Where do I stand on this strategy ?

[scott55tt]

I made a similar mistake as another poster of putting on a collar strategy & then modyfying it as follows.

Bought the Future at 719.00

Bought 720 Put for 47.00

Sold 740 Call for 37.00

( Both put & call settle as cash on expiration. There is no such thing as exercising )

Future ran upto 760 in one day with 2 weeks to expiration.

So I sold 720 put for 26.00 & bought 760 put for 46.00

Again future ran upto 815.00 next day so I

sold 760 put for 24.00 & Bought 800 Put for37.00.

I still have 740 call I shorted & it settled at 75.00

The future is now at 782.00

My thinking was that the future would probably retrace from the resistance & I wanted to lock in 800.00 price with a 800.00 put.

Well, did I create a mess & if yes, what would be the next step to salvage anything ?


All ideas would be highly appreciated.

Thanks in advance.

 

[riskfreetrading]

future and short call makes you flat at 800 + short a put at 740. Do you realize that buying the 800 put makes you short with a max profit of 60 points minus difference of premiums between the two strikes?

 

[jwcapital]

Quote from scott55tt:

I made a similar mistake as another poster of putting on a collar strategy & then modyfying it as follows.

Bought the Future at 719.00

Bought 720 Put for 47.00

Sold 740 Call for 37.00

So, your cost to put on the collar was 10.00. Your max profit is about 11, assuming no adjustments and underlying finishes above 740.

Future ran up to 760 in one day with 2 weeks to expiration.

Either leave everything alone, exit the whole thing--definitely with a profit, or roll up your short call. Your underlying went up the 41 points, but the call probably only went up 20. there is no rule that says you ahve to keep options until expiration.



So I sold 720 put for 26.00 & bought 760 put for 46.00

You rolled up the wrong option.



Again future ran upto 815.00 next day so I

sold 760 put for 24.00 & Bought 800 Put for37.00.

I still have 740 call I shorted & it settled at 75.00

The future is now at 782.00

I think you get the picture--you could have kept rolling the call option up. again, there is no rule that states you must keep your options until expiration.

My thinking was that the future would probably retrace from the resistance & I wanted to lock in 800.00 price with a 800.00 put.

Well, did I create a mess & if yes, what would be the next step to salvage anything ?


All ideas would be highly appreciated.

You basically spent your profits on losing puts. You might want to think about exiting the whole thing at this point and take a look at what you did and how you can do better next time.

Thanks in advance.

 

[shawntobin]

"there is no rule that says you have to keep options until expiration"



Maybe they were European options?

 

[junglerott]

You don't need to keep European options until expiration.

 

[shawntobin]

ahhh, sorry, i misunderstood. I understand now, you can still trade them of course, but they just can't be exercised until maturity. New to the thread and just trying to learn a few things.

 

[setu]

jwcapital

Thank you. I now see your rolling over Call makes sense.

Question now is if I stayed in, what am I looking at if the future goes up

OR goes down ?

Is there a way that I could still make money on this strategy by manipulating the position ? ( A stupid question but I might as well learn since I am loosing any way ).

 

[TheoHornsby]

Quote from scott55tt:

I made a similar mistake as another poster of putting on a collar strategy & then modyfying it.

Future ran upto 760 in one day with 2 weeks to expiration.

So I sold 720 put for 26.00 & bought 760 put for 46.00

Again future ran upto 815.00 next day so I sold 760 put for 24.00 & Bought 800 Put for37.00.

Think of it s 2 separate positions. Your futures position was coupled with a short 740c call so above 740 it was a locked in position.

What you ended up doing was rolling your long put up for debits. Whatever profit you had in the CC (plus add'l capital) was spent on your bearish put rolls up. So you made 58 pts on the CC and laid out a net of 80 pts for your puts.

If you wanted to continue playing the upside, you should have rolled the entire collar up.

 

[TheoHornsby]

Quote from riskfreetrading:

future and short call makes you flat at 800 + short a put at 740. Do you realize that buying the 800 put makes you short with a max profit of 60 points minus difference of premiums between the two strikes?

That makes even less sense then you usually don't make!

 

[TheoHornsby]

Quote from jwcapital:

Either leave everything alone, exit the whole thing--definitely with a profit, or roll up your short call. Your underlying went up the 41 points, but the call probably only went up 20. there is no rule that says you ahve to keep options until expiration.

Rolling the call up isn't a good idea for most. A turn down will add to the losses.