How to Salvage a Ruined Position?

M

monkeyjoe

All,

I put on a short box spread on UNXL for 0.45 credit above the difference in strikes, but now the stock shot up near my upper strike and I'm down almost 2.50 per share.

Super noob mistake, I know - I put the position on way too big and now the temporary loss has eaten up all of my buying power. Any suggestions on how to stop this temporary loss from turning permanent? ...other than just waiting it out of course. I fear my short low strike calls are gonna get exercised and I won't have the margin to hold the position.

mj
 
Quote from monkeyjoe:

All,

I put on a short box spread on UNXL for 0.45 credit above the difference in strikes, but now the stock shot up near my upper strike and I'm down almost 2.50 per share.

Super noob mistake, I know - I put the position on way too big and now the temporary loss has eaten up all of my buying power. Any suggestions on how to stop this temporary loss from turning permanent? ...other than just waiting it out of course. I fear my short low strike calls are gonna get exercised and I won't have the margin to hold the position.

mj
More...

What is your position? How can you lose 2.5 on a box?

You should be playing for pennies - maybe a little more given the borrow issues with UNXL.
 
Quote from monkeyjoe:

All,

I put on a short box spread on UNXL for 0.45 credit above the difference in strikes, but now the stock shot up near my upper strike and I'm down almost 2.50 per share.

Super noob mistake, I know - I put the position on way too big and now the temporary loss has eaten up all of my buying power. Any suggestions on how to stop this temporary loss from turning permanent? ...other than just waiting it out of course. I fear my short low strike calls are gonna get exercised and I won't have the margin to hold the position.

mj
More...


Not enough detail. How wide did you make the spreads i.e.. the strike prices on the short and long call side?
 
The way to 'salvage' any bad position is always the same. Ask yourself "If I was flat, would I still strongly want to put on this position, given the hostile market action?". If the answer is not "yes definitely!" then you should exit the whole position immediately.

Attempts to deny the necessity of getting flat e.g. putting on a 'hedge' or spread, legging out, or any other reason, are net losing decisions, sometimes disastrously so.

If you can't bring yourself to exit the whole position at once, then exit half and see what happens. If things get worse, exit the rest. This reduces the pressure of making an all-or-nothing decision, and some people find it easier to exit piecemeal.
 
Quote from Ghost of Cutten:

The way to 'salvage' any bad position is always the same. Ask yourself "If I was flat, would I still strongly want to put on this position, given the hostile market action?". If the answer is not "yes definitely!" then you should exit the whole position immediately.

Attempts to deny the necessity of getting flat e.g. putting on a 'hedge' or spread, legging out, or any other reason, are net losing decisions, sometimes disastrously so.

If you can't bring yourself to exit the whole position at once, then exit half and see what happens. If things get worse, exit the rest. This reduces the pressure of making an all-or-nothing decision, and some people find it easier to exit piecemeal.
More...

So true. The past has no meaning in evaluating your current position. If the trade still make sense at this moment at this price, keep it or even add to it. If the trade doesn't make sense at this moment at this price, get out of it. Whether it is carrying a profit or loss has no bearing in your decision making.
 
"If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in."

-- Paul Tudor Jones
 
Quote from noob_trad3r:

Not enough detail. How wide did you make the spreads i.e.. the strike prices on the short and long call side?
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The strikes are at 15 and 40. Last print was 37.85, and it was up right around 40 this morning.
 
Quote from zdreg:

maximum loss per share?
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Max loss per share was supposed to be 25, i.e. the difference between my strikes of 15/40. Problem is, there is heavy short interest so the PCP violation severe.

I started with net credit of 25.45 per share on a "max" liability of $25, so I thought I had an arb. Now, the stock has moved, the PCP violation has gotten more severe, and I am showing a loss. While I know this is supposed to disappear at expiry (May), that does not help at all if I get early exercised now.

I fear that, in part, because I got exercised on one of these on TSLA overnight, and that forced me to lock in the loss.
 
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