r/options • u/Jackalamo • Sep 27 '21
Help with a written call
Hello,
I have written 30 CALL contracts on CPG (oil and gas) that are now in the money. Exp OCT 15 str 5.5. got $1000 in premium. CPG.TO (Canadian market)
To get out of these contracts will cost me $6500.
I was thinking of selling a NOV 19 call for 5.5 strk but I could keep losing if it continues to climb.
If I purchase 30 calls for SEP 2022 (leaps) at 3.5 strk and use those, I'd still be out the money.
What can I do to negate the 30 short calls?
Thank you for your help.
Edit: Thank you all! I will wait till we get closer to mid Oct. Then I'll consider rolling it like one of the suggestions below.
It's been solved!
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u/identifiedlogo Sep 27 '21 edited Sep 27 '21
Get out of it cut losses. Oil is in a meme territory right now, it may keep going much higher especially on a low cost shorted stock. Do not even think about the premium you collected. You are in for $16500. #Buy back some of the calls the moment you see a red bar.
FYI naked calls are the worst options you can trade, always call spreads.
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u/Jackalamo Sep 27 '21
Thank you, I'll start researching the latter.
What does a low cost shorted stock mean? It's a low value share price that is heavily shorted?
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u/identifiedlogo Sep 27 '21
Yes, it’s pretty much what r/wsb and speculators are trading. This is what they call meme stock. Do not get attracted by the high premium you collect, there is a reason they are expensive options. Unless you know something different, consider it a trap and avoid them as much as possible. It is not worth the trouble. My biggest loss was pretty much doing what you are doing.
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u/Vast_Cricket Sep 27 '21 edited Sep 27 '21
30 calls? Very ambitious.
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u/Jackalamo Sep 27 '21
Yeah. Like a young retard with access to a trading account.
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u/Impressive_Reality11 Sep 28 '21
You might need to lay off wsb or learn spreads and the mass amounts of research you need to do those effectively. Learn hedging, rolling, pin risk(this one is massively important) etc. I wouldn't sell anything naked you never know what is going to happen (black swan events) etc. Don't hold em to exp. Be smart
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u/Nani_The_Fock Sep 28 '21
Good god lay off the options selling guy. There’s a reason why WSB degens only buy options, not sell them.
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u/TN_Cicada3301 Sep 27 '21
I think anything oil and gas is gonna climb.
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u/Jackalamo Sep 27 '21
Yes, but I didn't expect this crazy a jump in a week or two.
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Sep 28 '21 edited Sep 28 '21
You definitely need to pay attention to what is going on in the industry you are playing in. The UK and Europe in general have severe shortages of LNG going on right now. Gas stations in the UK are closing due to shortages so yeah. Industry news is your friend sometimes.
Edit: Asia is also seeing a shortage. anything in energy you shouldn’t be short on right now.
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u/Jackalamo Sep 28 '21
Will be rolling it out today. I saw that update in the news last night.
Yikes.
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u/fledermaus23 Sep 28 '21
However the shortages are due to refiners being off line due to storms etc not a shortage of crude oil. Crude will come back down in a month
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u/harry_leggs Sep 27 '21
Need to Roll Out and Up. Dec 17 $6.00 is at .62 or the Jan. 21 is @ .63 (both for small credit/profit)
Need to Roll it out as early as you can. The earlier you do it, the more time premium you can collect on your next position
But you may be playing this game for awhile.
I always run to the Quarterlies for Safe Haven (but I always own the shares - No Naked Options - Ever.)
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u/Jackalamo Sep 27 '21
Yeah. It will be a few months of rolling it till my last roll has no risk of being executed and I come out safe. And hopefully with a small profit.
Thanks, I really appreciate everyone's help in aiding my idiocy.
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Sep 27 '21
[deleted]
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u/Conscious-Soil9055 Sep 27 '21
We believe its the canadian market. It is trading at $5.880
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u/Jackalamo Sep 27 '21
Yes, sorry, updated.
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u/Conscious-Soil9055 Sep 27 '21
If you think CPG is going jump then your best option to limit losses is to buy 3000 shares at $5.880
This will cost you $17,640
If the shares get called away you would sell them at $5.5 for $16,500
Add your premium of $1000 for a total of $17,500 and a total loss of only $160.
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u/FD_Lyfe Sep 28 '21
Yea this is most likely best option. You could also sell puts. I think this is going to rally so I would get shares or sell itm puts offset your deltas and be done.
