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  • How to Enter & Calculate Closing a Weekly Put Trade After Rolling the Option in the Same Contract Cycle – October 3, 2022

    Oct 03, 2022 Uncategorized Comments Off on How to Enter & Calculate Closing a Weekly Put Trade After Rolling the Option in the Same Contract Cycle – October 3, 2022

    When we sell cash-secured puts, we are undertaking the contractual obligation to buy shares at the strike price by the expiration date. The option seller (that’s us) sets those parameters. In return, we receive a cash premium. The implementation of exit strategy opportunities allows us to maximize the success of our trades. This article will detail how to enter and calculate put trades that are both rolled-up and closed prior to contract expiration using a hypothetical example with Company BCI. The information provided applies to all expirations, not only weeklys.

    BCI weekly example

    • 9/19/2022: BCI trading at $84.00
    • 9/19/2022: STO the 9/23/2022 weekly $76.00 put at $0.37
    • 9/21/2022: BCI trading at $90.00
    • 9/21/2022: BTC the 9/23/2022 $76.00 put at $0.05
    • 9/21/2022: STO the 9/23/2022 $84.00 put at $0.27 (roll-up)
    • 9/23/2022 (expiration Friday: BCI trading at $83.00, and we want to avoid exercise
    • 9/23/2022: BTC the 9/23/2022 $84.00 put at $0.37

    Initial trade entries & Calculations + Roll-up entries & Calculations

    BCI Put Calculations Using the TMC Spreadsheet

    Note the following:

    • The initial 5-day return is 0.49%, 35.71% annualized
    • After rolling-up, the return moves from 0.49% to 0.78%

    How to enter closing the trade to avoid exercise and calculate final trade results

    BCI: Final Trade Entries & Calculations

    Note the following:

    • The rolled-up premium was changed from $0.27 to -$0.10
    • This incorporates the $0.37 BTC debit
    • The final trade result at the end of the 5-day period is 0.29%
    • This annualizes to 21.17% (not shown in spreadsheet)

    Trade notation in the Put Trade Journal aspect of the TMC spreadsheet

    BCI Put Trade Notation in the TMC Trade Journal

    Discussion

    Entering and calculating our initial put (covered call as well) trades is only our first step in achieving and archiving accurate final trade results. We must also incorporate trade adjustments during the course of the contract cycle, if any. This article highlighted how to enter & calculate a put trade that was rolled-up and then closed prior to contract expiration.

    Author: Alan Ellman

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