r/options
Getting out of a large deep itm protective put without exercising?
User seeks advice on exiting a large deep ITM protective put position on BX due to broker margin constraints.
I have a large stock protective put position on 10,000 shares of Blackstone. My broker wont let me close the position in a single trade(shitty broker).
I only have 100,000 in available margin in this account so i cant close out the options or shares in a single trade.
The puts are weekly 122s, pretty deep itm. I want to exit to buy leaps.
Any advice on an exit? I don’t want to do 20 transactions of selling some puts then some shares.
If your broker allows covered calls in a single order (long stock + short call in one order), then you should be able to close out the entire position (sell all stock and sell all puts in one shot.)
I'm assuming if they don't allow selling the covered put, they don't allow buying the covered call spread, either. However, covered calls are so common, that it's definitely possible they only allow a covered call order and not the covered put.
Bleh. "I don't need all the bells and whistles" until you do.
Exercising the puts is the clean one shot exit here and it sidesteps the margin gap entirely. When you exercise the 122 puts you sell the 10,000 shares at 122, both legs come off in the same instant, so there is never a moment where you are holding unhedged stock that trips the call. Selling the puts first is exactly what creates the gap, because for a beat you hold the shares with no protection and full margin. The only cost of exercising is the leftover extrinsic in the puts, and on deep ITM weeklies that is pennies. Do it, take the cash, then build the LEAPS fresh. The covered call single order route also works if Wealthsimple supports it, but exercise is the simplest path and you already own the long puts.
Thank you! This is the best answer. Exercising seems like the headache free route.
If i went the other way, do you recommend selling a covered call at the same in the moneyness to create a wash with the value of the put?
You're not collaring it, you're just closing it.
How can selling something generate a margin call? You sell the puts and now you have a bunch of cash in your account
Because the puts are reducing the risk on his shares, thus he’s able to enter stock positions he normally wouldn’t have the buying power for.
Protective puts allow a huge amount of leverage into the stock(like 10x). But it is a shifty weird position to manage. This is a good example of that.
I think the margin requirement it is some weird calculation of % of put strike
Sounds like a good short-term and long-term plan would be to transfer your account to a better brokerage. From there, you can do what you wanted to do.
Wealthsimple
If the puts are deep ITM and paired against the stock, can’t you just call the broker’s trade desk and ask them to work the exit as a covered/collar unwind?
Feels like this is more of an execution/margin problem than an options problem
Doing 20 partial transactions sounds awful, especially with weeklies and 10k shares
Also if they literally won’t let you close a fully hedged position in one shot, I’d seriously question whether this is the right broker for a position size like that
You could also call the trade desk and ask them to place a combo order (give them your limit price, don't let them market order it) to dump it. You need a better broker.
So what are you saying ? You have 100 long Puts at 122 for next Fri. So you could sell them for $8 or so. What is your broker (who) not letting you do?
Honestly I’d still call the trade desk before trying to get creative with deep ITM calls
With a position that size + illiquid weeklies, execution probably matters more than saving a step
My gut says there’s probably a way to structure it as a combo/collar unwind so the margin requirement nets out, but this feels very broker-specific
Wouldn’t want to accidentally create a bigger margin issue trying to solve a margin issue
Thank you! Its an odd situation. There are helpful answers in here, but i dont really trust the broker to do a phone trade though.
I will most likely unwind in chunks.
I have 100 115 calls in a separate account to hedge out the stock price changes as i sell down the shares.
Yeah i got out of them for $8 and bought July 115Cs. I like Jan 120s but i would nibble here, BX has been bouncing between 110-125, id load up in the 110-115 range.
I like Dec 2028 125s, short term market sentiment is unpredictable but i think this should currently be a $240 stock, if we have a good IPO market over the next 12 months my 2028 target would be in the high 200s-300+ range.