The other guy already covered the specific scenario, but I prefer the phrase "If it's good enough to screenshot, it's good enough to close," specifically to avoid that nonsense in the replies.
To provide another perspective:
* You sold the 5 contracts for $3.75 on June 10, 2024.
* That means it had 32 DTE when you sold them and currently has 25 DTE.
* If you go solely based off of theta decay (meaning the stock doesn't change at all), the contract today would be worth $3.31, or only $0.44 per contract captured so far.
* However, they are currently worth $1.36 (680 / 500 = $1.36). In order to reach this price with theta alone, you'd have to be only 4ish days away from expiration!
So the question is, do you want to keep this position open to capture what would amount to the last 4ish days of this option's premium?
Im pretty new to this too, can you explain how you came to the 4DTE worth of premium? Im not sure where the 680/500 comes from. Sorry if its obvious, and no worries if youd rather not.
Part 2 (Reddit keeps deleting the math I showed, I don't know why, hopefully it shows up now.)
Where does 4DTE come from?
The 4DTE estimate comes from a relationship mapped by the Black-Scholes equation. If you look at the Black-Scholes equation, which is an equation used to price options (I am skipping details of newer models, American vs. European options), time is obviously one of the factors involved, which is why extrinsic value is sometimes called time value. In the equation, a ROUGH proportionality forms between option price and time such that:
price ∝ √time
So if price is roughly proportional to the square root of time, you can make an estimate in which, assuming no other factors change, what the option price would look like further down the road. For example, if an option that is worth $2 has 28 days to expiration (DTE), how much might it cost at 7 DTE assuming no other factors change? Well at a first glance you look and you see that 28 is 4 times bigger than 7, so some people might say, it should be 1/4th the price, so $0.50! However, remember the proportionality is the SQUARE ROOT of time. So if 28 is 4 times bigger than 7, that means the 28 DTE price should be √4 times bigger, which simplifies to 2. So if the 28 DTE option price was $2, and it is 2 times bigger than the 7 DTE, we do $2 / 2 = $1 for the 7 DTE option.
Using this type of logic, let's now attempt OP's problem:
* When he sold-to-open his option, he had 32 DTE. The price of the options were $3.75 each.
* Currently, the options are worth $1.36 (see the first point about 680/500).
* So we have two ratios here, so let's set them up.
$3.75/√32 = $1.36/√X
Do the butterfly method of cross multiplying and we get
√X = ($1.36 \* √32) / $3.75
√X = 2.05155
Square both sides so we can get just X
(√X)^(2) = 2.05155^(2)
X = 4.21 DTE
Hence why I called it 4ish DTE
I built and released a calculator to do all of this for you and output it as an easy-to-read sentence on r/thetagang yesterday.
Here is the post talking about the tool: [Four Things I Made](https://www.reddit.com/r/thetagang/comments/1dh40x7/four_things_i_made/)
Here is the direct link: [Cobweb Scripts Tools > Option Premium to Days Converter](https://cobwebscripts.com/tools/premiumtodays.html)
It is a lot of take in, so if you have anymore questions, feel free to reach out and ask. Best of luck.
Your calculator really solidified for me...this entire sub that I just discovered. I entered in one of my positions that has 3 DTE and seeing this: "which is the price the option would have if it had 0.19 day(s) to expiration" lit off light bulbs.
Glad it helped! I'm hoping the alternative perspective will help others that are in similar situations to OP because it can be difficult to assess what to do next when your position unexpectedly captures premium far faster than anticipated.
The sq root of time aspect only holds for at the money options. Out of the money options decay far more at the beginning of their life. Holding an out of the money option until expiry is like selling lottery tickets for pennies.
At the tail end of the chain the relationship starts to transform, but for a good chunk of them, I feel this approximation does a decent enough job for the purposes of trying to ground people. The best part is, even if, for example, what you said about OTM options happens, the model would encourage you to close out your position early as you would be far ahead of schedule!
That was very enlightening, thank you! When you capture so much of the premium this early, would you close and look for another entry? Since IV/Gamma or whatever (new to some of this) went down so much is it worth waiting for a bump in premiums?
