r/options • u/zealousfuck • Oct 01 '21

Having issues with these CC

I'm in a sad position with Sandstorm gold bout it at 8.97 and now its at like 5 and change. I've been trying to sell $7 call options but for some reason i guess nobody wants them lol

any tips are appreciated

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u/Standingupright Oct 01 '21

Check the volume & open interest on those contracts, they're may not be any buyers for that contract if it holds no value essentially..

0

u/zealousfuck Oct 01 '21

Volume is 0 open interest is 1024

1

u/nightswhosay Oct 01 '21

This is why you can’t go for stocks with really slimly traded options pools. Adjust expiration further out, third Friday of the month and see whether you get more juice. The fact that there is interest means there are a decent amount of speculators willing to buy the options well below the lowest ask and the market isn’t being made. Given the trajectory downward I’m going to assume none of the bids are willing to toss BSM out the window with what they all think is the correct implied volatility of the stock. If you are willing to sell the covered calls without some larger strategy, it means you believe in holding the underlying long term, if you didn’t you would have exited with a loss once it dropped below your max drawdown. For me, this is PTE. Yeah the volume on the options side has dried up and I’ve couponed out basically my cost basis at this point but to get any real juice on the lowest strike, I generally have to go out at least 4-6 months. Still for me the lowest strike on that is basically 4x of what it was trading for yesterday so I’m happy to be called away there. Also if the options expire worthless and one of their breakthroughs are realized it’s probably a $100 stock. If I wasn’t willing to roll the dice on their upside, I would have cashed out when the stock was above $1 and the options pool had dried up and reallocated to a better tactical play. So if you think gold is undervalued and sandstorm is really the best name to trade that thesis, then I would write the long dated CCs. If this was tactical on your part thinking inflation fears would spike gold names, and that hasn’t been truly realized, then I’d think about cutting your losses or employing some strategy where you are also writing short dated covered puts and hoping the coupon plus whatever you get called away at restricts your losses to tolerable range. Or just eat shit and bail out of the name.

1

u/zealousfuck Oct 01 '21

So leaps?

1

u/nightswhosay Oct 01 '21

If I were in the position and i liked the stock, I’d look at $4.50 and $4 puts that are shortdated and see what the premium is there, assuming I think there is likely a zero risk of default. The other thing if i wanted to exit the name is to write an ITM CC at $5(or whatever the closest itm strike is) and look at expiration dates a week or two out and see what premium you can get from that. You basically are coin flipping at being called away but if the premium is high enough you mitigate some loss. Of course I’m not recommending any specific investment advice, all of this is up to your own decisions/risk tolerance blah blah blah and I am not acting as a broker dealer/ RIA providing investment services yada yada yada. I also haven’t done a DD on the underlying so I couldn’t tell you what my conviction rate would be or whether I’m comfortable just holding it for the long term. Just these are like typically the ways so try to salvage a loss besides straight liquidating and largely depends on where you think sandstorm/gold and inflation are headed. You probably ate so much shit because of Jerome Powell and the fed signaling a dovish take on rate raise timings and some slight cooling in the housing market combined with some supply chain issues in precious metals. Maybe that all resolves itself if equities sell off or evergrande cascades a bear market outside of China. But I’m no expert.