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Option Strategy Adjustments
- Thread starter jwcapital
- Start date
Quote from tancy2411:
Hi Put Master,
I have created your trade and looking at the risk graph and I have to agree with dhpar.
Chee Yong
My thanks to both of you. You've given me plenty to re-evaluate and consider.
My focus was more technical. That being the stock being 18% OTM, being in a trading range above my strike for 6 months, stock trending up recently, a potential 7 - 12% loss of capital if I closed it between $28 - $29, ect...
I agree my R/R is not very good, but the only way to improve it would be to select a higher strike, and/or a longer contract than 3 months.
But then my probability of success drops.
Are you saying I should have selected the higher strikes and simply managed the risk more conservatively?
Put Master
Agreed.Quote from dagnyt:
My 30+ years of experience tells me that there is no 'best' time to adjust. And it's always true that when the reward does not justify the risk that it's a bad position. And that ture with positions that are already profitable, as well as those that are losing money.
Each position has it's own risk/reward characteristics that depend on market volatility, time to expiration, your willingness to pull the trigger, the availability of other positions that are more attractive (increasing desirability of closing the current, losing trade), whether the stock has news pending, etc.
I don't buy into a fixed number such as 30% but with many strategies there's a point after which adjustments aren't feasible even if you want to hang in there.
Quote from dagnyt:
Each position has it's own risk/reward characteristics that depend on market volatility, time to expiration, your willingness to pull the trigger, the availability of other positions that are more attractive (increasing desirability of closing the current, losing trade), whether the stock has news pending, etc.
Quote from spindr0:
If your experience had been that adjustments worked most of the time for you, your post would have been the exact opposite of what you wrote.
We each have different objectives, tolerances, strengths, judgement and abilities. What works for one doesn't always work for another.
Hi spindr0 and Mark,
Seems like my guidelines on adjustments will only work for me because of my trading style.
Thanks a lot.
Chee Yong
Just because you are too dumb to comprehend what he wrote doesnt mean he owes you another explanation. All you have to do is read his post slowly sevral times and you might figure out what he was saying.Quote from Put_Master:
Are you saying I should have selected the higher strikes and simply managed the risk more conservatively?
Decided to close the $27.50/$25 spread.
Debit of $0.47.
My credit was $0.40, thus a loss of $140.
Stock still trading well above my strike, but with its large % drop today, I decided its better to lose $140, than risk $4,200 on a 3 month trade.
Had it been a one month trade, I might have continued to monitor it, as time decay kicked in. But 3 months is too long, given its large % drop today.
My thanks to all for your thoughts and constructive criticism.
Put Master
Debit of $0.47.
My credit was $0.40, thus a loss of $140.
Stock still trading well above my strike, but with its large % drop today, I decided its better to lose $140, than risk $4,200 on a 3 month trade.
Had it been a one month trade, I might have continued to monitor it, as time decay kicked in. But 3 months is too long, given its large % drop today.
My thanks to all for your thoughts and constructive criticism.
Put Master
-----------------------------------------------------------------------------------Quote from Put_Master:
Decided to close the $27.50/$25 spread.
Debit of $0.47.
My credit was $0.40, thus a loss of $140.
Stock still trading well above my strike, but with its large % drop today, I decided its better to lose $140, than risk $4,200 on a 3 month trade.
Had it been a one month trade, I might have continued to monitor it, as time decay kicked in. But 3 months is too long, given its large % drop today.
My thanks to all for your thoughts and constructive criticism.
Put Master
Having closed my MDT trade for a small loss, I've since reinvested some of those funds into a CB credit spread on May 20th.
I created a more S-T trade on CB for July, using 8 contracts.
Bought the $30 puts.
Sold the $35 puts.
Credit of $0.75.
Overall, I like the companies fundamentals.
However, since this is a more S-T trade, I'm more focused on its technicals. And I think it's downside tech support is pretty reasonable it the $35 area.
Over the past 5 years, when it's dropped below $35, its always retuned to that price, within a few days or weeks.
Thus the reason for my selection of $35 for my upper strike.
However, if it again tests that area, I'll have to decide whether to close it down, or give it a chance to recover,... as it has in the past.
This forum is about options questions and answers not posting of ones own real or imaginary trades. Further this particular thread in this forum is a discussion on strategy adjustments not posting of ones own losing trades. I'll be happy to alert the monitors so they can keep things on topic.
<<< I'll be happy to alert the monitors so they can keep things on topic. >>>
Thank you xflat2186.
We all appreciate the moderator maintaining this and other threads, as a place for civil discussion and debate, of option related questions, discussions and sharing of ideas and strategies.
We've all seen what can happen to an un-moderated board, like those found on yahoo.
It was the destruction of those yahoo boards, by just a few "mystery trolls", that brought me here..... to a moderated forum.
Thank you xflat2186.
We all appreciate the moderator maintaining this and other threads, as a place for civil discussion and debate, of option related questions, discussions and sharing of ideas and strategies.
We've all seen what can happen to an un-moderated board, like those found on yahoo.
It was the destruction of those yahoo boards, by just a few "mystery trolls", that brought me here..... to a moderated forum.