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April 11th, 2014 at 7:36 am
Rolling down/Wombat – That's a good point too. Craigs, you are looking at "just" 2 years of options. When we get to 2016 and ISRG is at $300 and our short puts are $50 in the money, we can either take the assignment and sell 2018 puts and calls to reduce our basis or we can roll to the 2018 $250 puts for about the same $50 or we can just pay the $50 ($5,000) and take the loss though, if we netted back $6,000 from the SDS spread back in 2014 plus the original $1,100 credit – it wouldn't be a loss at all. In 2018 we can roll to the 2020 $200 puts, etc. – That's another thing that's hard to teach… the LONG-TERM Perspective.