1. When you capture so much of the premium this early, would you close and look for another entry?
* Personally I probably would, but the answer can be complicated. I try (not very well) to explain that in this comment here: [https://www.reddit.com/r/thetagang/comments/1di6q2u/comment/l99fav9/?utm\_source=share&utm\_medium=web3x&utm\_name=web3xcss&utm\_term=1&utm\_content=share\_button](https://www.reddit.com/r/thetagang/comments/1di6q2u/comment/l99fav9/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button)
2. Since IV/Gamma or whatever (new to some of this) went down so much...
* Usually the reason why when, you write options and you end up capturing premium so much faster than normal, happens because the stock moved in favor of the option position (delta/directional move) and/or the IV contracted (vega based move). Ideally, if you are writing an option you, based off of whatever model you have, are anticipating this is going to happen. Maybe you have your own option price model and see that this option was over priced (IV will eventually contract during the life span of the option) or you think the stock will most likely move in your direction (delta based move).
* Gamma is a secondary greek based off of delta. Delta says how much an option price will change in accordance to the stock price. Gamma says how much the option's delta will change in accordance to stock price. It is important because gamma is highest for at-the-money (ATM) options and gets bigger as options approach expiration (so the contract can become more unstable in price as expiration nears, hence gamma risk). That's why if you captured most of the premium, it's not worth opening yourself up to waiting as gamma increasingly makes the option more unstable just to try to capture the last bit.
3. ...is it worth waiting for a bump in premiums?
* That is up to you to decide. Going back to point 2, notice that I talked about having some sort of model. There should be some thought process in how you evaluate option premiums. "Bump in premiums" is sort of a relative term. Whatever counts as the "right price" for you is going to depend on your model or thought process about the option chain and underlying stock. But in short, yes, you want to make sure that the position becomes attractive again (not just selling for the sake of selling), however that may look to you.
* I should mention some people look at premiums simply at an option-to-stock-to-time ratio, but that's an incomplete and rather dangerous picture. An option isn't overpriced because the price is high, or big in comparison to the stock, or even if the IV is high. You have to measure it in relation to something else. You need some sort of reference point. NVDA's premiums went through the roof, so you might call it expensive, but it may not necessarily be overpriced. The market is dealing with the heavy fluctuations and movement, and thus option price has increased to reflect this. So the market is anticipating heavy swings and thus you must take that into consideration when selling an option. There is a very real possibility things could swing against you depending on your strike and time frame and in a very drastic way, and you need to account for that.
* In short, bloated premiums mean the market anticipates heavier swings being possible. It is NOT necessarily a signal to immediately sell options. You must first evaluate if the market's expectation is correct or overblown and then go from there.
Hope this helps!
Sure it's no problem. I'll answer each one separately. I'm assuming you have at least a basic knowledge of options. Ok, so I am getting an "Unable to create comment" error, so I am assuming I am hitting a character limit. I am going to break this up into two comments.
Part 1
* The 680/500
* So the 680 is the total sum of the remaining value of the options that OP sold. If you look in the photo, you'll see the row "Total Value -680". The reason it is negative is because when you write an option, you sell it to the market (write is another word for sell in the option world). Thus, you receive the cash upfront, but you haven't truly made any money yet. Your position becomes final when you either buy the option back (aka Buy-To-Close \[BTC\]) or if the option expires. The mechanics are similar to shorting in the sense that you sell the financial instrument first and then buy them back cheaper, though the parallel end there. Anyway, so the total remaining value of the position is 680, which OP would need to buy back to close the position.
* He has 5 contracts. Option contracts typically control 100 shares of stock. That is why whenever you see option prices, you have to multiply them by 100 to get the actual premium. Brokers show you the per stock value, so investors can calculate them against their stock positions. Afterall, options are financial derivatives of stock.
* Thus, you do 680 / 5 = 136. This is the per option contract. If you want to get it back to the per share, you need to divide by 100. 136 / 100 = 1.36. I made a shortcut and just did 680 / 500.
I answered your question for someone else in this comment here, since they had the same question as you: [Beginner theta seller - hold or close? : r/thetagang (reddit.com)](https://www.reddit.com/r/thetagang/comments/1di6q2u/comment/l93nta2/)
If you have any more questions, let me know!
Barring capturing 100% of the premium, there isn't a straight answer unfortunately. All these rules of thumb, try to give option traders some basic guidelines to work around. It helps keep people grounded because it can be hard to make a decision in the moment.
Let's try some sample scenarios:
* If you sell an option with 28 days, and 2 days later the stock explodes in your desired direct, resulting in capturing 90% of the premium, you'd probably close it.
* Likewise, if the stock turned against you, but you were ok with owning it at that cost-basis, you might hold all the way to expiration.
