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Old Jul 12th, 2009, 10:45 AM   #1
wartrace
 
 
Join Date: Dec 2006
Location: Tennessee
Posts: 349
I have a bear call spread that went into the money by 1.82 & it expires in July. It was a very stupid trade in AIG- Yes I know it was very stupid to play with this stock & I screwed up big time (feel free to abuse me if you REALLY feel the need to- I can take it)

I sold the 10 call and bought the 12.5 call for a credit of 520.00.
A complete loss of (2500-520=1980) will not kill me as it is less than 3% of my account.

The way I see it I could sell a put spread (-10 +7.5) and use the credit to offset my loss on the call spread.

I could sell a naked call at 10 and offset the loss even further than a put spread.

I could just buy back the short call and "hope" the stock keeps rising enough to profit on the long side of the spread.

I could do nothing and hope for the best.
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Old Jul 12th, 2009, 12:21 PM   #2
SpreadSeller
 
 
Join Date: Jul 2009
Posts: 20
What was your exit/management before you entered the trade in case this happened?

Quote:
Quote from wartrace:

I have a bear call spread that went into the money by 1.82 & it expires in July. It was a very stupid trade in AIG- Yes I know it was very stupid to play with this stock & I screwed up big time (feel free to abuse me if you REALLY feel the need to- I can take it)

I sold the 10 call and bought the 12.5 call for a credit of 520.00.
A complete loss of (2500-520=1980) will not kill me as it is less than 3% of my account.

The way I see it I could sell a put spread (-10 +7.5) and use the credit to offset my loss on the call spread.

I could sell a naked call at 10 and offset the loss even further than a put spread.

I could just buy back the short call and "hope" the stock keeps rising enough to profit on the long side of the spread.

I could do nothing and hope for the best.
    Quote
Old Jul 12th, 2009, 01:00 PM   #3
heiasafari
 
 
Join Date: Jul 2009
Posts: 254
Number 1 rule: don't send good money chasing after bad money...

Whatever you decide to do, you need to see it as a completely new trade. If you try to catch up on a bad trade you may very well dig yourself deeper. If you transform this into a iron condor, then make sure the main reason is that the put spread would have a good R/R NO MATTER what you may loose on the call...

If you really want to do it, roll over your spread to the next month I guess with a higher strike - especially if you think the stock should not be as high as it is right now.
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Old Jul 12th, 2009, 01:21 PM   #4
wartrace
 
 
Join Date: Dec 2006
Location: Tennessee
Posts: 349
Quote:
Quote from SpreadSeller:

What was your exit/management before you entered the trade in case this happened?
That is the "learning experience" portion of the loss. I really didn't have an exit strategy. I probably deserve to lose the money as my tuition for doing stupid.
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Old Jul 12th, 2009, 03:16 PM   #5
SpreadSeller
 
 
Join Date: Jul 2009
Posts: 20
Quote:
Quote from wartrace:

That is the "learning experience" portion of the loss. I really didn't have an exit strategy. I probably deserve to lose the money as my tuition for doing stupid.
My advice is the same as heiasafari. Look at it as a new position? Would you still do it then?

There is nothing wrong with a losing trade.
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Old Jul 12th, 2009, 03:27 PM   #6
wartrace
 
 
Join Date: Dec 2006
Location: Tennessee
Posts: 349
Quote:
Quote from SpreadSeller:



There is nothing wrong with a losing trade.
Nothing wrong with it other than that pesky losing money thing

I hear you though, if I can't handle losing I shouldn't be trading. I just have to watch the "impulse trades". This is my first real loss(newbie), it was also the first I hadn't put a whole lot of thought into.
Live and learn

I will take your advice though, I have to avoid "revenge trading" and look at any attempted repair as a new trade.
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