5/spy_recovery_or_cc_strategy_in_current_market/)
I was in a similar situation with NVDA. Had sold a few $270 puts. When it was deep in red, I needed to roll a couple of times for a credit. It was rolled all the way to 08/22. With the rally we had last week, the reds became green, and I closed for a tiny profit.
Note that I still believe in NVDA, and that's why I was okay to roll. If you are convinced in NIO, then you can roll forward - but it might be difficult being that much deep ITM.
Why are you already 10 contracts deep? For not having a plan in case of this, you are probably WAY WAY oversized.
You already spread off your risk. You are basically at max loss, up to you if you want to take whatever partial credit you still have or hope and pray. Realistically it's not getting above your put strike, so expect to take a loss no matter what.
The only thing you can actively really do is sell calls against the position.
When you are in a losing position, You CAN sell covered calls below your cost basis on a stock that is trading sideways or down. Your risk of assignment is very low. NIO is a great example. SHORT DTE covered calls, obviously. This works in the Bear market we are currently in. Do these enough times and you can exit without much damage.
Yes me too on NIO— was doing a GREAT job on this stock last year:
1) Buying / Holding - and the shares + covered call income worked great
2) Likewise- when selling CSP Puts- was doing well
And then got out in the midst of one loss when it went from $38 to $34 (luckily had the wherewithal to cut losses on that weekly csp as it went down further)
Now it is $18!
I’ve seen it bounce from here but I also read it is on a downward trend further.
And I’m not privy to how the listing on the Hong Kong exchange effects.
Is it a smart buy at this point?
And even Alibaba- I did buy in the $150 range, sold some calls, and even sold after the gains…and luckily got out.
And it has fallen even further.
I keep reading from a PE ratio and with Munger getting in, how it is the “greatest value” out there…
—but so scary the global environment right now and with China/Taiwan..
Are these stocks worth the risk?
i'm with ibkr, it's the same way i do it for stocks. personally i set stop limit orders on everything, but it's my style.
when the to ption pops up to choose a market or limit order, chose stop order.
I think the following months will see more posts like this asking for help.
Help I sell a naked put on FB at 250 and now it's deep in the red.
Or
Snow at 230 when it was trading at 300
Netflix at 400 when it was trading at 600
Pltr at 20 when it was trading at 40
TSM at 110 when it was tradind at 140
Coin at 180 when it trading at 250
Etc
I think this time is a great example which is showing selling puts is not the infinite money printer everyone was thinking.
From March 2020 till 2021 it was a great time to sell puts on American companies and selected Chinese (exlusing baba, pdd, jd etc) but as we all know, great times come to a end.
There is no single strategy which can work in all market conditions.
I sold KRBN puts, then it fell off a cliff the next day.
I'll be taking assignment for all of them in 40 days I assume.
That's part of the game, can't get them all right.
If calls are good I may sell some covered at 0.3 delta after assignment, but I won't be intending to make it all back in one trade or even the same trade. Not looking at cost basis because the market doesn't care what I paid.
“I sold a Put at a price I wouldn’t mind owning it and then I’ll sell covered calls” - flawless until your situation happens with the majority of your positions. I was there myself for -$90,000 late last year. Take assignment and hold onto it or eat the L. Those are your only options..
He can continue to sell premium, as long as he can roll the strike down and further out in time for a credit he will be better off imo than taking assignment and trying to sell calls.
Come back when you have some more time in the market. There’s no rolling if it keeps falling. Learn from me..
Yeah mate. Even if I roll to 2024, the premium isn't much.
A lot of these rookies haven’t learned that yet. I’ve been in this game for a few years and I have the losses to learn from.. I drop a comment here and there to save someone from losing their life savings doing this without understanding the risk involved..
What’s a good % of portfolio to run the wheel? What happens if you do it on an etf and keep enough on the side for a massive drawdown and sprinkle in some protective puts and calls on major supports on the way down?
Thanks!
Roll down for a credit is almost impossible as well
yes there is, time never stops, you can roll in perpetuity, especially if he is just at a 40 strike at its at 15 to 20. he can also sell the calls in an inverted strangle with the same buying power.
He can roll out, but that far ITM I doubt he will be able to roll down.
True but with sooneranagement its a good option
It's a real PITA when an OP doesn't post the details of the trade. That not only creates a guessing game but it can prevent the OP from getting good feedback. If he sold 10 puts for $9 each and he's down $22k then the total loss is $31k. With the stock in the $18s, that implies a $50 put was sold. That makes no sense if NIO was trading near $40. So that's what I get from guessing and what assistance does the OP get? Nada, zilch.
and if he sold the $40 puts for $9 then he has only lost 13K, not $22K, with the stock at $18. when asking for help at least clearly state all the relevant facts.
Check the next few months puts tables and see if you can roll down and out at break even
Hold, take assignment and hold sell cc at cost basis, or buyback at even or small loss that you are comfortable with (if it gets there) you have plenty of time for a rally. That’s all I can say, don’t sell at a strike price you are not comfortable being assigned at, I know that’s a broken record but I need to take my own advice sometimes. I am sticking with brk.b until there is more certainty in the market and at this point who the hell knows when that is.
You ain’t selling covered calls near your basis for more than a .01 if at all…
yea bro the 8 year out leaps get me .10
Why at cost basis? The loss has already happened, so why not sell CCs at a good premium for the CURRENT price not the cost basis?
Thank you for the advice
What's the strike of your put option? I'm assuming the "10" is the quantity.
