3/16 $20P @ $2.85
23 Days till expiration
IV: 245.42% (vs 49.92)
Downside of this adjustment: Increase my overall margin requirements by about 60% and increase risk exposure should stock fall to $0 by same %.
Benefit of this adjustment: Instead of requiring a cost I receive additional credit, reduces break even (or stock purchase price) to $15.55 which would require ~40% drop from current price.
.50 credit for trade is below the midpoint price, however at accepting straight up bid/ask would require a 1.50 debit. That is a significant difference from .50. We'll see if it gets executed.
Ended up rolling only the $25P to $17.50P of same expiration (1 to 4 ratio) for .80 credit.
BTC 3/16 $25P @ $5.20 (received $5.49 premium, so net .29)
STO 3/16 $17.50P @ $1.50 x 4 = $6.00
$.80 credit to roll from $25 to $17.50
Total credit $6.29
BE (or purchase price if executed) went from $19.51 to $15.93
Max loss (if stock goes to $0) went from $1951 to $6371. However the odds of actually achieving any loss has been substantially reduce.
1st - the 3/16 $20 puts were exercised today. My net purchase price is $17.22 after commissions. With DERM at 9.07 my shares has decreased 47%. Painful.
2nd - I've rolled the 3/16 $17.50 to 6/15 $17.50 for a small credit (basically no cost). That will give me more time and take advantage of TV decrease and hopefully DERM appreciation.
My opinion of DERM price...based on whats in the pipeline and evaluation, I believe the current price is at least stable & has a chance to increase. The next key date that I am aware of is 6/30/18, which is the PDUFA for another product in the pipeline. That was one of the reasons for choosing the 6/15 expiration. If that product goes as the company expects, then I would expect price a DERM price above $20 and potentially even higher. THUS, as long as speculations is favorable, there could be substantial interest at this price and push the price higher over the next couple months.
I regret not making some kind of adjustment to the $20p before they were exercised. With smaller price drops, selling calls is typically the obvious course of action with a favorable outcome. It's not favorable at this price, however. I don't have a clear course of action and am staying put until I do.
The 6/15 $17.50 puts, I mentioned some of the strategy above. I am considering other possibilities as well. I would welcome the price to move higher allowing me to exit with minimal expense. Since I sold them at a high premium, there still is a strong likelihood I'll exit with a good profit. BUT I would like to take the risk off the books.
IF ANYONE HAS EXPERIENCE MAKING ADJUSTMENTS OR MANAGING A TRADE IN THIS SITUATION, I WOULD GREATLY APPRECIATE SUGGESTIONS. PLEASE SEND ME A MESSAGE. Let me know if I am missing anything. I am mostly interested in advice from those who have actually managed similar situations.
Implemented a little out of the box trade correction. Sold a June $8/$6 put spread and opened a June $11/$14 call ratio spread for .45 credit. IF DERM moves to $14, I will be able to close 100 shares a little above my purchase price. It also opens me up to a potential $1.55 lost if price moves to $6 or below.