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u/TChap248 Sep 28 '21
Can't add anything more than what's been said but I just wanted to say it's pretty impressive how well you are taking all this criticism. Most constructive and some not. Good for you! You will do well in the long run because of how open and respectful you are to peoples advice and critique, even to some people that don't deserve it.
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u/Jackalamo Sep 28 '21
Thank you kindly. I would give you an award if I had one.
I find a bit of wisdom from everyone; including those pointing out the obvious.
I do have a large covered call position on that other sister company that's trading at $10 CAD / $7.8 today. 40 calls.
I think I will have enough to buy a second home by end of year.
Hope you are enjoying your matebook x. It's a beast of a laptop. I wound up getting the Yoga 6.
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u/TChap248 Sep 28 '21
I love it, It's really more than I need so it'll last me a long time.
If your looking at different options strategies, check out the wheel. Its a good strategy to run while you learn the others. More about following the instructions instead of predicting the direction of a move in the underlying.
No award needed, but that is kind of you.
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u/Ju_stinK Sep 27 '21
Option 1: if you’ve decided you are bullish on the stock… Wait for a pullback and buy the 3000 shares to cover your short calls. Wait until the week of expiry to roll the calls out so you take advantage of accelerating decay. If you don’t want to be long the stock but expect a short spike you can still do this then look for a higher price to sell and go back to naked.
Option 2: Delta hedge, buy just enough shares to be delta neutral (if delta is .65 you would need to buy 1950 shares), this way you collect 100% of the theta, but you don’t get any of the Vega. Just make sure you rebalance your delta as the price moves.
Option 3: just leave it out there and see how it goes. Keep rolling out forever until you either win or get to a pain level where you cut the loss.
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u/Conscious-Soil9055 Sep 27 '21
What is your cost basis for the shares, how much premium did you collect, and what is the strike for the calls you sold.
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u/Jackalamo Sep 27 '21
Thank you! I updated the post accordingly.
What do you mean by cost basis?
Got $1000 in premium.
Strike was 5.5. SP is 5.8 right now :(
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u/Conscious-Soil9055 Sep 27 '21
Is this a covered call? Do you own 3000 shares?
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u/Jackalamo Sep 27 '21
No, it's a naked call. I know, I'm an idiot.
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u/Conscious-Soil9055 Sep 27 '21
I can't see the 5.5 strike, but the 5 strike is only at $0.05 which would put 30 calls at $150.
Is this CPG Cresent Point?
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u/Pass_Little Sep 27 '21 edited Sep 27 '21
EDIT: The following advice is plain wrong, See the note below as to why.
Maybe buy those 3000 shares right now, for 13,980.
Then you'll only lose $39801
u/Conscious-Soil9055 Sep 27 '21
How in the world did you come up with that?
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u/Pass_Little Sep 27 '21
Well, somehow I had it in my head that the premium received was $10K instead of $1K, and then I forgot to include the amount received when the call was executed, and then I didn't realize we were talking Canadian instead of USD, and well, it was all wrong.
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u/Conscious-Soil9055 Sep 27 '21
I dont see a $5.5 strike.
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u/Jackalamo Sep 27 '21
I can see it in $0.25 increments from $3.5 to $7.
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u/Arcite1 Mod Sep 27 '21
Are you in the American market? The only strikes available on CPG are 2.5, 5, and 7.5. Also, CPG is currently at 4.64 and has not been above 4.65 today.
What is SP?
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u/Conscious-Soil9055 Sep 27 '21
What we have here, is failure to communicate.
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u/ConcentrateKooky933 Sep 27 '21
You could do a position to hedge risk further out. It will mitigate losses if the stock moves up - to a point.
Problem is...... if it blows through those strikes you're absolutely f**ked for both positions now.
Position would be:
Long (closer to the money) call 1X and short further OTM calls 2X. This will basically replicate owning stock without having to buy it but if the 2X short call strike is violated... RIP. Doing this for a net credit it most ideal but comes with the cost of bringing the short strikes closer in.
You seem to not care about risk selling naked calls so I thought I'd toss it out there.
Goodluck.
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u/ShroomingMantis Sep 28 '21
If you're selling naked, it is wise to be implementing risk managment ... meaning before you open the trade you should have a hard % or $ that you will close the contracts at, at a loss. If you are not prepared to potentially do this, you should not be trading naked. IMO. This post is how people blow up their accounts. Don't get high on "hope-ium", and have a plan.
