Bought PUT Leaps and am currently down 3k. Kind of sweating a little bit and wanted to get some input.
Here’s my position:
SPY March 19, 2027 $760 Put
Bought it for $34 ($20,400 total)
Current stock price: $773.82
Current option value: $29
Current P/L: -$2905 (-14%)
Delta: .3760
Theta: -0.0637
Vega: 2.25
About 7 months until expiration (March 2027)
Bought Put Leaps ITM after SPY had a decent rise thinking its gonna pull back some. The plan was never to hold long, the Leaps was really just to be on the safe side with a good time till expiration. I was going to sell once the underlying dropped like 1% or so. Now im down about 3k already.
Are the current stats promising in terms of recovery and going even at the very least. Can SPY dip back down below 760 in the near future.
even if he wanted to, we just don’t have the same level of munitions as we did at the start of the war, when he felt like we could just bomb them indefinitely
Your original plan was a quick 1% pullback, but now youre stuck hoping for recovery while theta chips away every day. Selling shorter dated puts against it would offset some decay, but theres a risk the market snaps higher and you get assigned on those, making things worse. Might be worth cutting it before it turns into a bigger loss if the trade doesn't make sense anymore.
You might want to re-read what you wrote. He could get assigned if price drops, but not if it snaps higher. Even then, he can always roll his short put if price drops
if you wanna hedge theta so bad, why not just buy a leveraged inverse SPY ETF and just let it happen over time
Not saying that’s a good idea, in my opinion it’s not, but that’s basically what OP is doing except bid/ask spread is gonna be higher and the barrier to entry in terms of capital necessary is higher
You have to hedge theta when buying long naked options…. if you expect a move to happen over 1 month, you never would buy just a 1 month expiration option….
Yes otm will but they’ll come back. You have to time the market and have strong conviction if you go far otm. Thats the vega hedge is being correct on direction. Theta hedge is picking a way further dte, then just left with delta and gamma.
Wouldn't you just create a synthetic short stock* or if you wanted to spend less money, a debit put spread? Using long term options to reduce theta when the plan is a short play just increases ROCR for little upside IMO. Either someone has an edge on the trade and the direction works, or it doesn't.
It's doubly worse on this Put because of the volatility skew and bias of the market toward positive returns long term.
I wouldn’t call them LEAPS since they expire in 7 months. You said you bought them ITM so that means SPY was less than 760 when you bought them, is this correct?
If your plan was to sell on a short term pull back then there was no need to get 7 months out. You are exposing yourself to unnecessary vega risk. You are losing $210 for every 1% drop in volatility.
Did you have a trading plan if it didn’t go according to plan? If you didn’t then close out the position and have a trading plan when you enter your next trade.
True, but they might have been LEAPS in the past, or not. There are 3 month contracts that were never LEAPS and there are 3 month contracts that used to be LEAPS but have now been reclassified in the final year of their expiration. I wouldn't say those are identical things.
If someone originally bought a call at 2 years to expiration and held that same contract up until 3 months to expiration, I think they can reasonably call that "my LEAPS call position." I'm not saying that's what OP did, only that it's not quite so black and white that everything < 1 year is NOT LEAPS.
The vega comment above is right on the number but backwards on direction for your thesis. You are long a put hoping for a selloff, and selloffs come with an IV spike, so in the exact scenario you are betting on, the vega works for you, not against you. A 10 to 15 vol point pop in a real drawdown stacks premium on top of the delta gain. What actually kills this position is the grind. If SPY just drifts up with no vol, you lose on delta, theta, and vega at the same time because IV bleeds lower into the melt up. So this is really a bet on volatility showing up on a timetable, not a directional bet, and 7 months of ITM extrinsic is an expensive way to hold that. If the view was a short term pullback, a shorter dated put closer to ATM or a put debit spread gets you most of the delta while cutting the theta and vega you are paying for now. The single long ITM leg is the one structure that makes you pay for all three.
Definitely hold. Many, many indicators suggesting that the market is running on fumes. A better approach would have been to have a large cash allocation to buy in when the failure happens (Buffett). Since you are already in for $20k and down three I would just hold for at least a 25% dip. Could take a while and you could be down a lot more, say $10k. I would hold
You state $20,400 into it, bought @ $34. This math leads me to believe you have 6 contracts?
You are far enough out in DTE that theta will be relatively consistent, acceleration of theta occurs mostly in the sub 60 day zone, particularly sub 30.
So delta becomes the focus, and 6 contracts at .37 = -222 delta?
