You may wonder what is the best way to manage a position when a put is assigned and you end up having to buy the shares. If you’ve been following the progress on my journey in demonstrating how to grow a $10,000 account using options, you’ll see that the strategy that I use results in very few assignments on my puts. The goal is to try and avoid this, but it does happen occasionally.
I thought I would share my experience this week with an assignment that I encountered on a put in one of my other accounts. This was on a put option on SEZL. On July 15th I sold a $135 strike put with an expiration of 8/15. For this I collected a premium of $19.40 or $1,940 for the contract. On August 8th the price of SEZL dropped significantly to below $100 a share. So to try and avoid getting assigned I rolled my put on 8/11 to the next month with a new expiration date of 9/19. I collected an additional $1.12 or $112 for rolling the position out another month.
The price stayed low but at least it didn’t continue to drop even though it had ups and downs from one day to the next. Now in most cases a put option won’t assign before the week of expiration, though it does happen sometimes. I got notified on 8/21 that my put had been assigned which meant that I had to purchase 100 shares at a price of $135 each. This took $13,500 of my cash to purchase the shares.
So my next step was to sell a call position on the shares to continue to collect additional premium while waiting for the share price to recover. In most cases I will choose the strike price that I bought the shares for to not lose money by selling the shares for less than I bought the shares for. In this case, the price had dropped so much that I would have had to go out quite a ways to get any decent premium with having a strike price on the call of $135.
To avoid creating a loss on the position overall I decided to choose a strike price that wouldn’t be below my cost for the shares minus the premium I had already collected. Up to that point I had collected a total premium of $20.52 per share or $2,052 total. So I knew that I could sell a call with a $115 strike price and still be barely profitable on the position. I could also include any premium that I received from selling the call as a way to further lower the cost basis. I chose an expiration date of 11/21 and a strike price of $110. For this I was able to collect an additional $8 per share premium or $800 total. This brought my breakeven point down to $106.48 which is still below the strike price for the call.
Ideally the share price will rise between now and November 21st, but not enough so that it goes above $110. If it goes to somewhere near $110, I’ll be able to roll the call out more in time to a higher strike price and ideally get my strike price back to $135. I’m certainly not counting on this happening exactly this way, but that would be ideal.
Week 17 Results
Here are the positions I started the week out with:
This week I ended up not having time on Monday to do anything with this account. So Tuesday when the market was down I ended up rolling my TMC put out to 10/17 for the same strike price. I was able to collect $10 for this roll. I also opened a new position on Tuesday by selling a put on QBTS with a strike price of $16 and an expiration of 8/29. (10 DTE). For this position I collected a premium of $76.
My RUN put ended up being far out of the money by the end of the week so I was able to let that one expire. Here is a list of all of my trades since the beginning of August:
Summary
I was able to collect a total of $85.88 in net premiums for the week. My target for week 17 is $78.27. For the first 17 weeks I have collected a total of $1,373.92 (13.74%) in net premiums. My target for the first 17 weeks is $1,259.03.
My hope that the share price of TMC will come up by October at least some so I can possibly roll the strike price down. Here is the summary chart along with a snapshot of the account positions at the end of the week.
Read: How to Generate Consistent Profits Through Options Trading