Thanks Yip and Dagyt/Mark for your comments. My idea was not to keep doubling down but rather to try to accelerate back and get back to "even" then taper back to something closer to a Kelly Formula allocation with smaller regular contracts. Having learned a lesson I'd then hold that position size fairly constant month-to-month for about 6 months before I raise the total position size. My goal is to get $10K-$20K ahead in a few months then use that as "free on the house" trading money and not risk even a small portion of my core account ever again.
One thing I am also starting to contemplate is just relying on the natural credit spread of 10 points and leveraging the longs as the only natural insurance/hedge and just taking the risk of a full loss if it ever gets to that scenario; or even a partial loss and NOT getting shook out early. I see increasing the hedge as an analog to "doubling down" on losses and replicating the spread hedge redundantly. If I can stick to this discipline and then accept a "natural loss rate" then there is less chance that fear/emotion will force me to increase my insurance/hedge expenses at the time premiums for same are the most expensive. It will also let me hang tough to expiration for cases where the underlying is encroaching near the money but trend is weakening. It really sucks when one is scared by the possibility of losses and punches out early only to find the market reverse and positions to expire OOM as winners.
In my way of thinking extra hedging in the face of an approaching storm is metaphorically/conceptually not much different than rushing out and buying more hurricane insurance with lower deductibles every time a hurricane starts bearing down on one's home city/state and paying exponentially more premium for it. Frankly I am surprised the insurance industry does not really operate this way and play on peoples fears to extort more premium instead of current practise of locking out writing of new wind storm policies when a named storm is within 9 days traveling distance yet still subject to rapid changes in direction and intensity etc.
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On other pragmatic matters:
I was going to take a pass this month on SPX IC since there are so many "economic news events", earnings report and major political events. In my simple way of thinking, with VIX relatively low and premiums low I saw this as one of the worst possible options period to attempt IC since each major news event or report is an opportunity to put ripples into the market and shake out a new trend - or inject a sentiment spike that could punch well into the shorts of the IC. However, I hate sitting on my butt so I jumped in a week ago and legged in to open up a modest position as follows:
CALL (SXZ) NEW S & P 500 INDEX NOV 1430 50
CALL (SXZ) NEW S & P 500 INDEX NOV 1420 -50
Credit => $0.58
PUT (SXY) NEW S & P 500 INDEX NOV 1335 -50
PUT (SXY) NEW S & P 500 INDEX NOV 1325 50
Credit => $0.48 (a tad low but market was mostly up)
Net Credit $1.06
Market was down good today. But by the time I got back to my PC console from some domestic chores I missed the major move. Trying to pick up about 35 more put side spread contracts for a net credit of about .70-.85; if I get another run down this should be possible.
My only fear at the moment is a wild spike up by the fanatical bulls who are so deafened by all the frenzied hoof pounding on the stampede up they seem mostly drowning out the din of most all the negative news...
I don't expect a correction this month.
TrendSailor
