Roll or closed and new order?

[danjuma]

I pray for your assistance please regarding the following:

I BTO 1 INTC PUT strike 32 expiring 19/01/2018 for $3.09
INTC has gone up to 35.
As at now, I can roll up to a 30/35 bear put spread expiring 19/01/2018 for a debit of $1.14
OR
STC the 32 put strike for $1.58 (current bid) for a loss of -$1.51, and BTO the 35 put strike expiry 19/01/2018 for cost of $2.73 (current ask), for a total cost of -$4.24 (loss on closed option plus cost of new opened option)

My question/confusion is what is the difference (advantage/disadvantages) between rolling and just closing and opening a new trade, as -$1.14 (cost of the spread) would seem far much cheaper than the -$4.24. Obviously, there is something I am missing or don't understand. Many thanks

 

[vanzandt]

I pray for your assistance please regarding the following:

I BTO 1 INTC PUT strike 32 expiring 19/01/2018 for $3.09
INTC has gone up to 35.
As at now, I can roll up to a 30/35 bear put spread expiring 19/01/2018 for a debit of $1.14
OR
STC the 32 put strike for $1.58 (current bid) for a loss of -$2.32, and BTO the 35 put strike expiry 19/01/2018 for cost of $2.73 (current ask), for a total cost of -$5.05 (loss on closed option plus cost of new opened option)

My question/confusion is what is the difference (advantage/disadvantages) between rolling and just closing and opening a new trade, as -$1.14 (cost of the spread) would seem far much cheaper than the -$5.05. Obviously, there is something I am missing or don't understand. Many thanks

Is this click bait?
Why in the world would you enter a trade and not understand the intricacies of exercising a strategy if the trade moves against you?
Prayer is not the the answer when one trades options.
I apologize if this sounds mean.
But its true.
Close the position and hit the books.

 

[danjuma]

Is this click bait?
Why in the world would you enter a trade and not understand the intricacies of exercising a strategy if the trade moves against you?
Prayer is not the the answer when one trades options.
I apologize if this sounds mean.
But its true.
Close the position and hit the books.

Please move along sir, if you are not prepared to assist. Thank you! FYI, it's paper-trading and I am trying to educate myself!

 

[vanzandt]

Please move along sir, if you are not prepared to assist. Thank you! FYI, it's paper-trading and I am trying to educate myself!

I did assist.
Think about it.
And who the hell prays for help with a paper trade.
But I'll take your advice and move along.
G/L with your studies.

 

[xandman]

imho.

The decision to roll should be based on:

1) You have implemented a strategy that actually requires rolling from the start.
2) Or, the market is unwilling to give you a fair exit for a position that requires adjustment. Therefore, you are simply trying to cut costs on your exit by getting concessions for another entry.

More on 2) . By adjustment, your directional or volatility target remain but the current position is far from optimal. Therefore, you want a new position.

Finally, there is also the pig-headedness that makes us stick to losing positions even though it is a clear loser based on predetermined entry/exit criteria. Make sure you differentiate.

Ask yourself: Are you buying time or re-positioning optimally? At what price levels and DTE would you have called it quits? How different is the risk/reward for the previous position initiated? Are you giving up/gaining r:r and what is it costing you? etc etc

 

[danjuma]

Okay guys, this is being taken too deeply and delving into money management, psychology, English langauge, this and that. All I was after was to understand the difference between the two - why one appears cheaper than the other when it would appear they are both doing the same thing (closing one trade and opening another). That was all I was after really, not some long lecture. Thanks

 

[xandman]

Huh? Looser risk tolerance? Or do you mean 'losing'/'loser'?

Thanks for the spell check. Edits made.

 

[drcha]

danjuma, what was your thesis about the underlying when buying? I'm not sure why you want to roll or change the position at all. I am thinking that the reason you bought a put that does not expire until 2018 was because you are expecting INTC to fall by then. So what is the rush?

 

[danjuma]

danjuma, what was your thesis about the underlying when buying? I'm not sure why you want to roll or change the position at all. I am thinking that the reason you bought a put that does not expire until 2018 was because you are expecting INTC to fall by then. So what is the rush?

No it is not. That is not the premise of the strategy and the post was not to discuss the pros and cons of the strategy or the reasons why I want to go to a higher put strike. My strategy calls for me to this (not for discussion why). I just wanted an explanation of the difference between the two ways I can think of doing this as outlined in the first post. That's all I am after. Thanks

 

[drcha]

Sorry, but these questions can't be answered in a vacuum. And obviously, holding a spread is different from holding an option. Take a look at McMillan's book. He discusses many options for handling a trade that is not going your way, and points out the pros and cons among them. What is "pro" and what is "con" will depend on your thesis (your opinion about direction, volatility, or both). If you have a thesis, I think his book will help you to dissect what is best for you.