Would it make sense to review put spreads as well? For example, the VPG Nov 20 $105/$110 put spread is deeply ITM (VPG is now at $64.86) and the short put might be at risk of assignment. Is it a candidate for adjusting the exit order accordingly, or do you think it still has sufficient time to recover?
I'm not sure it does, tbh. Best case scenario, the stock recovers; worst case scenario, our short put gets assigned and we exercise the long put. That just happened today for me with TENX. It doesn't seem worth it to me to lock in a loss early to avoid that.
What about for portfolios that are margin-constrained? Does the expected value from holding the put spread exceed the potential return from a new position?
That’s a fair point. Closing an ITM put spread can release the broker’s margin requirement, although if the spread is trading near its full width, it may free very little net cash after the closing debit. How much usable buying power it releases depends on the account and broker, so I think this is more a matter of individual circumstances than something for which it makes sense for me to give blanket exit targets.
Would it make sense to review put spreads as well? For example, the VPG Nov 20 $105/$110 put spread is deeply ITM (VPG is now at $64.86) and the short put might be at risk of assignment. Is it a candidate for adjusting the exit order accordingly, or do you think it still has sufficient time to recover?
I'm not sure it does, tbh. Best case scenario, the stock recovers; worst case scenario, our short put gets assigned and we exercise the long put. That just happened today for me with TENX. It doesn't seem worth it to me to lock in a loss early to avoid that.
What about for portfolios that are margin-constrained? Does the expected value from holding the put spread exceed the potential return from a new position?
That’s a fair point. Closing an ITM put spread can release the broker’s margin requirement, although if the spread is trading near its full width, it may free very little net cash after the closing debit. How much usable buying power it releases depends on the account and broker, so I think this is more a matter of individual circumstances than something for which it makes sense for me to give blanket exit targets.