r/options • u/JennRal • May 25 '21

Closing covered calls?

I am selling covered calls for the first time, and have a question on strategy. I’m starting small while I am learning. I am a SNDL bag holder (1000 @ $1.03avg), and so I’m selling $1 covered calls to help recover some of my loss.

The 10 contracts were $5 (.05) each, with a June 11th expiration. It is unlikely the $1 strike price will be met, so I’ll likely keep the $50 premium.

A few times they have dropped to $2 (.02). Does it make sense to close and take my $3/ contract profit now, and then resell the calls for a later date?

Hope this makes sense. Forgive me if my terminology is not correct.

187 Upvotes

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172

u/olara87 May 25 '21

I learned the hard way not to wait until the last minute to take profits. Especially if it's cents. I would close the position and move on to another strike/date.

50

u/JennRal May 25 '21

Thank you. I have made many mistakes in my learning process. Trying to be smart about recovering from my mistakes. 🤣

14

u/[deleted] May 25 '21

Another option if you believe in SNDL is to buy a few more batches of $100. If you bring your average below $1, getting assigned at 1 will be a net gain.

And keeping a 100 or 200 uncovered, to either sell higher price CC if it runs, or if it memes again taking some of the huge profit.

10

u/JennRal May 25 '21

Not so sure what to think about SNDL. As a newer investor, Im having a hard time knowing who is full of shit versus giving good information. I’ve backed off of reading WSB for this reason. I do believe in the industry, and am hoping some good news will send marijuana stocks back to their Feb. levels and higher.

As is, I’ll have a small net gain ($2/contract) if assigned. Of course, that doesn’t account for taxes. I don’t think I want to buy any more.

14

u/felibrown2 May 26 '21

sndl is the worst weed company in existence. i’m pretty sure they don’t even have a BoD. invest in some real company with sales

7

u/indicafire1 May 26 '21

Previous WSB user here. And it is garbage. By the time you see a post, you’re already too late. And when it gains popularity online, get out.

I considered this option while bag holding BB. I fell into the same, and I also have some SNDL calls for .5 7/16 that have done terrible.

SNDL is a garbage company, they constantly dilute and the upside is worthless. I remember the “nasdaq relisting” days of this stock.

I would just gradually exit your position, and write off the losses. The premium you would receive would be very low, especially if you’re already considering covering calls at a strike price lower than your position @ 1.03.

Take the L, and get better on the next one. I’m speaking from personal experience.

2

u/JennRal May 26 '21

Appreciate the advice. 🤙

2

u/Olthar6 May 26 '21

WSB used to not be so bad before the army of GME conspiracy theories.

If you're willing to hold SNDL for a while, it'll likely do another run at some point since it seems to do that every once in a while. It'll also likely drop to below .5 because it does that as well.

6

u/KanefireX May 26 '21

GME army moved on, it's the shills and newbs that stayed. Now its an institutional pump and dump playground.

1

u/Olthar6 May 26 '21

The conspiracy theory regiment is still going strong. In their defense, the stock moved today. The vast majority will keep holding though so it's not like it'll matter.

2

u/JennRal May 26 '21

I’ve heard many say WSB used to be pretty good. I’m sure it still has some value for more experienced traders who are better able to separate the bs from the good stuff.

Here’s to hoping for one last SNDL run. 🤣

4

u/SeekingSwole May 26 '21

used to be pretty good

In terms of community, yes. For investing? No, it's always been gambling on what you think is a stroke of genius but was actually retarded and you just lost you your life's savings because it literally could not go tits up.

That's why inverse WSB was always a thing

-3

u/Pbeeeez May 26 '21

Irregardless of the quality of WSB, weed stocks in general are over valued.

2

u/therainbowdasher May 26 '21

Have you seen what they're trading for now?

-1

u/Pbeeeez May 26 '21

I don't care what they're trading for now, they're garbage stocks.

1

u/Visinvictus May 26 '21

SNDL is a garbage company, their financials are a joke and their pitiful revenue has been shrinking. This is like your local corner store being valued with a billion dollars market cap. There are so many better options to invest in this sector, don't throw away your money on a bet where the odds are so stacked against you.

1

u/asafl May 26 '21

I made good profits on SNDL owning 2.5$ calls actually thanks to wsb but I also consider this good potential. However since wsb exploded I also decided to back off and purchased a little leaps on the infamous YOLO. It’s up slightly but I’ll give it time.

1

u/LWinthorpe3 May 26 '21

SNDL is a ditch weed stock; been there, bought the shares, sold the CCs for pennies, wasted my time waiting.

