MikeL 11:58 am on Monday, March 5, 2018
Tags: CoveredCallCampaign ( 132 ), pietrade ( 143 ), ShortPuts ( 4,763 )

#shortputs A quick question. I…

#shortputs
A quick question.
I have puts on MCD ITM – Mar 16 $155 originally sold for 0.83
Is it a good time to roll out, or out and down?
Thanks.

#coveredcallcampaign, #pietrade

Jeff 12:05 pm on Monday, March 5, 2018

It’s best to roll before you get too close to expiration, but you still have two weeks and you are not too far from the strike. So if you think it can recover to 155, wait until this Friday (7 days out) and make your decision. You could also close today while it’s up, and look to roll on a pullback (if a pullback comes).

There is no magic time to roll, but if your extrinsic value of the option gets close to zero, you are at risk of early assignment. Of course, taking the stock is also an option.
- MikeL 12:36 pm on Monday, March 5, 2018
  
  Thank you Jeff.
  - Jeff 6:27 pm on Monday, March 5, 2018
    
    I should be clear… the BEST time to roll these is BEFORE they become ITM… I have a general rule to roll when the stock touches my strike price. You can see that I have been closing calls in my #CoveredCallCampaign the day the stock hits my strike. I make exceptions sometimes… like last week with my $AZO 660 puts, because my sentiment was that the move down was overdone and it would recover by Friday.
    
    Rolling options ATM is better than ITM. There is better premium to roll out and down. The farther ITM you go, the more expensive it becomes to close your position.
    - MikeL 6:42 pm on Monday, March 5, 2018
      
      Jeff, I completely agree with you on the roll ATM. Unfortunately, MCD dropped below support line on an analyst review and I did not have a chance to roll on that day.
      
      Do you use the sale rule for rolling positions that have 50+ days to expiry?
      For example having puts in June/July that are ATM.
      - Jeff 6:45 pm on Monday, March 5, 2018
        
        It varies case to case, but yes, I usually try to roll options once they hit ATM. Sometimes I miss them, too.
hcgdavis 1:31 pm on Monday, March 5, 2018

Or take assignment and turn it into a #pietrade and start selling calls against it. Usually get back to break even quicker with calls once the puts are deep ITM.