Yeah, you're right. It's the right play due to the 8.80 mark. Credit of 1.02 for the 70/80 bear spread doesn't add insult to injury (via OTM bull PS) and he kills the remaining MTM risk (less 0.18 or so) by legging into the bull fly.
Thanks again for your always mind blowing feedback, Yes, I shorted the Sep25 460/470 put spread for 5.26 I'm taking my time to fully understand the mechanics of shorting the Sep 470/480 call spread as I haven't traded any iron flies yet (just condors), I still don't fully get the profile of being short both the 470 put and call but i'm on it. 'You need 470 best case. Reduces your loss by $100.' Don't fully get it, so if I short the 470/480 call spread for a buck, i'm not already reducing my loss by $100? (not bad) even if my 460/470 remains ITM at expiration? 'You risked 474. MTM risk is only $120 from here. Is it worth $120 to you as an upside lottery ticket paying almost 9x risk above 470 on shares?' First sentence fully understood, second one don't.. where's the 9x risk? sorry that as much as I tried can't grasp the question. My first (indirect) exposure to synthetics was trading DITM puts debit spreads (bearish, to be assigned the short and exercise the long for full profit) and my direct exposure to them was carefully reading each of your responses in a previous post, and it's really mind blowing and eye opener so i'm really grateful for your efforts in trying to make us understand it.
You reduce your FUTURE loss on the 8.80 current MTM down to $20~ if you short the 470/480 call spread from 1.00. You are sitting on a MTM of 8.80 on the spread. Shorting the Sep25 470/480 call vert results in the following: (YOU ARE) short 460/470 put spread 1:1; (YOU WILL) short 470/480 call spread 1:1 (NEW POS @ 1.00cr) = short the 470 straddle; long the 460/480 strangle = long the synthetic 460/470/480 butterfly from 3.74 ($374) risk. That's your risk from inception + adjustment; NOT the marked loss. The 460/470/480 call fly is trading at 0.33 so you'll be sitting on a MTM loss of (3.74 -0.33) 3.41 or $341 per contract AFTER shorting the 470/480 call spread at a buck. YOU WILL OWN a Sep25 460/470/480 long fly from a risk of 3.74 from inception. Max gain of 6.26 terminally at $470 shares. Short iron fly = synthetic long call fly. I could go deeper but it's best to conceptualize the fly as OTM, or in this case as a synthetic long call fly.
I know it sounds complex, and it is when discussing synthetics, but as long as you know whether you're in a bull spread or bear spread will suffice. You cannot "repair" a position. A marked loss is a loss. The spread has no memory. Generally, people will repair the position by adding another unimodal bull(bear) spread to an existing bull(bear) spread. In this case you shorted a put spread for 5.26 which is worth 8.80. You terminal risk is only another 1.20, so what bear spreads avail to repair this? None that you'll feel comfortable trading here--so stick with the strikes you have (upside fly conversion) or cover.
It's taken me a while (and, um, actual trading experience; bleeding from losses, and paying for mistaken ideas...), but I've come around to seeing it this way. "Repairs" or "rolling", as most people think of it, it a cutesy way of hiding losses from yourself - and taking on more risk in the hope that price will revert. It might, but no guarantees... and meanwhile, MTM accounting goes on. Again, all of that is thanks to a long-ago discussion where you and @Wheezoooo clued me in. Much appreciated.
All these books and blog posts about "repairing" positions when they add risk the majority of the time. A blown out bull spread and they repair it with an OTM bull spread in a deferred. Never repair a spread by adding risk.
A DOTM 10-wide bull short put spread at 1.00 is a bull call spread at 9.00. If you're unwilling to reduce (towards zero) your delta position--then there is no repair. You're adding risk. DO NOT ADD DURATION. Mofo, DO NOT.
I too got burned by selling premium. Recently with NKLA - cost me $600 for nothing, it would have gone back to normal but what do you do when the stock goes up 50-percent? Initially, I had a condor and they short side scared me to unwind, then the GM news hit me. I bailed...my strikes were too wide - no stomach for this business. I WILL NEVER SELL PREMIUM OTHER THAN COVERED CALLS! you can make small money for a while until shit happens and your options go ITM.