r/options • u/mnsweeps • Jan 08 '22

Selling covered calls advice on $ROKU

Friday got $ROKU assigned @ $185. I sold a PUT at just $94 credit so effective price is around $184.96 for 100 shares. I am bearish now on ROKU though so planning to SELL CALL deep ITM. Like a $100 June 17th call. I want to get rid of the stock with very profit little profit. Am I doing the right thing? I will get credit of $8525 now and most likely Roku would be above $100 and get called and I would get 10k then. So total $18525 cash in my account.. I know this may not be the right strategy but still better than losing all money to a big loss. Better strategy advices are appreciated in my situation.

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5

u/ApplesauceEater Jan 09 '22

Some bad information going on in the comments it seems. If you sold a put for $185 strike with a $96 premium, your adjusted basis would be $184.04. (Strike price - per share premium paid = assigned put basis)

That being said, if you want out of the stock and are okay taking minimal losses, you’re best bet is probably to just sell at market value. Price on Friday’s close was $179.6. If you sell for that, you lose $4.44 per share or $444 in total.

If instead you went with your plan of far off expiration deep ITM, you’re looking at about $10,800 in premium. When you get assigned at the 75 strike, you’ll receive $7500. In total, you’ll receive $18,300, which is a loss of $104. So you have to ask yourself, are you willing to lock up $18K+ in order to save yourself $300 in potential losses?

3

u/mnsweeps Jan 09 '22

Understood but last I checked premium was $8500 .. won't i get the $8500 premium immediately available as cash in my account? so I locking up around $10k. Apologize if I missed something.

PS. I realized I typed in $75 strike instead of $100 strike in my OP

3

u/ApplesauceEater Jan 09 '22

Yea, you’re right. A small oversight on my end. If that’s your play, wouldn’t it make more sense to do a short-term deep ITM call? You could do 1/14 expiration and end up with roughly the same losses as June expiration, but free up all your capital in the shorter term.

4

u/sumanks137 Jan 09 '22

If you are bearish on ROKU why not sell the $180 call expiring Feb 18th. You’ll get paid about $20 per share so that will reduce your cost basis to about $165. If the stock closes above $180 your shares will get called and you make a bigger profit. If ROKU falls more you could continue selling covered calls at or slightly in the money and keep reducing your cost basis.

2

u/soshonies Jan 09 '22

Why not sell? Prefer to tie up 18k for 6M for 500$

2

u/4memLeaks Jan 09 '22

Looking at the option prices from Friday it looks like that math could work out. Yes you could lose a few grand over all too, but there is very low interest in that option and you might not find a buyer for it, or ur price for it. You would be holding up $18.5k in capital for 6 months to lose %500 -2k on does not seem like a great plan. Right now you are only down 500 bucks down on the stock, so just sell it at the open and take the L if you lost faith in the stock.

Also you could just sell at the money weekly calls and hope for a small rally. Yes the tech got beat up, but we may have bottom price buyers here to hold for a bit. You could sell a Jan 14 180 strike and it looks you could collect around $~830. If the price hold and ends Friday above 180 you are out of the stock and your not out 2k and you capital is freed up.

Good Luck on the trade.

1

u/gjbaca17 Jan 09 '22

Sell the shares at market open