Averaging Down A No-No In Options If So What About Rolling?

[ironchef]

Everyone on ET drilled into me to never average down. OK so on my regular stock trades I seldom do that anymore.

In options, it just occurred to me folks told me to roll-out, roll-up, roll-down, roll-up-out, roll-down-out.... Essentially the trade has already gone bad, so they say to do damage control we want to "repair" the trade. Aren't we then doubled down and throwing good money after bad in a bad situation?

Most writers of options practice roll-out-up-down... routinely. Good idea?

Not long ago, I had a pair of GILD butterflies that went bad. One advice was to "move" the challenged legs up, effectively a roll-up. Any coaching will be greatly appreciated.

 

[IronFist]

Give me details about this, too.

 

[radex78]

I think the main idea in averaging down is the price will move reversal, not always move in one direction, but the problem is when the time price will reversal, it hurt when appearing reversal signal but still continue the main trend.

 

[ET180]

When you average down, you're adding risk. If you can roll a defined-risk bear call spread out in time at the same price for a net credit, then you're not increasing your risk and reducing your max potential loss. Undefined risk is another story.

 

[qlai]

I know both Tasty trades and Options Alpha teach to only roll the unchallenged leg, never the challenged one. Makes sense to me.

 

[iprph90]

Everyone on ET drilled into me to never average down. OK so on my regular stock trades I seldom do that anymore.

In options, it just occurred to me folks told me to roll-out, roll-up, roll-down, roll-up-out, roll-down-out.... Essentially the trade has already gone bad, so they say to do damage control we want to "repair" the trade. Aren't we then doubled down and throwing good money after bad in a bad situation?

Most writers of options practice roll-out-up-down... routinely. Good idea?

Not long ago, I had a pair of GILD butterflies that went bad. One advice was to "move" the challenged legs up, effectively a roll-up. Any coaching will be greatly appreciated.

You wrote a GILD butterfly? Risk- reward not favorable for writing vanilla flies.

 

[beginner66]

stocks yes, futures not so much re averaging down

 

[winstonwee]

Everyone on ET drilled into me to never average down. OK so on my regular stock trades I seldom do that anymore.

In options, it just occurred to me folks told me to roll-out, roll-up, roll-down, roll-up-out, roll-down-out.... Essentially the trade has already gone bad, so they say to do damage control we want to "repair" the trade. Aren't we then doubled down and throwing good money after bad in a bad situation?

Most writers of options practice roll-out-up-down... routinely. Good idea?

Not long ago, I had a pair of GILD butterflies that went bad. One advice was to "move" the challenged legs up, effectively a roll-up. Any coaching will be greatly appreciated.

when you roll down you are actually reducing the risk. It is not a bad idea.
When you sell a put and the market go down
you need to roll down your put
This does not in anyway mean double down or adding risk to your position
you are actually reducing the risk (lowering the strike) but you have to sell a further expiry so you trade time to reduce your risk
but if the market drop too much you might not be able to roll down than other repair strategy has to come in