What is adjusting a short option position. When you are losing in the option trade you are losing period. It's like averaging down on an investment in the stock market right? Sharpe of that can't be pretty.
Best option strategies to learn ....
- Thread starter tradingpoker
- Start date
What is adjusting a short option position. When you are losing in the option trade you are losing period. It's like averaging down on an investment in the stock market right? Sharpe of that can't be pretty.
Example: This example is a losing position and maybe you can reduce the loss.
For $2 wide 30 delta vertical put credit spread collecting $0.50. If the market moves down and breaches the short put you can sell a 30 delta $2 call credit spread and may collect $0.35. You reduced risk from $150 to $115. You created an Iron Condor, with no change in margin and reduce overall risk
You could in time adjust the call credit spread to be at the same strike as the put creating a iron butterfly and may collect another $0.20. reducing the loss to $95
More example: Now market still moving against or position remains ITM, you could close the position at a loss of $95 from the original $150, then open a new position next month for a credit of $115 and collect another $0.20 ($115 - $95 = $0.20) reducing the over all loss to $0.75.
The loss was cut in half. Extrinsic value helps
For $2 wide 30 delta vertical put credit spread collecting $0.50. If the market moves down and breaches the short put you can sell a 30 delta $2 call credit spread and may collect $0.35. You reduced risk from $150 to $115. You created an Iron Condor, with no change in margin and reduce overall risk
You could in time adjust the call credit spread to be at the same strike as the put creating a iron butterfly and may collect another $0.20. reducing the loss to $95
More example: Now market still moving against or position remains ITM, you could close the position at a loss of $95 from the original $150, then open a new position next month for a credit of $115 and collect another $0.20 ($115 - $95 = $0.20) reducing the over all loss to $0.75.
The loss was cut in half. Extrinsic value helps
Last edited:
When you put on the call credit spread you are making a call that the market is probably going to move further down. Otherwise the trade itself has 0 expected value like the first, ignoring comms & spreads. If market always mean reverts when your first trade gets in trouble, by doing the second trade you are killing your first trade. No matter how many trades you put on, if each has 0 expectancy, they don't save nothing.
That deserves an award for nesting/stacking redundancies.
As for everything else, may God have mercy on your soul.
To the OP... Never saw good poker players -options traders, but knew quite a few very good option trader - bridge players.
Robert Morse
Sponsor
Good morning tradingpoker--My best suggestion is to learn as much as possible about options, how they trade, how and why they change in price etc. Then, never start with "I like a spread." Study the stock or index. Develop an opinion based on data, charting, fundamental etc. After you have a process in place to have the expectation that a stock/index will move up/down or be in a range over a period of time, you can then look at current option prices to execute a combination of stock and options that meet your expectations. Without that process, it is difficult overall to make money trading options. You make decisions in poker that put the odds in your favor. You need to do the same with options. Randomly picking an option spread will not get you there. And yes, I was a "seasoned pro." I was an option MM for 25 years and have been in this business since 1981.
Yes, At this point I feel the trade is a loser and I'm minimizing the loss. But assuming deltas can be used as an estimate of percent ITM, then the original position had a 70% chance of success. If IV is overstated then the chance the position stays OTM maybe as high as 80%.
So overtime and over a large number of occurrences the delta estimate should play out.
That's the theory
Last edited:
Couldn't figure out how to use fewer words
I'll give you credit. You are a good sport.
Try... sold the 30 delta (strike)-(strike) put spd for $.50
selling the put spd, and providing the strikes, implies credit, vertical, and collecting.
This I like and it what I have been trying to do.
It's hard for me as I got so good at poker and now it feels like I am going back to square one again. Not easy to do when you have a family and i'm just over 40 years old. But it is what it is and so be it.
I see on the 2nd link there is coaching for $350+ per hour, does anyone think this can ever be worth it?
Of course if we could have one hour and solve this then we all would, but in this case could it be 10+ hours and we don't make much progress?