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Looks like one of my option trades will lose money because RCII is not playing the game. There are only a few days left in my RCII Calendar put spread position. It is possible RCII will go back up in the next few days of course. In my experience, the more you desire that to happen, the less likely it will happen. It is like the Market Makers are watching me and do everything to avoid giving me what I want!

How much will I lose? By my calculations, the net cost of each share is $1.66 inclusive of all fees. Therefore the total loss will be about $830 for 5 contracts.

That is it, I won’t use RCII any more and I will try to get out the position for at least even, if possible.

For those interested in investigating covered call trading, I am using this live position to give my thoughts on how I will handle this likely losing trade. Mind you I don’t guarantee I am doing the correct thing just my thing.

My first thought was to avoid having to buy the shares at $20. To this end I managed to roll my November $20 put to the December $20 put for a credit of 15 cents minus costs. This got rid of the imminent danger of the November put assignment. The second benefits: the maximum total loss of the trade was reduced from 1.66 to $1.52 per share and I have another month for RCII to come back to life, if that is possible. Will see!

My new RCII position:
Long 5 contracts of RCII June $20 put.
Short 5 contracts of RCII December $20 put.

What alternative action I could have taken?
· Close out the position altogether.
Closing out the position will receive approximately $1.40.
That would mean a certain loss of about $0.30 per share. Keeping the position open is a better choice.

· Let the November put exercised at expiry (near certainty).
Buying RCII share for $20, it only needs to trend sideway or eventually return to the current level or better to offer a profitable opportunity. It would have been an acceptable choice of action.

· Roll the November $20 put to December $17.5 put (1 strike further out of money).
It will increase the cost from 1.66 to about $2.66 per share. What will this mean? It means RCII need to drop a lot more so profit from the June put option would turn the trade into overall profit.
If RCII trends sideways or up, the extra cost of the $17.5 put option will become a burden. It is not an acceptable choice.

· Roll the November $20 put to December $22.5 put (1 strike further in the money).
It is estimated that the December 22.5 put should bring in about $2.20 which would mean the position will have a total credit of about $0.60 per share. Unfortunately, it will also mean near certainty that the December expiry will mean put option assignment at $22.5 and make the position over sensitive to downside movement. Therefore it is not an acceptable choice of action.

From the above analysis, my choice of rollover to December $20 put is probably the best choice. Let November put to expire should also be acceptable. We have to wait and see!