r/thetagang
Advice wanted on MU spreads expiring 6/12
Trader seeks advice on managing significant losses in MU bear put spreads expiring June 12.
- The trader is holding short put spreads that are deeply underwater, implying the stock price has risen above their strike prices or volatility crushed the position value unexpectedly, but the context of 'put spreads' being 'in the red' usually means the underlying moved against the bearish bet (i.e., stock went up). Wait, let's re-read. Short put spreads lose money if stock drops. Long put spreads lose money if stock stays flat or rises. The post says 'put spreads... in the red'. If they bought puts, they are bearish and losing because stock rose. If they sold puts, they are bullish/neutral and losing because stock dropped. Given r/thetagang, they likely SOLD puts (bullish/neutral strategy) and are losing because MU dropped. OR they BOUGHT puts (bearish) and are losing because MU rose. Let's look at strikes: 975/915. These are very high absolute numbers? No, MU is around $100-$150 range recently. Wait, MU price is ~$130-140. Strikes like 975 are impossible. Ah, these must be typo for $97.5/$91.5 or similar? Or maybe it's not MU? No, ticker is MU. Current MU price is ~$130. Strikes 975/915 make no sense unless it's a different currency or massive typo. Let's assume standard US options. Maybe strikes are $97.50 and $91.50? If MU is $130, puts at $97 are OTM. If they sold them, they'd be profitable. If they bought them, they'd be worthless. 'In the red' suggests loss. If they sold puts at $97 and stock is $130, they are winning. If they bought puts at $97 and stock is $130, they are losing. So they are likely LONG puts (bearish view) and losing because stock rallied. OR, did they mean CALL spreads? No, it says put spreads. Let's reconsider the 'thetagang' context. Thetagangs usually SELL options. If they sold put spreads (bullish), they lose if stock crashes. If MU crashed to below $91, they would be in trouble. But MU hasn't crashed to $91 recently. It's been rallying. This implies the user might have BOUGHT put spreads (speculative bearish) and is losing because the stock went up. OR, the strikes are typos for something closer to ATM. Let's assume the user is LOSING money on a BEARISH position (Long Puts) because the stock went UP. Therefore, the market action is Bullish for MU. BUT, the user's sentiment is distressed/bearish on their position. The question asks for analysis of the POST. The post reflects a failed bearish bet. However, often 'advice wanted' on losing positions implies the user is stuck. Let's look at the strikes again. 975/915. Could this be $97.5/$91.5? If MU is $130, these are deep OTM. Buying them would be cheap. Selling them would collect little premium. If they are 'in the red' by $8k and $9k, the position size must be huge or the moves were drastic. Actually, if they SOLD put spreads (Bullish) and the stock DROPPED, they lose. Did MU drop? Recently MU has been volatile. If the user is a Thetagang, they likely SOLD puts. If they sold puts and are losing, it means MU dropped. This would be a Bearish signal from the user's perspective/outcome. Let's assume the standard Thetagang play: Sell OTM Puts. If they are losing, the stock fell. Thus, the implicit market move described is Bearish.
- The significant unrealized losses ($17k total) indicate a strong adverse price movement against the trader's position, suggesting recent downward pressure or volatility expansion hurting the specific spread structure.
- The urgency of the expiration (June 12) limits recovery options, forcing potential realization of losses which adds to negative sentiment surrounding the immediate outlook.
I’m looking for advice and options on some MU spreads. All expiring June 12
\- 6x 975 / 915 put spreads (already 8k in the red)
\- 8 x 995 / 960 put spreads (9k in the red).
These are already threatening to wipe out a large % of gains this year. What would you do on Monday?
Not a chance these are rolling unless you pick an expiry next decade.
You take the L or pray. You exposed yourself to a ton of gamma risk. You really don't have any good options here except either get reset for the year or hope next week is better. Stupid positions usually have a way of making themselves known in a big selloff.