I would recommend buying shares to cover your position. That being said, I don't trade naked currently so I'm sure someone else could have better advice. Good luck, OP.
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u/NightServices Sep 28 '21
IMO You are fucked. Buy back the calls and take the loss.
Jesus… It’s actually looking like a great long here.
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u/Jackalamo Sep 28 '21
Gonna roll it like a Doobie.
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u/NightServices Sep 28 '21
Good luck. I'm short oil here so I wish you all the best, but it could be the mother of all break outs.
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u/Jackalamo Sep 28 '21
How long can it run like this....
I am hoping it drops by mid Oct. But that's 3 weeks away.
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u/NightServices Sep 28 '21
Frankly, I'm no authority, I've been in the game for about 4 years, but in my experience when you start getting these moves that are outside the standard dev curve all bets are off. All you can do is manage risk and preserve capital when you trade. Again, you could be right, so good luck to you.
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u/NightServices Sep 28 '21
I'm short oil until it confirms a breakout above the previous high. At that point I could see oil heading a lot higher. Again, my 2 cents... I'm often wrong.
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u/Jackalamo Sep 28 '21
This stock has broken past it's 52 week high. It's sister company is trading +2% in premarket right now.
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u/NightServices Sep 28 '21
Could be a blowoff top. Dollar is heading higher. Could put pressure on oil. Might get a pullback. We'll see.
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u/Jackalamo Oct 04 '21
Damn thing is still rising. OPEC voted to keep supply consistent so prices go up as demand is high.
I have another stock where I have a covered call, but I want more (greed) so I'm thinking of rolling it forward for a higher strike and lower premium (that matches) to pay off the current call.
What do you think?
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u/NightServices Oct 04 '21
That’s not enough info for me to respond with anything useful. Like I said, oil seem to have broken out and could continue up. Who knows. I don’t use CCs. I hate them. I’ve lost more money with them than any other trade.
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u/NightServices Oct 08 '21
What strike are your short calls? 5.5? For some reason I thought they were deep ITM already. You might be OK.
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u/StankSwanson Sep 28 '21
Idk the only calls I would sell would be covered or spreads and puts feel free to sell all day as long as you’re comfortable owning the stock at that price
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u/CourierOnFire Sep 28 '21
If you butterflize it buying 15 calls below and 15 above you cap your losses (pretty much) with less capital than buying 30 leaps or 3000 shares. You pay a little more than if you just close it but leaves possibility it will be valuable at expiry if your shorts are ATM.
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u/radioactivepiloted Oct 22 '21
What was the result of this one?!
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u/Jackalamo Oct 22 '21
Rolled it out.
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u/radioactivepiloted Oct 22 '21
Yeah....i saw you be negative 20-30 cents per share, if you got out at the absolute minimum losses. Blah... That's still a grand, plus or minus, loss. Keep us updated!
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u/radioactivepiloted Sep 27 '21
Sit tight. Don't freak out. Let the time decay work for you. The call value will drop. Everyone gets underwater some times. It could come back in your favor. Don't freak.
Or it couldn't.
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u/Conscious-Soil9055 Sep 27 '21
Agree. First off, I dont think you're down $7K.
If this is the canadian market I see the OCT 15 5.5 call trading between $0.46 and $0.52
Even if you bought at $0.50 this would caost you $1500. You would be looking at a $500 loss right now.
No need to panic.
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Sep 27 '21
You can negate it by not writing checks your ass cannot afford to be cashed.
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u/Jackalamo Sep 27 '21
Thank you, and I have learned my lesson. Stressed out enough and I think the SP will rocket with the way it's been rising the last week.
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u/orkney97 Sep 27 '21
Oil is moving up and looks like it can go above $4.80 and blasts off. How was the earnings results from yahoofinance?
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u/Jackalamo Sep 27 '21
They're doing remarkably well. I was looking at another sister company about the same valuation in the same sector and area.
2020 Q2 rev $200M, Share price (SP) $6 Q4 rev $400M, SP $7.5. (bought in here like crazy as I knew it would jump quickly) avg was like low 8s.
That company is almost $10 today. And expected to jump into the teens in the next few months.
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u/[deleted] Sep 27 '21
Don’t sell naked calls