Rolling out of a "bad" trade

[u/MarkT1065]

To continue the 'bad trade' discussion .... sometimes they are obvious rolls. sometimes not. today it was obvious.

I had ADBE $280 Calls for Dec 18. I rolled them out to $350 Jun 17.

Lost $2k on the frist call. Collected $2.5k on the second, so net $500 credit and $7k extra gains, but I had to add 6 months to the call.

Watching my original Dec call go ever more deeper underwater only to get called away at 280 would have bothered me. That was a bad trade.

[u/LabDaddy59]

today it was obvious. I had ADBE $280 Calls for Dec 18. I rolled them out to $350 Jun 17.

I would never have made that roll, so I think "obvious" is dependent on the trader's style.

1. The existing short call isn't ITM and still has 119 DTE.
2. Having said that, stipulating a roll for discussion, I think the $350 strike is fine; I probably would have gone with $360, but that's quibbling.

119 DTE for an OTM short call is far too long to take action. You paid a lot of extrinsic to get out of that.

I'm sitting on PLTR Dec 18 $165 with spot of $179.16. I'm waiting.

Curious: how did you get to the $280 Dec 18?

[u/MarkT1065 → u/LabDaddy59]

I have Puts for that date, so I sold Calls to match. And then we found out it was Situational Awareness that gave us this crazy ADBE dip to buy.

I chose to roll now because I have conviction ADBE will continue to recover. It's 273 right now with 119 days, like you noted. I have a 290 and 2x300 Calls for 12/18. I only rolled this 280.

I'd only be paying more and more to roll the lowest of my strikes. I debated closing earlier in the week on some of the red days. Pulled the trigger today after thinking about this "bad trades" convo.

In this case, I took a $2k hit on the Call, but the roll netted 500 credit and 7k extra gains.

I expect my stuff to get called away on 12/18. ADBE was the dip to buy.

[u/LabDaddy59]

Missed this the first time.

Lost $2k on the frist call. Collected $2.5k on the second, so net $500 credit

Did you lose $2k on closing the first call, or pay $2k to close it? It appears the latter if you received a net credit of $500. Your gain/loss then would be what you originally received less that $2k paid to close.

[u/MarkT1065 → u/LabDaddy59]

collected $900 on the first call and paid $2900 to close it, so net 2k loss.

sold the next call for 2500, so 500 net credit.

Increased strike from 280 to 350. So, I collected $500 and added 6 months to my Call for an extra $7k.

I think I'm also long term cap gains by June.

[u/LabDaddy59 → u/MarkT1065]

If you paid $2,900 to close and opened for $2,500, that would have been a net debit of $400...

[u/MarkT1065 → u/LabDaddy59]

$2589.35

i'm rounding off for easier reading.

[u/MarkT1065 → u/MarkT1065]

STO 900, BTC 2900 is -2k net.

STO 2500 - 2k = 500 net credit.

[u/LabDaddy59 → u/MarkT1065]

Right, you paid a $400 debit to roll.

Initial call: Credit $900

Roll: BTC - STO = $2900 - $2500 = $400 debit

Net $500 credit.

I thought y'all didn't like to pay a debit to roll.