How to Calculate Rolling-Up Cash-Secured Put Trades: The BCI Trade Management Calculator + $50.00 Discount Coupon – October 30, 2023
When we roll-up our cash-secured put trades, we are required to place additional cash into our brokerage accounts to secure the higher strike 2nd trade. This article will detail how to accurately calculate both initial and rolling-up trades using the BCI Trade Management Calculator (TMC).
Real-life example with Super Micro Computer, Inc. (Nasdaq: SMCI)
- 5/16/2023: SMCI trading at $142.11
- 5/16/2023: Sell 1 x $135.00 (OTM) 6/202023 put at $4.09
- 5/18/2023: SMCI now trading at $161.29
- 5/18/2023: BTC 1 x $135.00 6/2/2023 $135.00 put at $2.00
- 5/18/2023: STO 1 x $140.00 6/2/2023 put at $4.65
SMCI: 10-day price chart showing the 2 trade dates
SMCI: Pre-rolling calculations
Note the following:
- The initial return is $409.00 or 3.12%
- The capital required to secure the put is $13,091.00 [(put strike – put premium) x 100]
TMC showing both initial and rolled-up trades
Note the following:
- Top Section: We enter data at the time of the initial trade and rolling-up exit strategy. $2.65 represents ($4.65 – $2.00)
- Middle Section: The return on the 1st trade is 3.12% and on the second, 1.93%. The spreadsheet will reflect a 2nd investment of $13,735.00 (brown cells), which includes the original $13,091.00, so a capital adjustment will need to be made to enable us to accurately calculate total portfolio % returns
- Bottom Section: Confirms that if no other trade adjustments are made, the returns are 3.12% + 1.93% before capital adjustments to accurately assess total portfolio returns (both trades combined)
TMC: Capital adjustment section
Note the following:
- Section 1: Before using the capital adjustment section, the total portfolio investment inaccurately reflects a total investment of $26,826.00 and a total portfolio return of 2.51%
- Section 2: In the capital adjustment section, we enter a -$13,091.00 (brown cell in mid-section- hard to read in chart), since that amount is already included in the $13,735.00
- Section 3: After using the capital adjustment section, the total capital invested now reflects the accurate amount, $13,735.00 (brown cell on bottom) and a final total portfolio return of 4.91%
Discussion
When rolling-up our cash-secured put trades, additional cash is required to secure the higher put strike. When using 2 lines in the TMC spreadsheet for initial and rolling-up trades, the capital adjustment section must be utilized to get accurate total portfolio % returns.
Author: Alan Ellman