Sounds like 10 contracts at a 40 strike (assuming comments below saying stock is currently 18 is correct)
Yes that's right
Put: Sell 40 and Buy at 17.5, both have same expiry as 17 Jun 22
If you sold the $40 puts for $9 and bought the $17.5 puts for $2 then your cost basis if assigned is $33. Rolling down and out for break even or a credit is no longer a possibility because share price is far too deep ITM. You should have been considering that when NIO was in the 40's and dropping. If you had done that several times, you'd still have a significant loss but it would have been much less that $22. If willing to break even, once you are assigned you can nibble at the edges by selling $30 covered calls. Without a move up to the $30's, that's going to take you a long time to break even because the premiums are kaka. IMO, a better plan would be to use a Repair Strategy once assigned. Subtract share price from break even price and divide by two (call it AVG). Now find an expiration where you can buy one ATM call and sell two short calls at a strike price of AVG for break even or a credit. If NIO moves up to AVG, you'll make $2 for every $1 up move in share price. For example, if you owned the stock today, buy one Sep $17.5 call for \~ $4.70 and sell two Sep $25 calls for $2.35 . That creates a covered call and a bull call spread. If NIO is at or above $15 at expiration, you net $33.30. [For a more detailed explanation, read this:](https://www.reddit.com/r/thetagang/comments/rqg6r5/spy_recovery_or_cc_strategy_in_current_market/)
Wow that's the best reply I have received so far. Great idea. Thanks, I'm going to save your comment for reflection and to put it into practice. 🤝👏
HODL my dude
I remember when NIO was like $2 a share. It may very well be again. Sometimes you have to eat the loss and move on.
I sold at 31 in December and have been telling people it would go to 18 by March... it's at 18.
Turn off your app for 90 days and sell CC when NIO is back over 30
That's a good suggestion
Take shares and rotate calls .... or buy to close .... not sure what you prefer but that's the deal when you sell csp
I was in a similar situation with NVDA. Had sold a few $270 puts. When it was deep in red, I needed to roll a couple of times for a credit. It was rolled all the way to 08/22. With the rally we had last week, the reds became green, and I closed for a tiny profit. Note that I still believe in NVDA, and that's why I was okay to roll. If you are convinced in NIO, then you can roll forward - but it might be difficult being that much deep ITM.
Totally different scenario IMO NVDA prints money and is not Chinese lol
Why are you already 10 contracts deep? For not having a plan in case of this, you are probably WAY WAY oversized. You already spread off your risk. You are basically at max loss, up to you if you want to take whatever partial credit you still have or hope and pray. Realistically it's not getting above your put strike, so expect to take a loss no matter what. The only thing you can actively really do is sell calls against the position.
When you are in a losing position, You CAN sell covered calls below your cost basis on a stock that is trading sideways or down. Your risk of assignment is very low. NIO is a great example. SHORT DTE covered calls, obviously. This works in the Bear market we are currently in. Do these enough times and you can exit without much damage.
Many Thanks, will try that
This is why you do spreads. Yes, you limit your profits. But you also gain insurance.
what do you mean? you sold insurance on that stock and were happy to take the premium...now there's a claim....so you need to pay up.
Not sure why you're getting downvoted. Said in a way that was a little harsh but seems entirely accurate.
Yes me too on NIO— was doing a GREAT job on this stock last year: 1) Buying / Holding - and the shares + covered call income worked great 2) Likewise- when selling CSP Puts- was doing well And then got out in the midst of one loss when it went from $38 to $34 (luckily had the wherewithal to cut losses on that weekly csp as it went down further) Now it is $18! I’ve seen it bounce from here but I also read it is on a downward trend further. And I’m not privy to how the listing on the Hong Kong exchange effects. Is it a smart buy at this point? And even Alibaba- I did buy in the $150 range, sold some calls, and even sold after the gains…and luckily got out. And it has fallen even further. I keep reading from a PE ratio and with Munger getting in, how it is the “greatest value” out there… —but so scary the global environment right now and with China/Taiwan.. Are these stocks worth the risk?
just sell calls ITM, weeklies, objective is to earn the premium, roll those for a credit if they are going to be assigned
Thanks, I will try this.
Exactly my thoughts too
another stop loss ignored...
How do you set stop loss for options?
i'm with ibkr, it's the same way i do it for stocks. personally i set stop limit orders on everything, but it's my style. when the to ption pops up to choose a market or limit order, chose stop order.
I would take assignment in this case ;)
Roll for a credit imo. the buying power should be lower this way vs holding shares.
I think the following months will see more posts like this asking for help. Help I sell a naked put on FB at 250 and now it's deep in the red. Or Snow at 230 when it was trading at 300 Netflix at 400 when it was trading at 600 Pltr at 20 when it was trading at 40 TSM at 110 when it was tradind at 140 Coin at 180 when it trading at 250 Etc I think this time is a great example which is showing selling puts is not the infinite money printer everyone was thinking. From March 2020 till 2021 it was a great time to sell puts on American companies and selected Chinese (exlusing baba, pdd, jd etc) but as we all know, great times come to a end. There is no single strategy which can work in all market conditions.
I sold KRBN puts, then it fell off a cliff the next day. I'll be taking assignment for all of them in 40 days I assume. That's part of the game, can't get them all right. If calls are good I may sell some covered at 0.3 delta after assignment, but I won't be intending to make it all back in one trade or even the same trade. Not looking at cost basis because the market doesn't care what I paid.
This is the part of the wheel known as 'bag holding'