Hi all, recently started selling vertical put spreads at .15-.25 Delta. It's been going well these last few months as the volatility's been flat and now it looks like i might need to defend my first position. So i wanted to get your feedback. Here's the scenario - 2 weeks ago, I sold the $SPY OCT 16 203/205 put spread for a $200 credit - 10 Contracts on each leg - Delta was around .14 and it's now around .24 - Max Loss= $1,800 - By 9/7/2016, i had collected about 35% of total premium - $SPY saw a significant downturn on Friday, now i want to figure out how to defend this position if the downturn continues into next week - I own 5 long put spreads 214/212 as a partial hedge expiring SEPT 16 So, my thinking is that if Deltas hit .35-.45, I roll down and out a week. It's my understanding that this doesn't add on any additional risk, it simply closes the old position and opens a new one with a longer time horizon and lower strikes. Am I wrong? Am i screwed up Monday gaps even lower beyond my short strike? Any advice from more experienced premium sellers certainly welcome!
Your long hedge is expiring prior to the shorts right? With the way we have moved down and the uncertainty, I would close the position.
Just based on the OP, this is a ratio condor (the non-ferrous version) and I would be happy with the down move on Friday. I would roll the long put spread to the same expiry of your short spread.
All the 'experienced premium sellers' are down at the Salvation Army soup kitchen. Stop by and ask them...
That is far from the truth. there are premium sellers who have earned tremendous amounts of money and there are premium sellers who are at the soup kitchen. Same with premium buyers, stock pickers, macro traders, stat arb traders, market makers, and brokers.
Browse the archives a while. You'll notice that after market crashes, the premium sellers suddenly stop talking about their P/Ls, or stop posting altogether.
Sure. Because that's their risk factor. The premium buyers who are losing bleed and leave without a whimper.