I bought a crapload of Feb out-the-money bond puts (expiring in 6 trading days) on Tuesday & Wednesday for 1-3 ticks each. They were 1-2 handles out of the money at the time, now they are slightly in the money. They are up about 10-20 fold and now represent about 7% of my total trading capital.
My dilemma is how much of the position to hold, how long, and when to take a profit and on what size.
I am still bearish on bonds and think there is a great chance they are down 2-3 handles more by expiration. However, I recognise there is a chance I may be wrong, and if I hold till expiry then the puts could easily be worthless.
So effectively I am asking, what would your plan be in this situation? My logical side says book half on the open tomorrow, sell another 1/4 if bonds have a selling panic and trade down big in the next few days, and hold 1/4 of them to expiry. However, another part of me wants to hold the whole position, and risk losing the entire value in return for the chance to run these puts from 2 ticks and cash them out at 200 ticks on big size.
What would you do?
My dilemma is how much of the position to hold, how long, and when to take a profit and on what size.
I am still bearish on bonds and think there is a great chance they are down 2-3 handles more by expiration. However, I recognise there is a chance I may be wrong, and if I hold till expiry then the puts could easily be worthless.
So effectively I am asking, what would your plan be in this situation? My logical side says book half on the open tomorrow, sell another 1/4 if bonds have a selling panic and trade down big in the next few days, and hold 1/4 of them to expiry. However, another part of me wants to hold the whole position, and risk losing the entire value in return for the chance to run these puts from 2 ticks and cash them out at 200 ticks on big size.
What would you do?
