Option Iceman 10:45 am on Friday, May 1, 2020

AAL news

Analyst sets a $1 price target on American Airlines.

fuzzballl 10:52 am on Friday, May 1, 2020

Wow…hadn’t seen that yet. Airlines, cruise ships, casinos, and anything brick and mortar retail pretty risky right now.
- john4419 11:12 am on Friday, May 1, 2020
  
  Fuzzball, Are you still holding the May 15. 30/35 BLPS? put on about Dec 30th. If assigned or should I say, when assigned, should be at about 1.27 above cost price.
  - fuzzballl 11:19 am on Friday, May 1, 2020
    
    I closed it on Feb 4th at breakeven. Stock was bouncing a little and we had just shut down China. Rumors of Europe being next so I bailed. Had to go back and check….lost about 10 bucks on commissions.
    - john4419 11:27 am on Friday, May 1, 2020
      
      Thanks Fuzz.
      
      I’m still in this and was wondering the best way to handle. I was going to close the Calls and take assignment on the 15th, selling Calls later?
      - fuzzballl 11:33 am on Friday, May 1, 2020
        
        If I were still in it I would wait until late in the day on the 15th and close the long puts for as much as I could get and then leave the shorts to be assigned. I didn’t have any calls in it.
        
        john4419 11:38 am on Friday, May 1, 2020
        
        Whooops….I meant Puts and not Calls, sorry about confusion!
        
        fuzzballl 11:38 am on Friday, May 1, 2020
        
        LOL I thought that’s what you meant.
      - fuzzballl 11:37 am on Friday, May 1, 2020
        
        I’ve never had much luck trying to time my long put sales in these types of situations. If you close them too early and the stock continues down you’re losing that protection and putting you in a deeper hole. Of course it could work in your favor too but I prefer just trying to get out as close as possible to my planned basis.
      - fuzzballl 11:40 am on Friday, May 1, 2020
        
        The last stock I did something like this in was SPCE. Assigned at 41 but had the long puts to reduce that. Sold some covered calls (that got run over to the upside as usual) and finally letting the stock go today at 15.50 with a 14.25 basis. Earnings next week so might get back in then.
        
        john4419 12:14 pm on Friday, May 1, 2020
        
        Would appreciate if you would clarify something for me with the AAL options. Would I end up with the stock at a cost of around 1.25 above the the stock price at the time?
        
        fuzzballl 12:25 pm on Friday, May 1, 2020
        
        Yep. Think about the mechanics of it. Let’s say the stock is at 10 bucks on expiration afternoon. The long 30 put will be worth about 20 dollars. You sell that for 20 and then add the 3.75 received for the original trade.
        
        That’s 23.75 total premium received and the stock get exercised at 35 for a basis of 11.25 with the stock trading at 10.
        
        john4419 12:27 pm on Friday, May 1, 2020
        
        Appreciate that, thank you.
        
        thomberg1201 12:30 pm on Friday, May 1, 2020
        
        One caveat is that the 30 put isn’t very liquid, you could have trouble selling it, for example it hasn’t traded yet today.
        The other thing is, you can sell a May 22, 10 covered call and be essentially even, not too bad these days.
        
        fuzzballl 12:31 pm on Friday, May 1, 2020
        
        I was just typing that…LOL. The fill quality on the long put sale and the amount the stock drops after the sale into the close would be the difference in the 11.25 basis.
        
        Or to be more exact the difference in the 1.25 above the stock as your basis…

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