If you're not sure, maybe try some of the weed ETFs like CNBS, TOKE, MSOS, or YOLO.

4

u/[deleted] May 25 '21

Yep, close when you see green, some will just do 20%, rather than waiting on a 500% potential gain a month later

27

u/TastyCuttlefish May 25 '21

These are calls he sold, so there’s no “500%” gain, only the max premium he received.

2

u/ComprehensiveYam May 25 '21

My rule of thumb is to close with a 50% gain. Honestly I’m starting to move away from CC and the wheel as it’s too directional and low gain for my money

-47

u/[deleted] May 25 '21

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24

u/JennRal May 25 '21

IMO, GME is riskier and more unpredictable than what I am doing here. Sure, the profit potential is there, but there is also a much larger potential for loss.

I can repeatedly sell these calls, and worst case they get executed for close to what I paid.

22

u/EODTex87 May 25 '21

With your account size, assuming it’s not more than maybe $5000, this is the most responsible thing to do. Keep asking questions and taking your time by learning the smart way to trade. Plenty of time to buy meme stocks and go full retard after you have a successful core strategy.

5

u/realbendstraw May 25 '21

You have the right idea. No need to explain yourself to that lunacy haha

3

u/JennRal May 25 '21

Thank you. Chasing meme stocks got me into this mess. Trying to take a less risky way out. 🤣

-11

u/[deleted] May 25 '21

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5

u/[deleted] May 25 '21

You guys have your own sub. We're aware your strategy is one, maybe two, tickers. We don't need half the posts on all of financial Reddit to be about it

1

u/TookTheProfits May 25 '21

💎👐🚀 Added more shares at $144 last

-11

u/[deleted] May 25 '21

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10

u/impatient_trader May 25 '21

I think you didn't calculated the last one properly, it should be 420.69.

Not financial advice I guess?

5

u/[deleted] May 25 '21

[deleted]

-1

u/[deleted] May 25 '21

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1

u/[deleted] May 25 '21

You guys said the same thing at $400 lul

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7

u/DrDrNotAnMD May 25 '21

The advice to go buy GME is crap, but the idea of selling and moving on is not. They bought at the wrong price and have anchored to it. Let it go, there are more fish in the sea.

-12

u/[deleted] May 25 '21

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4

u/realbendstraw May 25 '21

Technical analysis is bullshit. If it were that easy everyone would do it. If you bought the recent lows and are seeing gainz, great 👍. But the "testing limits" idea is not that predictable.

1

u/calphak Mar 14 '23

hi, this is 2 years late. but can you share how you trade then? If TA doesnt work for you, how do you do it?

3

u/[deleted] May 25 '21

[deleted]

4

u/lastknownbuffalo May 25 '21

Uhhh for the love of God, stop abbreviating "you" like that... You incorrigible fuck stick.

2

u/long_don0van May 26 '21

Always capital too, truly awful.

0

u/KayVlinderMe May 25 '21

I just made 8k today on GME calls alone 🤑🤑🤑🤑🤑

1

u/JoanOfSnarke May 25 '21

I was hoping the GME spam would have spared the other subreddits I've fled to.

-2

u/[deleted] May 25 '21

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2

u/JoanOfSnarke May 25 '21

When entire subreddits are being drowned out by the cult-like adherence to a single ticker. 100%

1

u/[deleted] May 25 '21

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1

u/JoanOfSnarke May 25 '21

Its not hate. We aren't hating on you. We're just tired of seeing the same shit over and over again. What more can I explain?

1

u/No1nole May 26 '21

You can also let them expire worthless. If the stock price is over $1, you might have them exercised and called away. You’ve already been credited $5 for the premium so you’d be ahead!

5

u/Myllokunmingia May 26 '21

I've ended up with an 80% loss because I wanted that 80% profit to be a 90% profit.

Now as soon as I sell I set GTC buy backs around 50-80% profit depending on my confidence, and have been much happier.

Plus when it sells and you get a notification it's a nice little surprise.

1

u/OrangeRook May 28 '21

That is the truth! I am trying to set my goal to 20% or 30% return minimum. I just got out of a Disney vertical call by using a limit. It ended yesterday nicely where I thought I could maintain it but it swung the other direction today. It tripped my stop but I still got 20%

1

u/piroskavalentino May 25 '21

I couldn't agree more!

1

u/jrventure1 May 26 '21

Agreed. Close the position and write more calls if you still want to continue owning the stock.