Buying back challenged side of Iron Condor, and leaving non challenged side open

A

Adam66639

Recently sold my Vertical Call Spread side of my NFLX Iron Condor position. This was the tested side, waited until after earning and got lucky that the underlying came back just enough to by back the Vertical Call Spread for slightly less than I sold it to open.

Legging out like this did cost me ~$600 in buying power effect. After the other leg (put side still open) expires worthless in a couple of days will I see that money come back? I’m trying to make sure that I didn’t shoot myself in the foot by leaving the worthless side open to expire worthless. I understand or the short 3 days I don’t have access to that $600, but I hope I get it back at expiration.

Normally, I would have sold the Iron Condor as a whole, and it would have been $0 of buying power effect.
 
Since you didn't post position details, it's not clear what you're asking or what the circumstances are at this point but one habit I've gotten into is buying to close near worthless short options rather than trying to capture some pennies/nickels. Not only does it free up margin for new position(s) but short, near worthless positions sometimes have a pervasive way of becoming headaches.
 
Adam66639 said:
Normally, I would have sold the Iron Condor as a whole, and it would have been $0 of buying power effect.
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Are you saying you can sell an IC with zero BP effect? Because I doubt that. An IC isn't a completely hedged strategy so there is risk. Where there is risk, there is is BP effect too.
 
Pekelo said:
Are you saying you can sell an IC with zero BP effect? Because I doubt that. An IC isn't a completely hedged strategy so there is risk. Where there is risk, there is is BP effect too.
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To close an open IC position there is $0 buying power effect (taking off risk). To open the IC, of course there is buying power effect.
 
spindr0 said:
Since you didn't post position details, it's not clear what you're asking or what the circumstances are at this point but one habit I've gotten into is buying to close near worthless short options rather than trying to capture some pennies/nickels. Not only does it free up margin for new position(s) but short, near worthless positions sometimes have a pervasive way of becoming headaches.
More...

Sell to open:

+4 - 150/-4 - 155 NFLX Vertical Put Spread
+4 - 205/-4 - 200 NFLX Vertical Call Spread

IC open trade price: $1.40


Buy to close:

-4 - 205/+4 - 200 NFLX Vertical Call Spread
Trade Price: $1.25
* Took on an additional $600 in Buying Power effect


Left to expire:

+4 - 150/-4 - 155 NFLX Vertical Put Spread
Current mark: $0.00


The question is, should I have closed the IC as a whole (which would have cost me $0 in buying power effect), or am I okay leaving the Put side to expire worthless (costing me $600 in buying power up front, which I should get back when the put side expires worthless, but saving me $12 in fees to close worthless contracts)?
 
truetype said:
If you're so tight on trading capital you're worried about "buying power," yr doin it rong.
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Thanks, but I’m not worried. I am simply trying to get perspective on the trade, and understand the consequences (good or bad).
 
Don't buy back that open spread... that's way out. On the other hand... nobody ever lost money because they buy back something at 1 cent... So... why not? If it massively holds you back because of margin or whatever, buy something back. Put in the bid (GTC) in the 155 put for 0.01 and wait until it fills, maybe also offer the 150 put at 2 or 3 cents... you might get lucky and sell that too....

Do you pay fees to close under 5 cents? Rip-off... ;)
 
PennySnatch said:
I'm sorry if this is a dumb question but are you insinuating that you don't pay commissions to close positions under five cents?
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I think on Euronext you don't pay for that... can't remember. I used to not have to pay for those... that was with a Dutch broker I think. Not sure about Interactive Brokers (which I use now).

You shouldn't be charged IMO, because when you don't pay fees, you might be more inclined to buy-back those open shorts... therefore inciting risk decreasing behavior.

Look at OP... he's actively considering not buying back an option that he will only pay 1 cent for... because including fees it might be too much. Although the chance of it expiring worthless is pretty darn high, you shouldn't really have to reconsider buying back something for 1 cent IMO.

Buy-back, no fee... move on... trade more... Is a win-win situation for both trader and broker.
 
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