lock in partial profit of a bear call spread?

V

Victor123

Let us say I sell a bear call vertical spread for .20 with the strikes a 1$ apart.
So max profit =. 20 and Max loss is .80

Let us say the underlying moves down a bit and the value of the spread drops from .20 to .10

Is there a way to lock in at least some of these profits while still allowing room for further profit, if the value of the spread goes all the way to 0.

For example, lock in .08 and still have profit potential of upto .16?

Let us assume underlying was at 45. I sold the 49-50 vertical.
And underlying drops to 42, so the vertical goes from .20 to .10
 
No.

For the sake of your mental health and wasted time googling, imagine the underlying as your only hedging vehicle and keep reading Sinclair. You will surely develop the question of the day. : )

So hedging with underlying, again no.

And if you did find away, you would probably uncover a risk from the very deep blue sea that nobody heard of...much to your detriment. So, no.
 
Thanks. Which book by sinclair...option trading or volatility trading?
I am reading 'trading option greeks' by dan passarelli. After that plan to take up charles cottle. My first attempt with charles cottles' book was not successful.
 
You probably have the foundation for volatility trading. Frankly, I would read anything from Sinclair, including doodles on a bathroom wall. He is a very good writer. Also, Gathreal is a great educator. Check out the volecube articles.

If you find any pdf from Sinclair, research or articles. Send it my way, pls.
 
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Sure, will do. Thank you. I will check out gatheral. I have read some volcube articles. Seems like a decade before I can make any money. Thanks for your help.
 
Hi Victor---
In response to your question, I would say a couple of things. Writing call spreads to earn $0.20
means that you are not looking to make a lot of money generally. Since the entire spread started out of the money and is now further out of the money, the most you can make is the remaining $0.10 per spread. Any adjustment to preserve profits without taking additional risks in this situation will use a lot of commissions and not make you much money. At this point, you should either let it expire worthless if there is almost no time left or take your profits.

Second, if you have a decent sized position and the initial credit was much larger, say a $10 wide spread with an initial credit of $3 that is now standing at $1.00, you can do some things that are worthwhile to make sure you keep most of your credits. An example of this is to use your profit in this case to make a butterfly centered on the short strike which would give you a chance to make "free" money if the stock recovered. Adjustments are sometimes touted as if they are magic bullets, but you must be careful about changing your risk profile when you do them. In this example, you would be changing your opinion on the stock when you set up the butterfly.
 
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