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-   -   Creative ways to salvage a vertical spread. (http://www.elitetrader.com/vb/showthread.php?t=194095)

MathAndLogic Mar 18th, 2010 05:44 PM

Creative ways to salvage a vertical spread.
 
Hello:

I am trying to get some suggestions to salvage a vertical spread. I initially had 116/119 bear call spread on SPY. I rolled to 118/121 when SPY rose past 114 on the employment report. There was a loss on this rolling.

Yesterday when SPY rose past 117, I closed out the spread with more loss, even though my calculation showed a very low probability that SPY would reach 118 by Friday. With SPY slightly down today, I am thinking maybe I shouldn't have close the spread.

Optioncoach has a vertical spread thread. His ways to salvage a vertical spread include rolling up or down, buying calls/puts. Some people convert the spread to a butterfly.

Anyone care to discuss the pros/cons of various creative damage control?

Thanks.

ammo Mar 18th, 2010 06:09 PM

your short the 116 call and long the 119 call, you short the 119 put and buy the 116 put, now u have a box ,( short 1 diagonal,long another).that willl always be worth 3,then you scalp in and out of the legs for 5 and 10 cents til its back up over 3 ,or cover the 116 calls while rallying and put them back out when we reach the next resistance, when dow hit yesterdays hi this morning you cover the 119 call and put it back out when we drop to 57 on the es, or cover the 116 calls down there and now you need to leg out of the put sprd, if your call legging amounted to u buying the call sprd for 1 1/ 2 and the put sprd is now 1 1/4 u just buy it back and u are out of the position at 2 3/4 , you can always sell the same put sprd and u have a box that wont move in value, i f spy is at 120 the call sprd is worth 3 and the put sprd zero, if spy is at 112 the call sprd is at zero and the put sprd is 3....you can use this box tool to always lock up your position overnite or during sideways action , or you scalp in and out of 1 of 4 legs , whichever seems at the money and reacting the most to the market at the time,volume wise

ammo Mar 18th, 2010 06:19 PM

1 Attachment(s)
todays vol vs open int in spy

taowave Mar 18th, 2010 07:27 PM

Re: Creative ways to salvage a vertical spread.
 
There is no such thing as salvaging.
In your case you had a short delta an were wrong.
Rolling,adjusting or salvaging is just a readjustment of your delta and you have a new position with a realised or unrealised loss.



Quote:

Quote from MathAndLogic:

Hello:

I am trying to get some suggestions to salvage a vertical spread. I initially had 116/119 bear call spread on SPY. I rolled to 118/121 when SPY rose past 114 on the employment report. There was a loss on this rolling.

Yesterday when SPY rose past 117, I closed out the spread with more loss, even though my calculation showed a very low probability that SPY would reach 118 by Friday. With SPY slightly down today, I am thinking maybe I shouldn't have close the spread.

Optioncoach has a vertical spread thread. His ways to salvage a vertical spread include rolling up or down, buying calls/puts. Some people convert the spread to a butterfly.

Anyone care to discuss the pros/cons of various creative damage control?

Thanks.


traderlux Mar 18th, 2010 07:37 PM

Re: Re: Creative ways to salvage a vertical spread.
 
Quote:

Quote from taowave:

There is no such thing as salvaging.
In your case you had a short delta an were wrong.
Rolling,adjusting or salvaging is just a readjustment of your delta and you have a new position with a realised or unrealised loss.

.....""no such thing as salvaging""
...amen, i never understood all the happy talk about adjustments, if something moves against you, your original plan was wrong.

..... your trade plan going in needs to have an EXIT for that.

taowave Mar 18th, 2010 07:47 PM

Re: Re: Re: Creative ways to salvage a vertical spread.
 
I never understood it either..

It is usually the nonsense premium sellers spew when their position goes against them.They rolll down/up/out/out and up/out and down...All this to "avenge" their initial trade going against them.

If they are lucky,2 rolls and 6 months later they have salvaged their position and broken even..




Quote:

Quote from traderlux:

.....""no such thing as salvaging""
...amen, i never understood all the happy talk about adjustments, if something moves against you, your original plan was wrong.

..... your trade plan going in needs to have an EXIT for that.



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