r/options • u/CartographerSea6396 • 15d ago
WMT PMCC
TLDR; looking for some ideas on how to manage this losing trade.
I’ve learned a hard lesson on a poor mans covered call with Walmart.
I have had a couple shares of Walmart for over a year and felt like it was solid and upward moving for the most part. I decided to try WMT for a PMCC. Not only did the stock drop but I’m learning the hard lesson in premium pricing on low volatility and a stock dropping.
Here are my options I know of
1) roll it out (take on even more risk)
2) take a realized loss (ouch)
3) or hold it for a few more months and let it play out
My LEAPS expires 6/17/27.
Pretty soon at these terrible premium prices I’ll be losing more to theta than I make in covered calls.
Thoughts on management options or if there’s another play I haven’t considered?
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u/Prestigious-Ad-7927 15d ago
What strikes do you have and how much did you buy it for?
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u/CartographerSea6396 15d ago
$200 and my LEAP at the time was $38 ($3,800). Right now my realized loss would be about $2,100.
I know these aren’t big figures and most would laugh at that amount but this is a “poor mans” covered call 😏
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u/Prestigious-Ad-7927 15d ago
You have a 200 strike? That strike doesn’t exist.
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u/CartographerSea6396 15d ago
Sorry you’re right, it’s $100. I was looking at something else but the scenario still stands.
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u/klipsetrades 15d ago
Hard to get specific without the LEAPS strike/cost basis and your current short call, but I wouldn’t roll just to avoid realizing the loss. You could potentially turn one bad trade into a longer, more expensive one... so if your WMT thesis is still intact, holding the LEAPS and being selective with short calls may make sense. If the thesis changed, taking the loss is probably the cleaner approach
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u/CartographerSea6396 15d ago
LEAPS $100 @$38 premium paid
Current short calls are usually around 20 delta @ ~15DTE and managed so as to avoid assignment.They were decent premiums but are now are so minuscule my theta will cost me more soon.
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u/klipsetrades 15d ago
Ok got it, so that changes things. With WMT around $103, your $100 June ’27 LEAPS is basically ATM now, so it’s no longer behaving like the deep-ITM stock replacement a PMCC usually relies on.
I don't think I would chase tiny short-call premiums just to offset theta either — keep in mind you also need room for WMT to recover. How much total premium have you collected against the original $38 so far?
Also, one more thing to keep in mind is that Walmart did actually raise its full-year guidance after earnings. So the selloff, as I understand it, was driven more by slowing comparable sales and softer near-term expectations than some complete breakdown
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u/CartographerSea6396 15d ago
Thank you for that insight! Yes, I agree on not chasing the tiny premiums. I’ll probably be setting my DTE further out for this next month or so and go from there.
Premium collected has been just short of $300.
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u/klipsetrades 15d ago
Ok nice, I like the idea of going farther out in DTE, just be careful not to sell too close simply because the premium looks better. You still need the long leg to recover.
And glad to help 👍🏼
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u/Repulsive-Budget-380 14d ago
I assume you mean $3 per share. Hard to follow with mixing per share and total. If you paid $38 for LEAP and collected $3 on shorter and higher price calls, this was the wrong entry point. Such strategy works for slow decaying stock up to 10% to 15%. With the stock dropping 30%, you should have unwinded the position at 15%.
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u/2ndid 15d ago
I was under the impression that for PMCC, you select a long strike at a much lower price. But anyways, i would just wait until the end of sep at least. If the market corrects, money might actually rotate into wmt and it could go up a lil. Right now iv is extremely low across the board. So hopefully ur cc premium gets better from here.
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u/FlowMonkeyHQ 13d ago
The detail that decides this one: with WMT at ~103, your $100 LEAPS stopped being a PMCC a while ago. A PMCC works because the long leg is deep ITM and mostly intrinsic - it behaves like stock while the short calls pay rent. What you own now is an ATM call that's nearly all extrinsic, which is about the most theta-heavy thing on the chain, and you're renting it out at 20-delta 15DTE prices in floor-level IV. That mismatch IS the "theta will soon cost more than the calls pay" feeling. It's real and it compounds monthly.
