Tackle Today: The Unfortunate Side Effect of Short Puts
January 17, 2023
«Where did my Upside Go?»
Cash flow seekers love the naked put. It offers a higher probability route to game time decay and a neutral to bullish move in price. When directional trades are being chopped to pieces in volatile times, the short put really shines.
But there is an unfortunate trade-off for these advantages. Your upside is limited. In other words, your payday runs out. This reality can make it difficult to fully capitalize on a bullish market move. To maintain your exposure, you have to be vigilant. Here are two ideas to accomplish this:
A: Roll up the put to a higher strike price to ratchet your delta back up.
B: Roll out the put to a longer time frame.
Either action or a combination of the two, will re-inflate the profit potential.
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