I got myself into a bit of a mess again with my ARKK spreads. This is the second time I have ended up deep in the money with ARKK. Before I get started, I just want to remind everyone that I do not offer financial advice, this an opinion blog about money. The main emphasis of this site is that you can earn easy income through dividends and safe option strategies. The last time I was deep in the money with ARKK was with call spreads. The stock moved up quickly. In the span of a couple of months it doubled in value. I found myself with spreads that were $10 to $15 in the money. You can learn about what I did in my post Rolling Stock Option Trades.
Now I find myself in the same position but with ARKK put spreads. As of this writing the value of ARKK in a matter of days has dropped nearly $20 dollars from around $120 to $102. (Graph below) I got too confident with ARKK and now I find myself with several contracts that are deep in the money. The first two have a strike price of $115 and they expire in three days. I had come up with a strategy where I was going to sell two contracts each week and hopefully make $300 on each trade. As you can imagine this strategy has come to a screeching halt. I have four other contracts that expire in two weeks. Will talk about them in the next blog post. For this post will focus on what to do with the contracts that expire at the end of the week.
I have a few alternatives with what I can do. First, I could close the trade but would lose a lot of money. If I closed them today, I would take a $2,400 loss. Since they close in three days, I can maybe wait another day or two. I would not do the trade on the last day just in case assignment happens over the weekend. So, the last day I can do the trade is Thursday. Another option is to let the be assigned. I might do this if I had only one contract. With two contracts this would constitute $23,000 of my cash. ($115 * 200 Shares = $23,000) I do not want to use that much cash. It would force me to sell something else or some of the shares after assignment. So, at this time the logical choice for me is to roll it out so that I can give the market some time to correct. However, do I think it will it go up and give me the opportunity to get out of it. I think it will to a certain degree. I still want to lower the strike price to better my chances. So, I am going to lower the strike price and again try to get around $100 in premium. I am going to look at different expirations and lower strike prices in the hope of finding some premium.
I recorded a video so that you can see how I find the trades. Please watch the video below to find out what I choose to do. Also, if you would be so kind and subscribe to my YouTube channel and as always leave any comments below. Finally, I have setup a Patreon membership where you can get early access, special content and live events. As always contact me if you have any questions!
Thanks, and happy investing!
Jim Adams
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