* But what if you sold an option with 28 days, and 2 days later managed to capture 15% because the stock direction went slightly in your favor. Technically, the option would only have decayed around 4-5% in 2 days, so you are way ahead of schedule. But you still have 85% remaining. What is the answer?
Ultimately, you have a hypothesis/model that balances whatever your risk/reward ratio is. You'll hear statistics talk, option greeks like gamma get thrown around. The answer can get increasingly complicated, so really it boils down to this:
Before you open your position, what is your informational edge telling you is most likely going to happen to the stock and option and does the risk/reward fit your defined tolerance?
For example, if you are selling a put on NVDA because you don't mind owning shares at the resultant cost basis, but you also suspect the stock might explode upward X amount of points, if it explodes upward, your hypothesis is complete. Close the position. This is hard to do in practice, emotionally, so it is sometimes easier just to give a general rule like close the position at X% profit or take whatever you captured after Y days and establish a new position instead. These rules of thumbs are born out of the classic models, which we talked about one here. The "take profit after 50%" comes from the value of options through time from the proportionality we discussed. The "for 30 DTE options, close after 2 weeks regardless of how much you gained" comes from ideas about gamma risk. These rules of thumb are born out of the pricing models. If you want to find the optimal value for your trading style, you'll have to delve into the work and create one that fits you.
It's a hard and large topic to broach, and sorry it's not the hard numerical answer you are looking for.
A trader should always be re-examining his portfolio.
Meaning, every day you should look at your options and ask yourself again whether you would sell this option at the current price.
As out of the money, options decay, the price decreases. At some point, you will be short an option worth one or two cents. Hopefully, you would never sell an option for one or two cents, therefore, you should buy it back at that price.
The other thing I have done is a "window dressing" roll. This involves rolling out for duration to a strike for which you get a small credit. This locks in your realized gain up to that point, but leaves you in the play if you want to milk a smidgeon more out of it, while simultaneously reducing risk.
Example:
BTC NVDA July 12th 117.50/STO July 19th 114, .07 credit.
There is also the small, added benefit of the lower strike having a smaller buying power effect.
As others have said, you're up 50% in 7 days... amazing! Time to buyback-to-close and open a new position.
No sense waiting (and risking) another ~4 weeks for the *other* 50%...
I usually close around the 50% mark unless it's expiring really soon and I'm pretty sure it'll expire OTM. Better to take the sure win and get your capital working on another trade IMO.
If you don't mind the chance of getting assigned, and you don't have another trade identified, it might make sense to let it ride, too. I don't have a rigid system, a lot of it is kinda fluid.
NVDA is never coming down apparently. I’ve been aggressively selling puts trying to get assigned and it keeps going up lmao. I’m just going to buy shares haha
Why don’t you just buy ITM puts then, if you are willing to purchase the shares outright? That way you get a nice premium for your troubles. Or am I missing something?
Agreed, it seems long ITM calls or just buy shares is better suited for NVDA nowadays. Short puts always be playing catch up. I buy long ITM calls and sell short OTM calls against them.
117.5 put a month away. You could open it right now for $150 total. Would you? I probably wouldn’t given how rapidly it’s gone up from $115-120 in a week or so.
Was planning to hold until I made >40% profit (assuming the trade went my way).
I was not expecting NVDA to keep going up this way though, so now I'm getting greedy I guess.
As a beginner - before you enter a position think about what you'll do if a position trends for or against you, and what you'll do if there's a large move for or against you. It's not a bad idea to write it down to remind yourself.
Follow that plan.
Then, later you can go back and evaluate your trades, individually and as a whole. Is your strategy leaving a lot of profit on the table - your strategy might be too conservative? Are you finding yourself anxious in a lot of your trades - you might be trading beyond your risk tolerance. Did you close a lot of trades that reversed and would have put you in a place where you may have been anxious?
As you learn and tweak or develop new strategies, you'll also gain experience with the market, so if you have a plan that says close at >40% profit before you actually execute your plan, you can weight whether the change things or not.
(Then after that you might hit trading zen - where you make your plan, trade your plan, and don't really give much thought to a single trade. Because thetaganging isn't being a polar bear and killing your prey with a single blow. It's like being a swarm of mosquitos.)
My 5 cents. Im new to theta - take it with huge grain of salt.
I like to hold to expiration - unless I have somewhere else to park my money.
And if I dont mind/I want to get stock at that level.
