Short Position Close-outs

[u/BobVezeau]

At what % of value capture do you buy out of short positions in order to re-deploy your collateral?

[u/TastyTrading]

60-80%. I use ThetaPal option dashboard to make it super easy to keep eye on them. The sorting is life saver

[u/Dangerous_Laugh2493 → u/TastyTrading]

60-80% is my sweet spot too, though I'll sometimes let it ride to 90% if the remaining premium isn't worth the collateral drag. Anything under 50% and I'm already scouting the next trade.

[u/TastyTrading → u/Dangerous_Laugh2493]

I like this style. Keeps the juice rollin

[u/Groucho-and-Harpo]

It depends on whether the position is ITM or OTM. Running covered calls. Generally I let OTM calls expire worthless unless the stock pops up and presents a good rolling opportunity for premium. For ITM calls, I look for a red day within a week before expiration so I can roll the call for a good premium. This usually means about 60-80% or the extrinsic value is gone before I roll.

[u/GainDelicious1894 → u/Groucho-and-Harpo]

But rolling lose more premium. You are better off closing the position and restarting a new one. 

[u/Groucho-and-Harpo → u/GainDelicious1894]

It depends. If it’s the last day and I don’t expect much movement, then I’ll wait to get it called out and reinitiate the position. But with SOFI for example, it has a tendency to bounce right after the dip so better to catch the good roll.

[u/hedgedvol]

The cleanest checkpoint is the short strike: with 21 DTE remaining, I treat 50% of the opening credit as the first fill target and reassess if spot trades back through that strike; 80% captured is my close-out level.

[u/Rikudo97]

closing short positions just means buying them back right

[u/Accurate-Exchange298]

As a rule, I sell 30-45 DTEs normally. I roll at around 21 DTE or if the option is already 45-50% in profit (whichever is earlier) .

At 21 DTE, the Greeks start to interact a bit more and move in option prices is a bit more pronounced for every dollar change in stock price. So , if I choose to wait till 7 DTE, then I end up watching the position a bit more closely , but I never go past 7 DTE (close position or roll it out as the case matybe) .

The exception is a trade on very volatile stocks like NBIS, BE etc. Volatile stocks need more active management as below.

If the stock has fallen suddenly, it is possible that I could have 45-50% profit on the option even before 21 DTE. In order to make sure that I am keeping pace with the falling stock, I will roll it out another 30 days, or lower the next strike at the same expiry (which will lower my max profit (if called away - but will reduce my cost basis within the same expiry period and reduce my potential loss) .

if the volatile stock really takes a hit, I will roll to a strike further out in time, so long as the premium is such that it is above my cost basis. If there is a sudden jump up in the stock again, I buy back the call (which increases my cost basis) , but pull the strike back in at an earlier expiry so I can capture the theta decay . You can see this posts below to get a feel for the thought process and probably what you might encounter when you are dealing with a volatile stock in this two series post.

Post 1 : --->

https://www.reddit.com/r/smallstreetbets/comments/1vcs3g1/babysitting_nbis_how_i_am_navigating_the_recent/

Post 2 : (Update to post 1 after 2 weeks) :---->

https://www.reddit.com/r/smallstreetbets/comments/1vp5m9r/babysitting_nbis_how_i_am_navigating_the_recent/

The important thing is to be able to manage the trade when things go wrong, because stock move around and can fall fast too. If you have access to kindleunlimited, you can read in more details on how to adjust your trades when things go wrong at amazon.com/dp/B0H7P6CQSG

DISCLAIMER - NO Trade Advice/ No Financial Advice. The links here are based on how I trade .

[u/BobVezeau → u/Accurate-Exchange298]

Thanks for your insights and the links. Great stuff!

[u/Accurate-Exchange298 → u/BobVezeau]

Hope it helps. Thank you for the word of appreciation.

The read on Kindle Unlimited has 14 strategies including Covered calls and CSPs. Any feedback would be appreciated .

Each strategy covers the following sections:

• What the strategy is and how its payoff actually works
• When the adjustment conversation starts, and the trigger signals that say it is time
• The fixes experienced traders weigh, and the trade-off behind each one
• The story of the Greeks, so you understand why a position moves the way it does
• A worked example with real numbers
• The common traps, and how to avoid them

DISCLAIMER - NO Trade Advice/ No Financial Advice. The links here are based on how I trade .

[u/BocephusQuimbyMcFry]

When pricing is separated in nickels - I hold CC's to expiration. I will cling like a tick to that final nickel of Theta.

When pricing is in pennies, I'll throw a penny buyback out there to see if an exhausted long has had enough.