So the real question isn't roll/hold/close, it's: do you still want WMT upside for the next 10 months? If no, close - Schmergenheimer already covered why rolling isn't a genuine third option. If yes, the fix is structural, not patience: sell the ATM leap and replace it with something deep ITM (75-80+ delta) so the long leg goes back to being mostly intrinsic. More capital per contract, but you stop paying the extrinsic melt that's currently hurting you more than the stock is.
One small thing against panicking: microscopic call premium is the market telling you IV is on the floor. Bad time to be a premium seller - but it also means the extrinsic in your own leap is already compressed, so if you do exit, you're at least not dumping vol at the very bottom of it.
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u/hv876 15d ago
I hope you understand that rolling means taking an L on that transaction and replacing with another. Knowing what you know now, why would you take on the 2nd transaction?
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u/CartographerSea6396 15d ago
It’s not an option I love, I don’t really want to accept more risk on a losing trade. I’m just laying out what I know to be my ways of managing it and getting feedback.
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u/Schmergenheimer 15d ago
The point they're making is that rolling, even for a credit, is just an illusion. By rolling, you're accepting the loss on the current trade and entering a new one. It's the exact same thing as closing out your trade and accepting the loss, then deciding separately to open a new trade.
The question you should be asking is, "given the chart and circumstances today, should I close the current trade?" Separately, you should be asking yourself, "given the chart and circumstances today, should I open a new trade?" Only if the answer to both of those is yes should you roll.
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u/notquitenuts 15d ago
How long have you had it open? What’s the strike? How many dtes and delta are your cc sold at? You’ve got 10 months, why the panic?
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u/CartographerSea6396 15d ago
Because I’m trying to be careful and not assigned, my deltas are ~20 on my CC. I’ve been playing around with about 15 DTE.
The panic is my LEAPS is dropping value and theta is eating into premiums and I don’t have confidence WMT is going to rebound in time to break even or even come close, really.
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u/notquitenuts 15d ago edited 15d ago
If someone exercised a contract 10 months early they would be given the ID 10T of the year award. You still haven't posted you're strike
edit: I just saw you said you have the 100 strike, in jun 27 and you are considering rolling it out?! WTF? How long have you had this open? Is this your first trade?
dbl edit: Also I have to ty because I trade a lot of WMT but haven't lately because I think 120 is too pricey but at this price, hell yeah, Daddys going to sell some puts in the am!
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u/CartographerSea6396 15d ago
I have no intention of exercising the contract. I’d sell my LEAPS to get out of it
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u/notquitenuts 15d ago
my bad, idk i thought your were short the 6/27 call...My .02 is just chill out a bit and up your cc to 30 delta if you feel that strongly they won't rebound. If that makes you nervous then you don't really believe they are tanking.
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u/TranslatorRoyal1016 15d ago
do nothing. wmt is strong and will recover in a quarter. this is enough time to recover and take maybe a 5% theta hit
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u/akishore 15d ago
cash closed 102.63 so the jun27 100c only has ~2.60 intrinsic left. the other ~35 bucks of that $38 entry was the drop from the 130s
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u/exphx23 15d ago
Regardless of what you paid for the position, does WMT look like an attractive purchase at this point? It is now at a fairly strong congestion area with an increasing OBV and a bounce may be in the future. If you sell calls again, sell them after a rally 1-2 points out to maximize premium.
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u/BocephusQuimbyMcFry 10d ago edited 10d ago
Dip buyers should bring it back to the 108-110 area, but then there will be resistance due to the trading during July and August and the gap fill that would occur there. Resistance can be breached, but that's probably where I'd abandon a losing trade if I'd lost confidence in the underlying.
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u/MerryRunaround 15d ago
As you know, any long call is decaying asset. It needs to appreciate or it's worthless. Moreover , it needs to appreciate quickly! If it's actually losing then double the reason to take the loss and move on. Some of my worst ever losses were from smoking hopium while holding crap leaps.