The Buyback: Taking Your Option Selling Profits Early

  1. Mr.C & Mr.G
    Thanks for opening up the world of option selling for me. { and others}. I am way below your act. requirements. Still, I am now re-reading your book {3rd edition} and look forward to your emails.
    I have begun to invest with my nickels and dimes and incorporating your ideas into my own trading I have met with some initial, albeit, modest success.
    Thank you gentlemen.
    Max

  2. Hi Michael,

    Do you (the firm) ever decide to buy back at greater than 10% premium remaining? I’ve found that it can take an extra long time for short options to go to 10% when there is a decent amount of time remaining (pretty much anything nearing 2 months or more).

    They may get to 20% premium remaining, but it seems that that remaining 10% (to get to 10% left) is almost as hard to shed as those last 5 pounds when dieting!

    If you do buy back early with > 10% left, how much further out (premium-wise) do you buy back? How rare is this, or do you generally find it is still worth it to wait for that last 10%?

    If I’ve sold an option for $500, I’m sitting on a lot of them just to wait for another $50 of decay to buy it back at $50. So, I can claim 80% and re-position, or wait around for what feels like an extended amount of time for that last $50…

    I suppose one could say that about every incremental 1% and you have to draw the line somewhere, but it’s hard to determine the best place for that line (for me)!

    • Michael Gross Says:
      February 21, 2018 at 2:20 pm

      Dear Chris,

      Its not a hard and fast rule. But as a general rule, yes, we stick to the 90% rule. There are times when we feel the fundamentals may be shifting – or we want to scale down the position to reduce risk, that yes, we will buy back sooner.

      However, over the years, we’ve found the 90% buyback level to be a solid rule of thumb.

      Regards,
      Michael

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