Ramie 12:14 pm on Friday, June 4, 2021
Tags: FallingKnife ( 963 )

Rolling Jan TSLA

Rolled $TSLA Jan 21 2022 200 put up to 300 put @ 6.50 credit. Total premium now 11.65.

#fallingknife

Hawk 10:03 am on Saturday, June 5, 2021

Was this part of a spread?

I am curious how is the % return per month when you go that far out, vs selling more frequently of short dated ones.
- Ramie 7:18 am on Monday, June 7, 2021
  
  This is a specific kind of trade idea that @optioniceman likes to a call a #FallingKnife trade. The basic idea is to find established/blue chip companies whose stocks have been hit hard in recent weeks/months and look to sell puts at levels much further below where they’ve come down to. You would go out let’s say 4-6 months and likely be able to find some good premium at strikes that would be below multi year lows and below support, etc. Because the strikes are so low, the margin requirement to carry the position is usually relatively low so return on capital can be pretty good. It likely doesn’t compare to the ROC% for selling shorter term expirations but the major advantage is the delta is so low that the chances of expiration (or taking off for most of the profit prior to opex) is extremely high. So I always keep room for opportunities like this–low risk, high POP% and decent ROC%.
  
  The TSLA trade wasn’t really a textbook example but with the stock moving around so much the premium was really good out in January and I knew any reversal back up would allow me to take it off for maybe 70% of the max several months early. A few weeks after my initial sale of the Jan 200 put, I was able to take it off for 45% of the max profit and roll it up to 300 at a delta of 06. Typically I just close it and move on but in this case the opportunity was there to keep the trade going. I would also still consider buying the stock at that level (basis of 300.00 – 11.65 = 288.35).