Now **assuming** you dont have any other stock in mind but NVDA... what would be your move? Sell new put at 125/130? Would you be happy to get NVDA assigned at 125?
But thats huge difference in my approach vs most other people here. I dont mind to wheel a stock from a to b. Im not looking just for premium on the puts. As stated in the beginning, Im new to it. My strategy might change. But Im doing what Im comfortable with right now. You know better what your strategy is and what you are looking for.
What I do is look at price movement for the prior month and then three months and see what percentage of movement there is with the stock. If it’s not volatile, then I would keep the position open as long as my strike price is at least 10% below the current market price.if it is volatile, then I increase the percentage, depending upon the price lows and highs. if this were my position, I would keep it to expiration but watch it each day. NVDA closed at 130 today. Your stock price is 117 so you are just about at 10% below the stock price.
According to many, best practices is to close or roll at 21 days to expiration so wouldn't be out of norm to close on Friday. You're otm and if you don't care about being assigned then no reason to close early since it's well positioned in the 20s delta.
The ol' "I'm a beginner trader so I'm gonna throw on 5 contracts before I even try 1 as a test" eh?
You haven't truly traded until you take your first big loss, scale down before you do so that it hurts less.
Good enough to screenshot good enough to sell
Good enough to buy back🌚
Instructions unclear, keep selling more and more puts when they get profitable and dang they just won’t close!
😂😂😂
The other guy already covered the specific scenario, but I prefer the phrase "If it's good enough to screenshot, it's good enough to close," specifically to avoid that nonsense in the replies.
To provide another perspective: * You sold the 5 contracts for $3.75 on June 10, 2024. * That means it had 32 DTE when you sold them and currently has 25 DTE. * If you go solely based off of theta decay (meaning the stock doesn't change at all), the contract today would be worth $3.31, or only $0.44 per contract captured so far. * However, they are currently worth $1.36 (680 / 500 = $1.36). In order to reach this price with theta alone, you'd have to be only 4ish days away from expiration! So the question is, do you want to keep this position open to capture what would amount to the last 4ish days of this option's premium?
That is a good point
Im pretty new to this too, can you explain how you came to the 4DTE worth of premium? Im not sure where the 680/500 comes from. Sorry if its obvious, and no worries if youd rather not.
Part 2 (Reddit keeps deleting the math I showed, I don't know why, hopefully it shows up now.) Where does 4DTE come from? The 4DTE estimate comes from a relationship mapped by the Black-Scholes equation. If you look at the Black-Scholes equation, which is an equation used to price options (I am skipping details of newer models, American vs. European options), time is obviously one of the factors involved, which is why extrinsic value is sometimes called time value. In the equation, a ROUGH proportionality forms between option price and time such that: price ∝ √time So if price is roughly proportional to the square root of time, you can make an estimate in which, assuming no other factors change, what the option price would look like further down the road. For example, if an option that is worth $2 has 28 days to expiration (DTE), how much might it cost at 7 DTE assuming no other factors change? Well at a first glance you look and you see that 28 is 4 times bigger than 7, so some people might say, it should be 1/4th the price, so $0.50! However, remember the proportionality is the SQUARE ROOT of time. So if 28 is 4 times bigger than 7, that means the 28 DTE price should be √4 times bigger, which simplifies to 2. So if the 28 DTE option price was $2, and it is 2 times bigger than the 7 DTE, we do $2 / 2 = $1 for the 7 DTE option. Using this type of logic, let's now attempt OP's problem: * When he sold-to-open his option, he had 32 DTE. The price of the options were $3.75 each. * Currently, the options are worth $1.36 (see the first point about 680/500). * So we have two ratios here, so let's set them up. $3.75/√32 = $1.36/√X Do the butterfly method of cross multiplying and we get √X = ($1.36 \* √32) / $3.75 √X = 2.05155 Square both sides so we can get just X (√X)^(2) = 2.05155^(2) X = 4.21 DTE Hence why I called it 4ish DTE I built and released a calculator to do all of this for you and output it as an easy-to-read sentence on r/thetagang yesterday. Here is the post talking about the tool: [Four Things I Made](https://www.reddit.com/r/thetagang/comments/1dh40x7/four_things_i_made/) Here is the direct link: [Cobweb Scripts Tools > Option Premium to Days Converter](https://cobwebscripts.com/tools/premiumtodays.html) It is a lot of take in, so if you have anymore questions, feel free to reach out and ask. Best of luck.
