Question on Debit Spread

aphexcoil

aphexcoil

I currently own a $24 LONG PUT on QQQ and a $23 SHORT PUT on QQQ.

The futures are down and it looks like there is a remote possibility that they could both end up ITM.

If that happens, what is the best way to handle the situation commission wise?

Should I let the short get excerised or sell it on the open market before that happens?

I've never been excerised before.
 
Originally posted by aphexcoil
I currently own a $24 LONG PUT on QQQ and a $23 SHORT PUT on QQQ.

The futures are down and it looks like there is a remote possibility that they could both end up ITM.

If that happens, what is the best way to handle the situation commission wise?

Should I let the short get excerised or sell it on the open market before that happens?

I've never been excerised before.
More...

Why did you do that trade?
 
Originally posted by metooxx


Why did you do that trade?
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Because when I bought the $24 PUT, I felt QQQ was headed down. I sold the $23 PUT to reduce the cost of my $24 PUT.

In the end, I wound up selling my $24 PUT for a profit and buying back the $23 PUT.

Looking back, I should have never bought back the $23 PUT but then I would have been naked.

It didn't help that I was out of daytrades, so excerising would have been a mess.

Oh well, live and learn. The important thing is that I made $20 on an $80 risk.
 
Originally posted by aphexcoil
I currently own a $24 LONG PUT on QQQ and a $23 SHORT PUT on QQQ.

The futures are down and it looks like there is a remote possibility that they could both end up ITM.

If that happens, what is the best way to handle the situation commission wise?

Should I let the short get excerised or sell it on the open market before that happens?

I've never been excerised before.
More...

Perhaps I am wrong but...

The option gets exercised.

The writer gets assigned.
 
Originally posted by aphexcoil


Because when I bought the $24 PUT, I felt QQQ was headed down. I sold the $23 PUT to reduce the cost of my $24 PUT.

In the end, I wound up selling my $24 PUT for a profit and buying back the $23 PUT.

Looking back, I should have never bought back the $23 PUT but then I would have been naked.

It didn't help that I was out of daytrades, so excerising would have been a mess.

Oh well, live and learn. The important thing is that I made $20 on an $80 risk.
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Making a $1 and risking $4 is not a good idea ...
 
Originally posted by metooxx


Making a $1 and risking $4 is not a good idea ...
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I don't know about aphie's trade but what about credit spreads in general? You often will get those kinds of risk/reward numbers.
 
Unfortunately, I'm realizing now that all the advice I get on here doesn't really apply to my real-world situation.

For example, I purchased the $24 PUT on QQQ for a good price and then purchases the $23 PUT to offset some of that price. My real risk was my outlay of $65, not $80. The $23 PUT gave me money back.

Furthermore, I wouldn't have let the option go agaist me. The real reason why I got it was because of the PDT rule, and I saw an opportunity and took it. I lost money dealing with the spreads of options, but I would not have let my option gone totally against me.

If there was a reason to get out, I would have gotten out -- probably at a $40 loss total. So now you are looking at risking $40 to make $20 -- something that doesn't seem so far-fetched to me.

I can't help the fact that my hands are tied behind my back with daytrading, but I'll get the experience any way I can.

Today I'll be watching MSFT closely. I anticipate a sell-off on MSFT over the next week or two. I'm just looking at the various PUT options and trying to come up with a good strategy.

I made one or two mistakes on my QQQ debit-spread -- but it is all learning to me.
 
Originally posted by aphexcoil

For example, I purchased the $24 PUT on QQQ for a good price and then purchases the $23 PUT to offset some of that price. My real risk was my outlay of $65, not $80. The $23 PUT gave me money back.

I made one or two mistakes on my QQQ debit-spread -- but it is all learning to me.
More...

Don't you mean you sold, and not purchased (as you just stated) the QQQ 23 OCT Put to defray the cost of the QQQ 24 OCT Put you bought?

Hmm...and you wonder why people think you will lose money in the options market?
 
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