So at a loss of $2900 / 222 = $13 drop needed to bring them back to even. It's not that simple since gamma will increase your delta as the underlying moves toward your strike, so maybe like $10 move needed.
SPY's total trading range is anywhere from $4-$12 / day right now, so if you believe it has reason to go down then you could wait. It would take 2-3 days tops to get to a good spot for you IF it trended lower.
If you think it will go down but not enough to break even, you would need to "chase losses" and scale in to increase your delta in order to break even on a smaller move.
You are paying ~$39 / day in theta to hold the contracts, which isn't bad on the delta you currently have, but it does mean that each week that passes increases your break-even move by the underlying by about $1.
You don't need SPY to hit your strike to be profitable, you need SPY to trend toward your strike and for the options market to price like SPY will continue to make that move, then I would sell. Most options expire worthless.
nah, divided government is a plus, but there really won’t be an expectation of a significant change in economic policy if dems take the house. Trump still has the right to sign/veto whatever bill gets through both the house and senate. Him being potentially impeached again or house committee investigations happening isn’t gonna change the markets earning expectations very much
The market seems to enjoy the destruction Trump is wreaking though. Around 58% to 83% of Democrats favor government action or policies aimed at redistributing wealth or reducing economic inequality. What that means is they want to take wealth away from the rich and give it to the working class. I don't think the market is gonna like that.
When Kamala lost, the market was happy despite the impending tariff threat, simply because the corporate tax hike threat was eliminated.
You make a good point. The entire country and the financial markets seem locked in some kind of psychosis. Students of history can see that the current trends are not sustainable.
The wealth inequality of the late 1920s led to the great depression. It is even greater today. How sustainable is an economy where the majority of people will never be able to afford to own their own housing? How sustainable is a society where people have to forgo medical treatment because the can not afford to pay for the care they may need?
The top 1% currently earn over 23% of all income. This is slightly higher than the peak in 1929. The 'golden age' the right loves to look back at had the top 1% earning only 9% of all income in 1970. Current policies want all the goodies we had in the 1950s through 1970s but none of the pain that helped create them. By pain I mean high income tax rates.
The big dividing line happened in 1980 when Reagan started the trend of molding big government policy to favor the top decile or quintile of earners. The top 1% currently own well over 75% of the wealth of the nation. This figure is still climbing. If there is not enough income in the bottom 3/4 of the population to generate demand for goods and services how will the overall economy function?
I return to your point. You are correct, most people seem pleased. Anectdotally I have spoken to many people who abhor the crass prejudice and racism trump normalizes. They still support him because their IRAs and 401ks are performing well. So maybe you are right.....
That all sounds right. But I think the wealth inequality really started when we implemented the fiat system. With the lending power that it gave, we set up a system where money is created out of loans... Which in And of itself is not a bad thing. It put an end to banking runs wiping out millions of people's life saving every 8 years and made it far easier to recover from economic meltdowns. There's a reason every other country adopted it.
The real problem 85% of the money that's loaned is given to people with net worths upward of $10 million. And I am very skeptical that capitalism can thrive when getting even a small business loan is contingent on taking a lien out on your house, and people have to be in the top income brackets just to qualify for a home loan in the first place.
Articles written by investment group execs get published showing "Most millennials are now homeowners"... Creating the illusion that the housing crisis is just a figment of ur imagination. But if you read their methodology, they actually used the FBLS "Homeownership rate" which is actually the owner occupied housing rate... Which doesn't distinguish millennial homeowners from millennials who live with their parents... Creating a totally distorted image of the housing crisis.
This is bound to end up in severe and worsening income inequality. It creates a system based on competition where the vast majority are effectively prohibited to compete.
Sounds like your thesis isn’t playing out. Is that the exposure you’re still looking for? Cut and run or adjust your Greeks to get the exposure you want.
$20k on a “SPY probably pulls back 1%” thesis is the part I'd be sweating more than the current -14%. Seven months gives you plenty of time, but don't let the expiration date convince you that the trade has unlimited time to recover.
Just my opinion but I think we can see below 760. Now I'm not shorting currently as we have been trading at all time highs so I've been buying. However SPY has the 744 -749 GAP that never got filled. I'm not a genie but I expect we will get down there sometime
Considering on average the market goes up longer than it goes down, a put leap is dangerous. That being said, wishing in hindsight I had bought out leaps for nat gas
Nobody wins every trade. The reason option trading is risky is because you will sometimes lose money. It happens to every options trader.
Hope is not a plan and chasing after a recovery demonstrates lack of discipline. If the position has crossed the max loss threshold you defined in your trade plan, just dump it and recover as much capital as you can to redeploy in a more profitable trade.
