Bull Put Spread - your feedback?

E

erol

Hello,

New to the forum, and fairly new to options.

Wanted to share my 2nd trade

It was "successful", but my short put spreads were (I believe) undervalued.

So I sold 5 MOS 35 puts and bought 5 MOS 30 puts for a net credit of 0.65 on Feb 23, put my order in before the market opened.

Of course, the market tanked that day, allowing my order to fill. When I got home my heart sank.

It was tempting to close at that point, but I roughed it out.

I closed the position this past Monday 24th, moving my credit of 0.65 to 0.50 (excluding commissions).

Next time, I'm definitely not going to place the trade outside market hours.

Had I held on to MOS, I could have gotten the full 0.65.

Was it wise to close? This stock has slowed down in the last little bit.

Anything else you guys think I didn't do correctly that I should consider next time?

thanks so much for your feedback
 
Quote from erol:


I sold 5 MOS 35 puts and bought 5 MOS 30 puts for a net credit of 0.65 on Feb 23, put my order in before the market opened.

It was tempting to close at that point, but I roughed it out.

Next time, I'm definitely not going to place the trade outside market hours.

Had I held on to MOS, I could have gotten the full 0.65.

Was it wise to close? This stock has slowed down in the last little bit.

Anything else you guys think I didn't do correctly that I should consider next time?

thanks so much for your feedback
More...

1) It was very wise to close. The trade made you uncomfortable, and that's the bottom line.

2) Trading during market hours - especially to open a new position is a good idea.

3) Do not think about the results. You decided to close for good reasons. What happens after that should not matter to you. You cannot expect every decision to make money. You must consider risk and make good decisions.

4) 'Roughing it out' is very poor technique. That's adopting the strategy of 'hope' - and hope is not a strategy.

Mark
http://blog.mdwoptions.com/options_for_rookies/
 
Quote from dagnyt:

1) It was very wise to close. The trade made you uncomfortable, and that's the bottom line.

2) Trading during market hours - especially to open a new position is a good idea.

3) Do not think about the results. You decided to close for good reasons. What happens after that should not matter to you. You cannot expect every decision to make money. You must consider risk and make good decisions.

4) 'Roughing it out' is very poor technique. That's adopting the strategy of 'hope' - and hope is not a strategy.

Mark
http://blog.mdwoptions.com/options_for_rookies/
More...

Thanks Mark for your advice, truly appreciated.
 
Totally agree with Mark here - do what you need to do and limit any losses - and after that forget about what could have happened - it could have become a lot worse as well.
 
In addition to trading while the market was open, I would have entered a stop order to sell if MOS declined below the previous swing low of feb 17th. knowing what we know now about where price went, we can say that that would have been a bad move, but to me - that's where I would have decided that the trade wasnt going to work. And I would have gotten out.

Only other thing I would add is to try to get one or more areas of support between the currnet price and your short strike to make it less likely that it gets hit.

My 2 cents.
 
Quote from schreibdave:

In addition to trading while the market was open, I would have entered a stop order to sell if MOS declined below the previous swing low of feb 17th...
More...

In practice, stop orders with options, and especially option spreads is a desperation move.

The markets are wide and the broker is going to submit a market order for you. That means paying the offer and selling the bid.

That's a disaster with wide markets. It's often better to close the spread when you have time to enter a spread order.

Best compromise is to get an email alert at work when theoretical stop point is hit, and then go to computer (or phone) and enter LIMIT order to exit.

Mark
 
Mark's right in terms of getting burned by the bid/ask spread on stop orders. If you can be by the computer/phone during market hours it might be better to enter a limit order. But if you cant be by the phone/computer then not having a stop order entered runs the risk of your not getting out when you wanted to.
 
wow this is great advice, really appreciate it.

E-mail alert, never thought of that.

Luckily I have access to a computer, but with my broker (Canadian) I have to phone in my order with spreads. (I know)

I'm looking at TOS Canada right now...
 
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