Got wrecked selling puts on meme stocks. Guess I'll be selling covered calls for years

First time getting a profit from IBKR's rebates.



I initially sold naked puts on MVST and rolled it few weeks ago. I forgotten to close my Buy to Close order for 9 contracts at $0.05 and it was filled at market open (i.e. ended up longing the option).

Realising my mistake (it will expire OTM since it's 0 DTE), I quickly sold it back at $0.05. Initially I thought I made a loss because of commissions as I bought and sold at the same price. Turns out IBKR gave me rebates for providing liquidity and I made a profit

How much you sold your call for?
Looks like your call strike price is below your average price which means your will be making a loss if the stock gets called away.

Either roll or buy back the puts at a loss.

You should not exercise the calls even if you profit because you will be losing time value and it is costly to exercise. Usually you will sell to close.

At expiry, your BEP will be $116.16 without short call. If you sold the Aug call, it will be $110.41 (26.16+90.00-5.75) and your max loss will be $2,041 (26.16-5.75) if the share price is below $90.

Note that your longer DTE call that you bought is subject to greater IV crush/IV gain since it has longer DTE than the shorter call. This means you could incur loss or gain before even reaching expiry.

You can always roll before expiry. Of course, holding till the 19 Aug call expires gives you the most theta decay.

After it expires, whether you want to sell another call depends on the share price. If the stock price is below $90 on 20 August, you won't want to sell calls below $90 strike price. Meanwhile, selling calls above $90 strike price will give you peanuts. Like for real peanuts. Maybe like $200 max for 3 months DTE depending on IV.

Your short call should not be automatically exercised near expiry unless it is deep ITM. Anyhow, it is better to roll or close it rather than allow your broker to do funny things and also for a peace of mind.

It is likely that you will be short selling AMD shares i.e. cough out the shares if your short call gets exercised. This means you may incur short selling interest fees.

Your loss from the short call should be offset with the long call. The risk is when the stock spikes above $120 on 19 August, you buy to close, then the stock crashes below $90 by December.

This is why if your shorter DTE call is deep ITM and about to be exercised, just close it with the long call.

Can't tell for sure but likely a net gain. Sometimes you will still be in a loss although your short call did not get exercised because of IV crush on your long call.

This is why people don't usually buy calls when IV is high.

No.

Also, keep in mind that if AMD is below $90 in December, you might lose around $2k if things go South. You might be better off selling naked/covered put or bull put spreads at around $70 or $80 strike price to be on the safe side.