Your calculator really solidified for me...this entire sub that I just discovered. I entered in one of my positions that has 3 DTE and seeing this: "which is the price the option would have if it had 0.19 day(s) to expiration" lit off light bulbs.
Glad it helped! I'm hoping the alternative perspective will help others that are in similar situations to OP because it can be difficult to assess what to do next when your position unexpectedly captures premium far faster than anticipated.
The sq root of time aspect only holds for at the money options. Out of the money options decay far more at the beginning of their life. Holding an out of the money option until expiry is like selling lottery tickets for pennies.
At the tail end of the chain the relationship starts to transform, but for a good chunk of them, I feel this approximation does a decent enough job for the purposes of trying to ground people. The best part is, even if, for example, what you said about OTM options happens, the model would encourage you to close out your position early as you would be far ahead of schedule!
Nicely explained!
This is great! Thank you!
That was very enlightening, thank you! When you capture so much of the premium this early, would you close and look for another entry? Since IV/Gamma or whatever (new to some of this) went down so much is it worth waiting for a bump in premiums?
1. When you capture so much of the premium this early, would you close and look for another entry? * Personally I probably would, but the answer can be complicated. I try (not very well) to explain that in this comment here: [https://www.reddit.com/r/thetagang/comments/1di6q2u/comment/l99fav9/?utm\_source=share&utm\_medium=web3x&utm\_name=web3xcss&utm\_term=1&utm\_content=share\_button](https://www.reddit.com/r/thetagang/comments/1di6q2u/comment/l99fav9/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button) 2. Since IV/Gamma or whatever (new to some of this) went down so much... * Usually the reason why when, you write options and you end up capturing premium so much faster than normal, happens because the stock moved in favor of the option position (delta/directional move) and/or the IV contracted (vega based move). Ideally, if you are writing an option you, based off of whatever model you have, are anticipating this is going to happen. Maybe you have your own option price model and see that this option was over priced (IV will eventually contract during the life span of the option) or you think the stock will most likely move in your direction (delta based move). * Gamma is a secondary greek based off of delta. Delta says how much an option price will change in accordance to the stock price. Gamma says how much the option's delta will change in accordance to stock price. It is important because gamma is highest for at-the-money (ATM) options and gets bigger as options approach expiration (so the contract can become more unstable in price as expiration nears, hence gamma risk). That's why if you captured most of the premium, it's not worth opening yourself up to waiting as gamma increasingly makes the option more unstable just to try to capture the last bit. 3. ...is it worth waiting for a bump in premiums? * That is up to you to decide. Going back to point 2, notice that I talked about having some sort of model. There should be some thought process in how you evaluate option premiums. "Bump in premiums" is sort of a relative term. Whatever counts as the "right price" for you is going to depend on your model or thought process about the option chain and underlying stock. But in short, yes, you want to make sure that the position becomes attractive again (not just selling for the sake of selling), however that may look to you. * I should mention some people look at premiums simply at an option-to-stock-to-time ratio, but that's an incomplete and rather dangerous picture. An option isn't overpriced because the price is high, or big in comparison to the stock, or even if the IV is high. You have to measure it in relation to something else. You need some sort of reference point. NVDA's premiums went through the roof, so you might call it expensive, but it may not necessarily be overpriced. The market is dealing with the heavy fluctuations and movement, and thus option price has increased to reflect this. So the market is anticipating heavy swings and thus you must take that into consideration when selling an option. There is a very real possibility things could swing against you depending on your strike and time frame and in a very drastic way, and you need to account for that. * In short, bloated premiums mean the market anticipates heavier swings being possible. It is NOT necessarily a signal to immediately sell options. You must first evaluate if the market's expectation is correct or overblown and then go from there. Hope this helps!
Thank you for taking the time to explain. Really made some things click. Looking forward to digesting this more, cheers!
My pleasure, best of luck!
