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Disaster Recovery

Down on an assignment? Map the recovery plan: how many CC cycles at what premium to recoup the paper loss.

Position Setup

Fill in the position setup above to see the recovery plan.

Understanding the Disaster Recovery Calculator

This calculator answers the most important question after a bad trade: what return do I now need to get back to even, and which recovery path produces it fastest? The math is not symmetric — losses always require disproportionately larger gains to recover, and ignoring that asymmetry is how small drawdowns become permanent ones.

The Recovery Math

The core formula:

Required gain to recover = Loss % / (1 - Loss %)

A 50% loss requires a 100% gain to return to flat. A 75% loss requires tripling the remaining capital. This is why position sizing and the whitelist filter exist upstream.

The Four Recovery Paths

  1. Roll down and out. Move the short put to a lower strike and longer expiration, collecting net credit. Best when the drawdown is modest (under 15%).
  2. Deep ITM covered call. After assignment, sell an ITM CC to generate immediate extrinsic income while giving up upside.
  3. Convert to PMCC. Sell assigned shares, buy a deep ITM LEAPS call, sell short-dated calls against it. Restores capital efficiency at the cost of leverage.
  4. Accept the loss and redeploy. Close the position, take the realized loss, and redeploy fresh capital into a whitelist-compliant CSP. Often the fastest mathematical path.

Worked Example

Assume you were assigned AMZN at $200 and shares now trade at $160. Drawdown: 20%. Required gain to recover: 25%.

Path A — Deep ITM CC. Sell the 30-DTE $150 call for $13.00. Intrinsic = $10, extrinsic = $3.00. Monthly extrinsic income = $3/share.

Path D — Take the loss. Close at $160, redeploy $16,000 into a fresh whitelist CSP yielding ~1.0% weekly. Recovering the $4,000 takes roughly 25 weeks. Often the fastest mathematical path, despite feeling the worst.

Bottom Line

Losses are asymmetric. The four recovery paths each have a specific math signature. Compute them honestly, pick the highest expected return per unit of capital, and never let ego override the spreadsheet.

Educational only. Not investment, tax, or legal advice.