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July 23rd, 2017 at 9:47 am
Winston,
Good comments but I need some more specific explanations.
BCS meaning buying a call ITM and selling a call OTM what do you mean with having short covers do you mean having sold puts against your BCS? Or do you mean selling 1/2 a monthly calls against this BCS?
Closing out short puts is the first iceberg in a storm I agree 100% with 75% or even less is a good start.
In respect of BCS as you know I like to plant my trees and it is very painful to chop down a leap tree in the making. Look at AAPL 130/170 just recently planted. Never mind looking at one other AAPL Jan19 90/125 where full matured is 35 and it is offered at 28.85. You will find in most BCS plays the caller (short) is always a higher extrinsic value as the call, with other words you paying a much higher price for the caller.
Buying back a put if the stock price is 100 and you sold a 50$ put is it wise to buy back this put you need to expect a stock drop of 50% just to be ITM.?
Another thing I am looking at is for example you hold a Jan18 BCS say 30/60 and your stock price is 35$ I am inclined to roll the call to 25 Jan19 and sell a new caller say 40 or even wait ( but could be dangerous at a drop) and leave the 60 call standing alone (naked). The chance of the stock going to 60 is not very high, so at best put a buy stop order on it.
The alternative is close everything. Looking at your port at a theoretical value of say 1,000,000. Today after a 20% drop 800,000 to 750,000. The other side is if there is no drop the same port will be 1.2 million or more in a year’s time. So as always what is in the stars? Your play!!!!