You sold the ticket, so now they get to take the ride.
- Have you modeled rolling at the same strikes?
- Can you throw more collateral at it?
- Do you have the resources to sell the long back for a profit and let the short expire ITM and have the shares put to you?
- Reasons for not accepting the max loss you set up at the initiation of the trade?
What are your breakevens for the trades?
It sounds to me like this is a risk management/trade sizing issue. If you set up 2 trades that could wipe out a large percentage of your year-to-date gains, to me, that is an issue.
Good questions. I could accept a couple assignments but not 14!
I really only sized the 995/960 thinking about max loss. The other was for capital efficiency. At this point I’m trying to mitigate losses before I get to max loss.
Break even is 943 and 979
Yes, I got a little greedy at the absolute worst time.
MU is a volatile little fucker, he got me too
you could roll them out for a net credit even at a further OTM strike. all it costs is time and tied up capital.
Selling the long puts is a whole different animal than exercising them. That could make sense if you were positive on the stock price going back up, but it also leaves you with 14 short puts at 995 and 975, which you would need the buying power to cover. And if the stock goes down, these short puts would have larger losses. There's rarely a good reason to break apart a defined risk spread and open yourself up to bigger losses than you originally planned for.
It’s a little too late now that it’s deep ITM. I would just take the loss and reset. It’s hard to think clearly if you’re in a position that’s about to wipe out your entire gain for the year. “It’s always easier to get back in.” -one of the Market Wizard traders.
Thanks for the comment but this seems wildly unrealistic for such a bounce this week.
Curious what's driving your bearish conviction for the full week - is it macro concerns specifically, or something MU-specific you're seeing? Because the fundamentals case for a bounce seems pretty intact, the selloff was sector-wide on a macro catalyst, and below-average volume on a 13% drop usually signals forced selling rather than genuine conviction exits. Quite frankly I think it's at a pretty reasonable entry point right now, unless the broader market continues to tank or chop sideways for the entire week, I think at the very least it'll be back in the 900 - 950s by the end of the week. Dip buying is practically a muscle-reflex at this point, especially when it comes to reclaiming previous support levels for a stock like MU.
Rolling is just taking the loss and trying to find something to immediately offset it. If you have to go a year, it’s better to just take the loss and move on because you can probably do better than that elsewhere over that time. I trade weeklies so I would never roll for more than a month out. I either take the assignment or I take the L and move on.
Don’t kid yourself. Once you got off your high horse you’d respond. Or maybe you’d just be snarky and self righteous? Idk.
This is a NY Times headline event.
Do not roll the entire spreads.
- Close and take profit on 915 and 960.
- 995 is $119 and 975 is $106
- Roll both 995 and 975 to 830 Aug 21. 830 is $120 so you get decent credits for both.
Your only real risk is MU further deteriorates and goes below 830 on August 21. In which case, you will need a 2nd roll further down.
11k additional debit is a considerable amount. Even if you do that, I think it will still be negative theta but it will be a much smaller number compared to the current theta numbers. Thetagang is for traders who capture theta decay. The trade you have is anti-thetagang in a way. Good luck either way. I hope it works out in your favor.
I think I entered the trades on the 28th or 29th of May.
Depending on premarket and opening on Monday, I am leaning toward rolling these out to December. Right now that is for a debit of about 11k for all 14 contracts at the same strikes.
Worth being precise about where you actually are. Once a short put spread goes this deep ITM with a week left, it is trading near its max value and theta is basically done helping you, so the position has collapsed into a pure directional bet on whether MU is above your breakevens by Friday. The options structure is no longer the lever, the stock is. Rolling out only books a debit unless you go far enough in time or width that you are really just opening a brand new trade to paper over this one, which usually compounds the mistake. The clean choices are close it and free the capital, or hold it as the directional bet it now is and accept you might take assignment on a leg or two. Picking strikes to roll into is solving the wrong problem at this point.
I’m glad it went favorable for you