Here is a recent question from an investor who is concerned about his in-the-money Apple Stock credit put spreads set to expire in a week’s time.
I have expanded on the original answer posted to the forum as this is a topic often asked about by investors and I wanted to include some examples on repairing and rescuing in-the-money positions while focusing on staying profitable and growing a portfolio further.
INVESTOR QUESTIONS
Hi Teddi,
I have some concern over 5 AAPL puts I sold at the 108.75 strike for the Oct 2nd Expiration. The company had it’s announcement day on Sept. 15th and there was no real change, so I rolled down from the 113.75 strike price to where I am at ($108.75 put strike). I realize that a lot can change rather quickly in this game, but for the last couple of weeks indexes have continued to slide downward.
If you would, could you tell me or direct me to an article? I am trying to figure out if I should set a loss threshold vs time threshold to consider rolling down again. In my inexperienced head I am thinking that as long as I end up above 108.75 by next Friday, I can buy to close for a small profit and move on to another trade with better prospects, but if the stock continues to slide the cost of buying to close becomes higher and the amount of time to go out longer to stay profitable. You’ve probably heard and seen it a thousand times.
I’m not scared. You taught me what to do and I have done it once for an increase in profit. I’m just trying to understand the when.
All The Best
Some Answers:
When stocks fall, investors panic rather than look for opportunities to roll options for more income to take advantage of the plunge in valuations. Consider that a true black swan event is extremely rare and honestly I would question if there actually are any.
I have been through the following: The 1974 oil embargo, 1987 collapse, dot com bubble, 9/11, credit crisis, May 2010 flash crash, current pandemic collapse. All were in fact opportunities for huge profits. Investors worry when their short puts fall into the money which is understandable. However investors should instead look at how to stay profitable and take advantage of declines in valuations. Every decline is met with a recovery at some point. The key to investing especially through selling options for income is taking advantage of every opportunity for more income.
Stay profitable = growing your overall portfolio to take on more risk and earn still more profits.
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Questions About Rolling Down In-The-Money Apple Credit Put Spreads – Investor Questions
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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.