Today the market obliged in testing my strategy by gapping up across the board. Mercifully this was on a Monday before the options had given up all their time premium, but I did learn what I set out to do, and for a bit less than I was expecting (in fact the commissions are only a few pennies off from the losses this week).
Percentages were:
BA 34% loss
BABA 47% loss
NFLX 24% loss
V 18% loss
SPX 122% gain
MSFT 63% gain (This would have been better if I hadn't been hurrying to work)
All told, I'm down less than 5% this week--had I been quicker about closing the MSFT position with BABA and BA closings, this actually would have been a winner.
This is the .5% - 1% gap that presents the subjective risk to my positions that I was concerned about, and that I so regularly complain about here (and yet today I'm cheering its arrival!). The larger gaps take time premium out of the equation and leave me closing hedges, and hoping on the core positions for a 30% loss on the week. These are the moves that require subjective closing of positions to manage risk. So I learned a very important lesson pertaining to this strategy this week, namely, how I personally will handle closing the positions.
And since this happened so fast, I can effectively get another "week" of trading in...this time in line with my sentiment.
SPX put spread open 2430-2440 for 1.90 debit.