As a rule of thumb, at what delta should a naked call seller consider covering before the loss gets out of hand if the OTM position is slowly moving against him and is getting close to strike?
I'll use the deltas to manage the risk as opposed to an exit. For example....if the short call was at -20 Deltas and price moved against it then maybe the deltas have gotten to -40...I might then sell a put at a strike with -20 deltas and bring my risk back to -20. Doing this shouldn't change the capital requirements and brings the risk back in line....if price continues to move against me I can continue rolling the winning side to appropriate Deltas....the goal would be to get my break even moved out giving me a chance to get closer to expiration where I can roll to the next month for more duration and/or possibly more credit.
haha...ye with pennies wide markets and my account size maybe than can get an extra bagel from Little Goat every now and then.
No, if you stick to penny wide, you're ok. Nice nick. How many of the illiterates here get the reference?
There is no rule of thumb on when you should close or hedge a position. That's part of the art of trading volatility. Sometimes delta would be a good criteria. Other times, your gamma levels. Other times, your dollar losses/gains. It really depends on your view, your structure, and your strategy.