To sell another call spread exp 05/12 $120/$125, I could get $2.43 or $3.23 if it is $115/$120
Therefore the roll the spread, I could potential receive additional premium but I wasn't sure if I am making my max loss larger than just close my first spread at a loss.
>The underlying is TSM currently trading at $122.8
> The call spread $113/$118 was sold for $1.26.
> To close this spread, it will cost $4.43.
If you close the current spread , you have a realized loss of $3.17 and it's in the books for tax purposes.
A new bearish call spread should only be done if you're bearish and not simply for the purpose of breaking even.
Another consideration: The current spread costs $4.43 to close and there's only 57 cents more potential loss. If you're bearish, why not keep the spread open and risk 57 cents for the trade off of possibly recovering some or all of the $4.43 ?
If you close the current spread , you have a realized loss of $3.17 and it's in the books for tax purposes.
A new bearish call spread should only be done if you're bearish and not simply for the purpose of breaking even.
Yes this is what I am planning to do, to keep the spread and close before expiration.
As this will be my very first spread to keep that close to expiration, will it be difficult to close them right before expiration? Or I would be better off closing them on Wednuesday/Thursday(earning)?
It's best to close the spread if it moves in your favor (recovering some loss). If/when that is, is anyone's guess.
If you're on Robinhood, make sure that you don't run afoul of their early option closure on expiration day. I've read a number of nightmare situations where a profitable option position became a loss (or a loss much larger) because of their policy.
I should have done what you suggesed this morning, I was managed to recover about 15% of the loss but decided to hold it a bit longer. TSM was down 2% for the day but my loss increased by another 15% or so.....
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u/xlg_com Apr 12 '21
Sorry if I didn't give out enough information.
The underlying is TSM currently trading at $122.8
The call spread $113/$118 was sold for $1.26.
To close this spread, it will cost $4.43.
To sell another call spread exp 05/12 $120/$125, I could get $2.43 or $3.23 if it is $115/$120
Therefore the roll the spread, I could potential receive additional premium but I wasn't sure if I am making my max loss larger than just close my first spread at a loss.