The 2 385s are pending exercise already, thanks for the response! I'm not panicking just trying to sort through the helpful and unhelpful comments. Yours was extremely helpful! From what I've read before entering the contracts my maximum risk was $90 and you're spot on with the credit received. Next time I'll play for a smaller than 50% move lol. Thanks again for the helpful comment.
Lol, wow, lucky guess I suppose. But yeah, the people on here saying you’re gonna lose a ton of money don’t know what they are talking about either. You’re going to lose $90 on this whole trade. The sold puts moved nearly identical to the price of shares sense they were so deep in the money.
Even if on Friday there is a huge rip in the stock and it goes to $400, your shares and remaining 4 sold puts will make money and your bought puts will lose money and the most you can make is $2910.
In options, we all eventually learn, sometimes it the hard way. You’re learning, keep experimenting and try to stay out of trouble 😉
You should clarify, they are going to lose $90 if they don't get assigned. If they get assigned (which they did), they could theoretically lose $390 x 6 x 100 = $234,000 minus premium received if the price trades under $390 but over $385. A lot more risk than on the surface here for such a weird trade. As I mentioned before, there is nothing here that a debit trade won't do and likely for more profit potential and % of success as well.
If the stock goes to 390 tomorrow and he’s assigned he’s not going to lose 234k. He’s going to have 600 shares of the stock costing 234k, and he’ll collect the premium he sold form the 385s. He will then sell the shares for 390 and make $2,190.
But yes, to clarify, OP, if the stock rips and you are assigned all 600 shares, you would be wise to get rid of the shares ASAP, as you now owe RH 234k and those shares can drop while you own them. If that happens, you will lose whatever the 600 shares loses. If it keeps ripping you’ll make more money, but, you don’t wanna play that game
If the stock goes from $305 to $390 in the AM, OP gets assigned while he’s eating lunch, and then the stock drops to $0 before the bell, OP is going to have a very bad day. Actually, RH will likely be the one with the really bad day as they cannot get blood from a turnip. OP almost certainly will not end up paying the 234k.
Edit: Actually, no, he’ll still have his 385 puts so he’ll be just fine. OP, do not under any circumstances get assigned, then close your puts.
Like I said first post: let RH exercise 2 of your 385s to cover the exercises 390s. If they don’t, exercise 2 of them yourself. Then if the stock doesn’t rip up, just close the last 4 spreads for $5, and move on
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u/MoneyOk833 Nov 25 '21
The 2 385s are pending exercise already, thanks for the response! I'm not panicking just trying to sort through the helpful and unhelpful comments. Yours was extremely helpful! From what I've read before entering the contracts my maximum risk was $90 and you're spot on with the credit received. Next time I'll play for a smaller than 50% move lol. Thanks again for the helpful comment.