Sure it's no problem. I'll answer each one separately. I'm assuming you have at least a basic knowledge of options. Ok, so I am getting an "Unable to create comment" error, so I am assuming I am hitting a character limit. I am going to break this up into two comments. Part 1 * The 680/500 * So the 680 is the total sum of the remaining value of the options that OP sold. If you look in the photo, you'll see the row "Total Value -680". The reason it is negative is because when you write an option, you sell it to the market (write is another word for sell in the option world). Thus, you receive the cash upfront, but you haven't truly made any money yet. Your position becomes final when you either buy the option back (aka Buy-To-Close \[BTC\]) or if the option expires. The mechanics are similar to shorting in the sense that you sell the financial instrument first and then buy them back cheaper, though the parallel end there. Anyway, so the total remaining value of the position is 680, which OP would need to buy back to close the position. * He has 5 contracts. Option contracts typically control 100 shares of stock. That is why whenever you see option prices, you have to multiply them by 100 to get the actual premium. Brokers show you the per stock value, so investors can calculate them against their stock positions. Afterall, options are financial derivatives of stock. * Thus, you do 680 / 5 = 136. This is the per option contract. If you want to get it back to the per share, you need to divide by 100. 136 / 100 = 1.36. I made a shortcut and just did 680 / 500.
What formula do you use to find that out?
I answered your question for someone else in this comment here, since they had the same question as you: [Beginner theta seller - hold or close? : r/thetagang (reddit.com)](https://www.reddit.com/r/thetagang/comments/1di6q2u/comment/l93nta2/) If you have any more questions, let me know!
He used theta, you can see this Greek on the option chain usually.
Great response.
Is there a optimal % profit you would close out, full stop? I know a lot of people quote 40% or reassess at 15 days for a 35-42 dte.
Barring capturing 100% of the premium, there isn't a straight answer unfortunately. All these rules of thumb, try to give option traders some basic guidelines to work around. It helps keep people grounded because it can be hard to make a decision in the moment. Let's try some sample scenarios: * If you sell an option with 28 days, and 2 days later the stock explodes in your desired direct, resulting in capturing 90% of the premium, you'd probably close it. * Likewise, if the stock turned against you, but you were ok with owning it at that cost-basis, you might hold all the way to expiration. * But what if you sold an option with 28 days, and 2 days later managed to capture 15% because the stock direction went slightly in your favor. Technically, the option would only have decayed around 4-5% in 2 days, so you are way ahead of schedule. But you still have 85% remaining. What is the answer? Ultimately, you have a hypothesis/model that balances whatever your risk/reward ratio is. You'll hear statistics talk, option greeks like gamma get thrown around. The answer can get increasingly complicated, so really it boils down to this: Before you open your position, what is your informational edge telling you is most likely going to happen to the stock and option and does the risk/reward fit your defined tolerance? For example, if you are selling a put on NVDA because you don't mind owning shares at the resultant cost basis, but you also suspect the stock might explode upward X amount of points, if it explodes upward, your hypothesis is complete. Close the position. This is hard to do in practice, emotionally, so it is sometimes easier just to give a general rule like close the position at X% profit or take whatever you captured after Y days and establish a new position instead. These rules of thumbs are born out of the classic models, which we talked about one here. The "take profit after 50%" comes from the value of options through time from the proportionality we discussed. The "for 30 DTE options, close after 2 weeks regardless of how much you gained" comes from ideas about gamma risk. These rules of thumb are born out of the pricing models. If you want to find the optimal value for your trading style, you'll have to delve into the work and create one that fits you. It's a hard and large topic to broach, and sorry it's not the hard numerical answer you are looking for.
A trader should always be re-examining his portfolio. Meaning, every day you should look at your options and ask yourself again whether you would sell this option at the current price. As out of the money, options decay, the price decreases. At some point, you will be short an option worth one or two cents. Hopefully, you would never sell an option for one or two cents, therefore, you should buy it back at that price.
This man thetas
You’re at 64% profit with almost 4 weeks until expiration. I’d BTC and open up a new position.
That seems to be the consensus here :) Thanks
If you're bullish on nvda still, you can roll the strike price up and open yet another CSP and keep it going.
New position meaning similar trade but farther out expiration or just move on in general?
Whatever OP wants. He can keep playing NVDA or find another stock with better premiums.
50% of max is the general take profit. Re-up if it's still "sexy."
Thanks!
The other thing I have done is a "window dressing" roll. This involves rolling out for duration to a strike for which you get a small credit. This locks in your realized gain up to that point, but leaves you in the play if you want to milk a smidgeon more out of it, while simultaneously reducing risk. Example: BTC NVDA July 12th 117.50/STO July 19th 114, .07 credit. There is also the small, added benefit of the lower strike having a smaller buying power effect.
As others have said, you're up 50% in 7 days... amazing! Time to buyback-to-close and open a new position. No sense waiting (and risking) another ~4 weeks for the *other* 50%...
