SPX Credit Spread Trader

[Cache Landing]

Quote from apex82:

I am new to selling bull put spreads and put on a position a day or so ago. I went short 50 of the june 650-640 put spread on the RUT for a credit of .20

During the panic selling this morning I got a little worried and decided I would try to adjust it a little bit. Of course I didnt really know what I was doing and it didnt help with the market going crazy. I ended up buying 3 670 june puts for a debit of 7.50 per contract and 5 680 june puts for a debit of 8.00 per contract.

I am now sitting with a loss of 5,520 with any expiration close above 669. Any help with this one? I am confident the market will not close below my short strike by june expiration but I am in a pickle now and need some option expertise on how I can reposition this. Thanks

Unfortunately you've left yourself with very little choice. Honestly I think the best advice that I can give you is to offset (close) the long puts that you bought today. You are sitting on a $4K loss right now and stand to lose an additional $1K if held to expiry. In all likelihood you'll lose a bit more than $5K if you hold everything from here.

1) Close out the longs that you just bought.

2) A few choices:

A: hold the existing bull puts through expiry for a loss of about $3K

B: roll the bull puts up to a closer strike to lock in a bit more credit for the next week, which will make up for the losses without requiring additional margin.

If you rolled up to the 660/670 you've got a 92% chance of breaking even on the trade.

If you rolled up to the 670/680 you've got a 85% chance of making about $2K.

C: You could roll out a month and stay at the same strikes (640/650) under which circumstances you will have an 82% chance of making about $3K if held through JUL expiry.

Just remember that we've got some volatile events coming up.

 

[apex82]

Thanks a lot cache, I really appreciate it. I think I will monitor the first 30 minutes of trading tomorrow. Could possibly get a small retracement towards the lows which would be a nice place to exit the puts. I dont feel to comfortable rolling up the puts because of the recent volatilty.

When you say roll out do you mean close the position and sell the spread higher up? Or is there a special way to replace the trade in one transaction? Thanks

 

[dagnyt]

To anyone:

A friend asked me to recommend a few good books on Technical Analysis, and I am totally unfamiliar with the books in this area.

Recommendations, please.

Mark

 

[ready]

Martin Pring Technical Analysis Explained

 

[rallymode]

Quote from dagnyt:

To anyone:

A friend asked me to recommend a few good books on Technical Analysis, and I am totally unfamiliar with the books in this area.

Recommendations, please.

Mark

stockcharts.com

After going through several hundred symbols and their N month(s)/N-year(s) charts, you will know all you need to know. You will be wasting your time reading a TA book moreso relying on it. For every formation that held i can find you one that didnt.

 

[dagnyt]

Thanks. Not looking for myself, but for someone else who wants to learn the basics.

Quote from rallymode:

For every formation that held i can find you one that didnt. [/B]

 

[Cache Landing]

Quote from rallymode:

stockcharts.com

After going through several hundred symbols and their N month(s)/N-year(s) charts, you will know all you need to know. You will be wasting your time reading a TA book moreso relying on it. For every formation that held i can find you one that didnt.

Stockcharts.com is a good site, and you should realize that about 90% of all TA is bogus.

 

[Cache Landing]

Quote from apex82:

Thanks a lot cache, I really appreciate it. I think I will monitor the first 30 minutes of trading tomorrow. Could possibly get a small retracement towards the lows which would be a nice place to exit the puts. I dont feel to comfortable rolling up the puts because of the recent volatilty.

When you say roll out do you mean close the position and sell the spread higher up? Or is there a special way to replace the trade in one transaction? Thanks

You can do it in two separate transactions or one transaction called a vertical roll. It makes noe difference to me because I just pay a per contract rate with no one time flat fees. If you do pay a one time fee then the vertical roll will save you money. Sometimes it is also easier to get filled in two separate transactions.

[edit] I forgot to mention. I believe that technically speaking a vertical roll is supposed to be rolling a vertical spread to the following month. Personally I consider it a roll any time you close out the original vertical while at the same time opening another on the same ticker. For me:

Rolling up = repositioning at higher strikes

Rolling down = repositioning at lower strikes

Rolling out = repositioning in a later month

 

[rallymode]

Quote from Cache Landing:

90% of all TA is bogus.

i didnt want to paint such an ugly image, but you said it much better i guess

 

[ryank]

Quote from rallymode:

i didnt want to paint such an ugly image, but you said it much better i guess

Weren't you the guy talking about "bullish hammers" or some other TA stuff yesterday? Those must be part of the 10% that is good lol.