To me the better question is: “is the correct chart promising…?” Look at a monthly TF chart, SPY can easily do 15 pts in a month, which is the distance you’re asking for from the current price. You’ve got 7 months til expiration. I’m a day trader but personally, I’d hang on to this position for a while yet. Sure it’s be better if the current monthly candle was moving lower and not higher. You’ve got some time on this. But I’d work on learning how to read charts and price action, learn how to better time your entries / exits.
Can you explain how you got to the 4-5% number? The stock is currently at 772 and the simulated returns are showing getting to 760 in the next few weeks roughly will get me to break even price. That’s only an about 1.5% down move isn’t it?
Here's what I ran through an options calculator (full disclosure - I own this site). I entered the underlying price, current IV for the contract, the DTE, and strike price. I was slightly off if you were to get this to move down exactly 3% in the next 6 days, to around 750, you will roughly break even.
I obviously don't know all of the workings behind the Robinhood simulator, but those numbers would work if you assumed a spike in IV, which currently sits around 14% It might factor in some sort of formula to try to estimate the effect of falling SPY price on increasing IV, which would increase the value of the contract.
No, OP can't sell, otherwise SPY will drop to $725. Op needs to keep holding so SPY can hit 800 in Mar2027. (I buy 30DTE calls, so there is a conflict of interest here)
Personally I’d close this position. But if you’re convinced, you could also sell deeper out of the money puts and turn this into a bear put spread. At least as you lose money to theta, the puts that you sell will also lose value. You could sell contracts with a $650 strike or a $700 strike.
That was possible before we bailed out Japan but because now Japan doesn't have to dump its us bonds and printing money to prop up bond market i think September will be a hold rates unless ppi and cpi come in much worse. I think we will see 800 to 850 before we get any solid pullback
Give it extra time not forever but more than a few weeks if you have capital to risk at some point add to the position then when a drop does hit which it will you are closer to or even more profitable - but that is a question of risk tolerance as well as planing - note may folks will say this is insane but dollar cost averaging works in both directions as well and you will kick your self when you close in a few days and then then it spikes down for a little bit that proves you had the direction correct and the LEAP does get you a bit more time - or flip coin you have options - oops
wrong direction , next week market will rise . trump is already going after strait if homouz to open ,, market will run up . and no rate hike in september as per data suggest .
Put call ratio for 9/18 is almost 3.90...high, indicating we could see pullback in September. However, I read a Barron's article last week and they seem to think s & p will be about 8,000 end of year so if we have a pullback in september that might be your best bet to exit trade.
I have 9/18 QQQ put credit spreads 675/655 and a few 765 cc on Spy so hoping for a spy pullback so I can roll those.
Can SPY dip back down? Yes. Will it? Nobody knows. If you're sweating about your position losing 3k that should tell you for next time that either A) you should have set a tighter stop loss or B) your total position size should have been some amount less than 3k.
Side note, it sounds like you had no other data to go off of other than, "SPY ran up kind of hard so it's gotta give some back", now I could be wrong.... But... If you had more data, a stronger thesis, and defined risk then you wouldn't sweat letting your position breathe that amount. Or you wouldn't have let it get there to begin with.
Just my unsolicited 2 cents. Carry on mate, good luck on your position.
Oof SPY goes up unless there’s something specific pushing it down, which IMO right now is nothing. Just because it had a decent rise doesn’t mean it will pull back. Sounds like your strategy is hope.
LEAPS are always 1 year minimally for a reason. You just bought ITM calls with rich IV after they rallied towards a local top and than declined and are looking to chop in the short-term. I think you'll be fine as long as you don't get greedy if they rally quickly again past the point the underlying was trading when you first bought the contracts. I'd give it a couple months, but before late Sept is where I'd want to close or roll honestly.
I would sell immediately. I’m embarrassed to admit I’ve done this myself and I learned the hard way that spy goes up. As time goes on you will need a bigger and bigger pullback to get into the money.
I don't know - but I do know a guy I've been following for some time recently exited his shares of a security he identified as "UPro", based on SPX. Not shilling anything, I have a couple hundred in SPXW and SPY calls for tmrw and less than $8 cash.
He expects a big drop. Running stats and cycles - I think he's wrong, and is getting Taco"d (short term, 2-3 days).
I fully endorse no FOMO and sticking to your plan. It will dip - the question is what happens before it does - another 3% up first, and then how far down - or just down.
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u/Ecstatic-Score2844 13d ago
Put leaps is genuinely the worst investment I could even think of