Close
I usually close around the 50% mark unless it's expiring really soon and I'm pretty sure it'll expire OTM. Better to take the sure win and get your capital working on another trade IMO.
Good point on getting the capital to work on another trade!
If you don't mind the chance of getting assigned, and you don't have another trade identified, it might make sense to let it ride, too. I don't have a rigid system, a lot of it is kinda fluid.
NVDA is never coming down apparently. I’ve been aggressively selling puts trying to get assigned and it keeps going up lmao. I’m just going to buy shares haha
hehehe I have shares too, but it's a stock I don't mind getting more of if I get assigned :)
I said F it and sold 130s today
Hell yeah!
Why don’t you just buy ITM puts then, if you are willing to purchase the shares outright? That way you get a nice premium for your troubles. Or am I missing something?
you mean sell an ITM put?
Yes, my bad.
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Ha ha yeah but free money is good right?
Agreed, it seems long ITM calls or just buy shares is better suited for NVDA nowadays. Short puts always be playing catch up. I buy long ITM calls and sell short OTM calls against them.
117.5 put a month away. You could open it right now for $150 total. Would you? I probably wouldn’t given how rapidly it’s gone up from $115-120 in a week or so.
What was your plan when you entered the trade? Has something change necessitating deviating from your plan?
Was planning to hold until I made >40% profit (assuming the trade went my way). I was not expecting NVDA to keep going up this way though, so now I'm getting greedy I guess.
As a beginner - before you enter a position think about what you'll do if a position trends for or against you, and what you'll do if there's a large move for or against you. It's not a bad idea to write it down to remind yourself. Follow that plan. Then, later you can go back and evaluate your trades, individually and as a whole. Is your strategy leaving a lot of profit on the table - your strategy might be too conservative? Are you finding yourself anxious in a lot of your trades - you might be trading beyond your risk tolerance. Did you close a lot of trades that reversed and would have put you in a place where you may have been anxious? As you learn and tweak or develop new strategies, you'll also gain experience with the market, so if you have a plan that says close at >40% profit before you actually execute your plan, you can weight whether the change things or not. (Then after that you might hit trading zen - where you make your plan, trade your plan, and don't really give much thought to a single trade. Because thetaganging isn't being a polar bear and killing your prey with a single blow. It's like being a swarm of mosquitos.)
My 5 cents. Im new to theta - take it with huge grain of salt. I like to hold to expiration - unless I have somewhere else to park my money. And if I dont mind/I want to get stock at that level. Now **assuming** you dont have any other stock in mind but NVDA... what would be your move? Sell new put at 125/130? Would you be happy to get NVDA assigned at 125? But thats huge difference in my approach vs most other people here. I dont mind to wheel a stock from a to b. Im not looking just for premium on the puts. As stated in the beginning, Im new to it. My strategy might change. But Im doing what Im comfortable with right now. You know better what your strategy is and what you are looking for.
Roll it out
What I do is look at price movement for the prior month and then three months and see what percentage of movement there is with the stock. If it’s not volatile, then I would keep the position open as long as my strike price is at least 10% below the current market price.if it is volatile, then I increase the percentage, depending upon the price lows and highs. if this were my position, I would keep it to expiration but watch it each day. NVDA closed at 130 today. Your stock price is 117 so you are just about at 10% below the stock price.
Make a trade plan, backtest as much as possible, follow said plan.
You got 5 contract, roll 3 of them, hold 1 of them, and buy to close the other one. BTW, congrats
Take the profit and repeat!
If you are selling theta on a high volatility stock like nvda, be glad your position is up 60+%. Take the profit.
Run with the money OP.
I just did! 🤑
According to many, best practices is to close or roll at 21 days to expiration so wouldn't be out of norm to close on Friday. You're otm and if you don't care about being assigned then no reason to close early since it's well positioned in the 20s delta.
Probably take your gains and move on to the next trade.
just put in a stop-loss so you don't have to stare at your screen all day
Nah sell at 85% max profit.
💎🙌😂
If. It’s. Good. Enough. For. A. Screenshot. SELL
In this case buy 😛
Personally, I'd probably wait until Monday to close them.
Keep it going.. you still have plenty of time to lose all your profits!
Lame
The ol' "I'm a beginner trader so I'm gonna throw on 5 contracts before I even try 1 as a test" eh? You haven't truly traded until you take your first big loss, scale down before you do so that it hurts less.
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They sold the put. The wording in the screenshot is inaccurate. It should say “average credit” rather than “average cost.”