Tastytrade published a video on how they reverse a trade turn bad In the video they sold a put otm on pcln but the price gap down They sold three call at 2.1 dollar 9.9 dollar 4.5 dollar 4 dollar each and close out the bad trade at a slight loss However the problem they close out the call each they would not take in the total 2.1 dollar 9.9 dollar 4.5 dollar 4 dollar and thus total credit would definitely be lower than the total credit 20.5 Did they have an error or someone would comment on how they do the trade and credit?
The summary of all trades is at 13:39. They didn't post individual leg quotes, so I will guess at the quotes and it should fit together. My estimated quotes are in the brackets. Trade 1: PCLN at $678.00 - Sell 565/785 PCLN Strangle @ $2.10 ($1.05 / $1.05). Trade 2: PCLN at $578.00 - Sell 590/785 Call Credit Spread @ $9.95 ($10.00 / $0.05). Trade 3: PCLN at $565.00 - Sell 575/590 Call Credit Spread @ $4.50 ($9.50 / $5.00). Trade 4: PCLN at $560.00 - Sell 565/575 Call Credit Spread @ $4.00 ($9.00 / $5.00). At this point they are short the 565 put and call (565 Straddle), total credit $20.55. Trade 5: PCLN at $563.00 - Buy-to-close 565 Straddle @ $20.50 ($13.00 / $7.50). Total Credit: $20.55 Total Debit: $20.50 P/L: + $0.05
How do you get the estimate of 10 9.5 and 9 dollars? Didn't they mentioned in the video that 9.95 4.5 and 4 dollars are referring to the opening sold price of the call rather than the net credit after closing the sold call?
By looking at the price of PCLN and guesstimating the price of the individual legs to come up with the credit they received. I scrolled through the video quickly because those guys ramble on so much, a 2 minute video would have been enough to explain all 5 trades. The summary at 13:39 has enough info, except for the individual leg quotes. When I see the premium collected from a Credit Spread I know that figure comes from: Short Call - Long Call = Premium Collected
You maybe wrong abt the price On 3.46 he mentioned he sold the strangles at 2.10 so 2.10 is the sold opening price not net credit after closing the call The 2.10 price is showed on the 13.39 as the sold price The subsequent 9.95 4.5 and 4 dollars are sold OPEN price of the calls on the column price on 13.39 He mentioned credit spread is due to the long call is to close the previous sold call and the short call is sold open a lower call and not doing a credit spread individually This bring a point is how much did he close the 3 calls sold if he close them not at zero he would not gotten the entire 9.95 4.5 and 4 dollars and would not scatch the trade Using bs model and taking into account fall in volatility those calls would be close at above zero Do you have data of pcln on the specify calls to verify his claim on the total credit?
Summary of the 5 PCLN trades from the TastyTrade video a 13:39. Study the flow of the 5 PCLN trades from start to finish. Using TastyTrades credit received quotes and PCLN's stock price you should be able to estimate the individual prices of the legs. My estimates are in post #3. TastyTrades claim of a cumulative credit of $20.55 is consistent with the price of PCLN at the time of each trade, as is the final closing trade for a debit of $20.50.
Trade 1: PCLN at $678.00 - Sell 565/785 PCLN Strangle @ $2.10 ($1.05 / $1.05). Trade 2: PCLN at $578.00 - Sell 590/785 Call Credit Spread @ $9.95 ($10.00 / $0.05). Trade 3: PCLN at $565.00 - Sell 575/590 Call Credit Spread @ $4.50 ($9.50 / $5.00). Trade 4: PCLN at $560.00 - Sell 565/575 Call Credit Spread @ $4.00 ($9.00 / $5.00). Assuming your estimate is right but the total credit is not 20.55 In trade 2 he close the 785 call for 0.05 and sold the 590 call for 10 dollars and the net is 9.95 but he didn't took the 9.95 dollar In trade 3 he close the 590 call for 5 dollar He sold the 590 call for 10 and close the 590 for 5 the net he took in is 5 dollar not 9.95
You must visualize the trades. Each progressive trade complemented the one before it, and keep in mind the Short 565 Put from the original trade. The puzzle comes together with the 5th and final trade.