Debit Spread - Risk Management (STOP)

T

TraderSU

Friends,

I did not put any stop in my debit-spread combo and my peak profit of about 100% is now in RED.

Can someone please suggest a way to do risk-management in debit spreads?

Perhaps STOP loss is the solution but I'm confused about the implementation part. My current broker (OH) let me add stop (or trailing-stop) only on a single leg order. I only see limit/market for multiple leg orders.

There is a possibility of adding an advance order triggered by stock price but guess that spread-sell order won't be a LIMIT order.

Any feedback will be highly appreciated.

Thanks,
 
Well, you get what you pay for with OH,

if you cant do a trailing stop on spreads, do a trailing stop on the part of the spread that is most sensative to market changes. Also, if you make 100% on a spread, trade out of it and call it a day.

Mark 911
www.option911.com
 
Quote from option911:


if you cant do a trailing stop on spreads, do a trailing stop on the part of the spread that is most sensative to market changes. Also, if you make 100% on a spread, trade out of it and call it a day.

Mark 911
www.option911.com
More...

Don't you think that selling out the long leg and leaving short leg open is lot riskier?

My debit spread is like following

FAZ MAY 10 CALL - LONG
FAZ MAY 20 CALL - SHORT

Max Risk / Max Reward: 1.40 / 8.60
 
Quote from sudhaker:

My debit spread is like following

FAZ MAY 10 CALL - LONG - 2.20 Debit
FAZ MAY 20 CALL - SHORT - 0.80 Credit

I also wrote following PUT which is hedging some of my time decay on above mentioned spread.

FAZ MAY 7.5 PUT - SHORT - 1.10 Credit

FYI. This is my first complex options order ever.
More...

Current value of each legs are as followings

FAZ MAY 10 CALL - LONG - 1.12
FAZ MAY 20 CALL - SHORT - 0.18

FAZ MAY 7.5 PUT - SHORT - 0.65

What should I do with these legs for better risk-management? I've attached the risk graph for your quick review.

My overall position is near break-even (slight loss .03). Does it look like a controlled gamble on "stress test" result (may-4)?

Do I need to act on this combo (repair) or leave it until the expiry and see the final outcome?

Thanks in advance for your valuable inputs.

Thanks,
 

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