Quote from newwurldmn:
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:
I was playing for 0.45 in a month on about $3.75 worth of margin. The strikes were 15/40, and my broker, Optionshouse charges essentially 15% extra margin on a box spread.
So, $25/share x %15 = $3.75 margin, with me receiving $25.45 per share. Basically, I was expecting to just cash in the 0.45 in a month for better than 10% return on the margin.
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.
Quote from poyayan:
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.
Quote from Butterball:
"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 atticus:
The May 40-synthetic is 2.00 under the natural. I assume that it became HTB just very recently? The carry on these can double or triple in a year.
I am not here, we are not having this conversation.
Quote from monkeyjoe:
Word. I know all this, but it certainly helps to be reminded.
I guess my question had better be rephrased:
I am currently in a position which will gain ~$2.95/share, if I can hold it until May expiry. Problem is, holding it eats up all my margin, and if the short call early exercises, I am completely f----d as a result, with a $2.50 loss being locked in. So, any suggestions on how to mitigate that risk so I can turn my current $2.50 loss into a $0.45 gain?
This is a total noob mistake because if I had had the right size, then I could've used margin to delta hedge the move and not be in this predicament.
Quote from atticus:
Delta hedge a change in borrow? The position is directionally-agnostic. The problem is that the synthetics "dropped".
Look at the price of the 40-strike May synthetic.
Quote from monkeyjoe:
Thanks atticus. It was hard to borrow initially, but apparently that has blown out like crazy and I didn't realize the risks.
The main problem is size. I can't even get into the May 40-synthetic to delta hedge without capitalizing some of the loss as all my margin is used up. Like I said, noob mistake on size.
All - do you think it's good advice to capitalize some of the loss in order to delta hedge with the synthetic? I feel here like I shouldn't be trusting the deltas because of the borrow.
Quote from monkeyjoe:
Right. So what on earth do I do? Am I forced to lock in the whole trade at a loss?
I am trying to figure out how to limit the downside of waiting (i.e., early exercise risk on my short calls) but still retain some upside if I can make it to expiry? Is this just foolish?
It's not that getting exercised is any worse than the current position, it's that if the underlying moves up further, then I fear becoming exponentially f--d by the position.