Alice in Optionsland

[qlai]

So I screwed up today. I don't normally trade anything related to TSLA, but today I couldn't help myself and decided to buy a put when TSLA hesitated around 1040s. Since I normally sell puts in that account, I accidently sold the $990 put instead of buying it. As Murphy's law would have it, it moved immediately against me. So I decide to "fix" it by creating my first ever calendar spread Now watch me sweat trying to get out of this with as little damage as possible (or with a profit?).

Net debit: ~$37.50

 

[thecoder]

It looks like this:
https://optioncreator.com/st8lzs5

I think you safely could immediately close the position to "fix" the situation.
You still can and should simply close both positions, IMO.

 

[newwurldmn]

So I screwed up today. I don't normally trade anything related to TSLA, but today I couldn't help myself and decided to buy a put when TSLA hesitated around 1040s. Since I normally sell puts in that account, I accidently sold the $990 put instead of buying it. As Murphy's law would have it, it moved immediately against me. So I decide to "fix" it by creating my first ever calendar spread Now watch me sweat trying to get out of this with as little damage as possible (or with a profit?).

View attachment 270003

Net debit: ~$37.50

why didn't you close the mistake instead?

 

[qlai]

why didn't you close the mistake instead?

It started moving quickly against me and I thought it might have been a blow off top, so I just thought of “hedging”
I am thinking that I have enough time on the long leg to close the short leg and then to re-short again. In best case scenario, I would like to have a free lottery ticket ticket left.

But honestly speaking, I have a bad habit of working out of bad trades. I think I get some sort of satisfaction out of that, but definitely something I would like to change.

 

[newwurldmn]

It started moving quickly against me and I thought it might have been a blow off top, so I just thought of “hedging”
I am thinking that I have enough time on the long leg to close the short leg and then to re-short again. In best case scenario, I would like to have a free lottery ticket ticket left.

But honestly speaking, I have a bad habit of working out of bad trades. I think I get some sort of satisfaction out of that, but definitely something I would like to change.

that’s an easy trap to fall into.

but it’s not a free lottery ticket. Your risk is reduced but your trade is different than your initial desire and your mistake.

 

[qlai]

You still can and should simply close both positions, IMO.

Thanks for posting the graph. It looks terrible but I am hoping I can trade in and out of the short leg multiple times. I suspect there will be a lot of discussion whether TSLA deserves this valuation or not, providing some opportunities. Let’s see.

 

[qlai]

it’s not a free lottery ticket.

It’s not, but I am going to try making it so by trading the short leg(poor’s man covered put?). The idea is to pay fully for the long leg and then be left with the long put by itself (hence the lottery ticket). Easy to imagine, hard to do.

 

[newwurldmn]

It’s not, but I am going to try making it so by trading the short leg(poor’s man covered put?). The idea is to pay fully for the long leg and then be left with the long put by itself (hence the lottery ticket). Easy to imagine, hard to do.

you went from a view that the stock will drop (wanting to buy a put) to the stock will be rangebound and the vol will stay firm in the back.

 

[qlai]

you went from a view that the stock will drop (wanting to buy a put) to the stock will be rangebound and the vol will stay firm in the back.

I see what you are saying, but it kind of went from a quick trade to a 90 day adventure (mental burn?) I am not a volatility trader, so I will just use the option as a proxy for directionally trading the stock on the short side. I may switch the short leg to weeklies.

 

[newwurldmn]

I see what you are saying, but it kind of went from a quick trade to a 90 day adventure (mental burn?) I am not a volatility trader, so I will just use the option as a proxy for directionally trading the stock on the short side. I may switch the short leg to weeklies.

you went from a trade where your primary desired risk was direction to a trade where your primary risk is forward volatility.