The Setup
purchased 100 shares of RCL @ $40
sold 35 25 Put Spread and a 40 Call Expiry August 19 for $5.00
the original post is here: https://www.unpackinvesting.com/2022/07/using-options-to-recover-from-big-move.html
Management
After a month holding and the stock rallying up to around $38, I closed the options for $2.28. Even though I could have waited longer to see if it goes to zero, I would have much more increased gamma risk (gamma risk is changes in value with respect to stock price, it gets really big the closer it gets it expiration). I collected a total of $5 - $2.28 = $2.72. Which is just over 50% of the original option premium for holding the position for about 66% of the time. Generally, when options get to within 2 weeks of expiring it is a good time to re-asses the structure and potentially close out the trade or roll the position further in time.
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