The problem with the higher stock price is that I cannot cover as many PUT contracts.

I sold 7 $18.50 PUT contracts that expire 9/12/25. Premium received: $350.00.

It is important to understand the difference between realized and unrealized capital gain/loss. The gain or loss is only realized when the underlying asset is sold. In the case of a capital loss, most or all can be washed out if asset is repurchased at a price lower than the original cost basis.