Q&A: The Share Price Is Falling, Why You Are Not Rolling Your Apple Put But Rather, Letting It Get Exercised?

I think this is a good question posted by one of my readers.

Firstly, rolling (close an existing contract and open a new contract subsequently) the AAPL PUT means I will lose the entire premium that I have collected last month. Not only that, I have to cough out extra money to buy the contract back.


My AAPL PUT contract earned me $1215 when I first sold the contract.

However, I will have to pay a premium of $2,980 to buy back the contract now as the share price of Apple has dropped more than $20 since I last sold the PUT contract.

This extra money can be compensated by the premium that I will collect from the new PUT contract that I will be selling after I close the current PUT contract. However, it also means that I may have zero or even negative returns for 2 months (the duration of 2 PUT contracts), with a capital of USD19k invested.

I think that in a free-falling market, selling OTM Covered CALL contracts is going to help me make more money than rolling PUTS. If the share price keeps falling, then the PUT contract will have to keep rolling and options sellers may face a long period with zero or negative returns.

However, if he turns from selling cash-secured PUT to covered CALL, he can keep earning more premium when the share price keeps falling. In a CALL contract, the seller will need to sell away his shares if the share price rises above the strike price, so if the share price keeps falling, then it drifts further from the strike price and the premium drops proportionally. The CALL option seller can then close the contract earlier when the premium has dropped significantly.

In terms of rolling options contracts, my strategy is to roll PUTS contracts only when the market is bullish and to roll CALL contracts when the market is bearish, and I have explained the rationale in these 2 linked articles:
Why I Choose To Roll My PUT Option Contract When Share Price Rises
How I Do Earn Even When The Stock Market Is Bearish?

Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading

The LEAPS Strategy has helped me make more than USD120,000 in 2021. Here’s all you need to know about this strategy that can help you increase your wealth exponentially:
The Ultimate LEAPS Options Thread

Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts behind executing these trades:

Excited to start your trading journey or perhaps try out with a paper trading account to build your confidence in trading? Check out this step-by-step to help you get started:
How To Buy Options on Interactive Brokers (Step-By-Step)

If the bear market in 2022 is making feel depressed as your stocks come tumbling down, read this article to find out how you can use options trading to help you claw back some of your losses as you await market recovery:
How I Do Earn Even When The Stock Market Is Bearish?

I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day

I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021

This blog is as authentic and as transparent as I can share, I do not just show the wins and hide the loss. I have made some very bad decisions in the first 8 years of investing and paid a huge price for them. Here is the loss I have accumulated during these years. I hope you learn some lessons from my mistakes.
I Cut $135,715 Worth Of Losses In The Last 1.5 Months

Follow me on your favorite social media platforms, FacebookLinkedIn or Twitter, to get notified of my latest blog posts. Or join our investing/ trading community at Telegram to exchange ideas or ask questions relating to investing/ trading.


2 thoughts on “Q&A: The Share Price Is Falling, Why You Are Not Rolling Your Apple Put But Rather, Letting It Get Exercised?

  1. Both are actually right answers. There are many options when position get tested. Yours is to use short call to chase down the stock. And when call gets challenged, to roll up so as to avoid selling below costs. Both reduces delta which is the objective when price tank. However long stock is more capital inefficient but since yours is cash secured, there is no difference. Only for Margin account, will rolling be preferred.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s