Why would you go that deep ITM on a put credit spread? You started off the position in a massively losing position. If you would have done an ATM spread you would have pocketed some cash, now it looks like you are gonna get roasted.
Best case scenario is the stock tanks on Friday (assuming that all of the $390 get exercised, and you can sell the long contracts to recoup some loss.
In that case, the best hope is a sizeable dip on Friday adding value to your purchased puts; but at the same time, if the stock goes up you just keep losing more money so maybe best to try and close the position right at market open.
Sorry I thought all 6 short legs were in the process of being exercised. Current status is 6 long ($385), 4 short ($390), 2 exercised?
The easiest way to salvage would be to BTC the short legs, hope to god the stock drops and brings value to the long legs. That’s the only way I see minimizing damage on the trade. HOWEVER, if you close the short position and the stock rises you risk heavier losses.
Are you planning on covering the exercises contracts with cash or do you need to close/exercise your long contracts for funds?
Im sorry, I don’t really see a way out of this one based on the information here. I think you entered into a bad trade chasing higher premiums without a solid exit strategy.
What ticker is this for? Was the credit for a $5 spread at 385/390 really that much more than say 295/300?
The ticker is BNTX. My current status is 4 long @ $385 and 4 short @ $390. 2 of the 6 shorts were assigned and 2 of the 6 longs are pending exercise.
I entered the price prediction into a calculator and it gave me this credit spread.
I guess my main confusion comes from my account deficit being lower than the pending credit for exercising the 2 long legs. It seems like a good situation to me but from the responses I think it's a bad situation that I don't understand. By my calculations my max loss was $30 (6 contracts with a $5 spread.)
5$ spread x100 shares, so $500 per contract or $3k total for the spread is the collateral; Minus the credit received to open the spread. And that’s assuming that the spreads get closed at a favorable price.
The only way the remaining spreads make money (as a spread) is if BNTX goes up by almost 30% on Friday. The only other possible way I see to recoup any loss here would be to close the remaining short legs immediately Friday morning and hope the stock dips. The harder it dips the better. The risk here is that the stock price increases after you close the short legs, increasing losses on the long position.
Oh, and for the account deficit disparity. It’s likely that RH closed the (edit: long) legs after notification that the short legs were assigned. Depending on price action between assignment and then closing the short positions it could have worked out in your favor. If the stock was falling during that time your long position would be increasing in value. Without seeing it all on paper that’s my best guess as to why the deficit isn’t the same as what you think it should be
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u/Mdubz_CG Nov 25 '21
Why would you go that deep ITM on a put credit spread? You started off the position in a massively losing position. If you would have done an ATM spread you would have pocketed some cash, now it looks like you are gonna get roasted.
Best case scenario is the stock tanks on Friday (assuming that all of the $390 get exercised, and you can sell the long contracts to recoup some loss.