I just do not even know where to being saying how this just does not add up. Why would you feel you expose yourself to too much risk trading cash? You can square the position even if it goes against you by 1 pip. Also, spreads again are not designed to take directional exposure to. Leaves me in a very confused state of mind. But what the heck, that was your trade not mine. I can only urge you to realize your losses and to never let markets move against your position by that much. I am afraid my appeal will be fruitless, because you do not sound at all you feel or sense the slightest pinch of pain.
I don't know how many times I have to tell you this. You stay hedged your whole life, always with the idea of protecting yourself from bad luck, and leaving the door open for good luck. and maybe once, twice or even three times in your whole trading carreer you hit it big like the guy that was short yen then you just let it ride the worse that can happen is you just go back to your hedging career trying to eak out a living each month
Correction: X1 was not at spot, rather it was at 8 big figures in the other direction. Vol curve was not perfectly symmetrical, so even when the distance between X1 and X2 from spot was net 4 figures, premium we paid was limited.
Let me clarify on this usdjpy trade. I have never before in my trading career (almost 4 yrs now) done such a trade. This was a very experimental kind of trade for me and it did not work out. About the calendar spread, its good news because you learnt something new today To give you some color - I was very new into my job when I took this trade. My desk wanted to do such a trade for ages, but they never ran the numbers. I ran the numbers took the proposal to my head of trading. The sanction for the trade came from head of trading and head of GM and I executed it. The trade lasted for around 3 months, when we finally closed it. During these 3 months, I had numerous discussions with my head of trading on this trade and we developed a great professional relationship. To be honest, when we closed the trade and lost 70% of X, my boss was irritated for about a week and I avoided him But after around a week, he took me aside and told me that I managed the losing position very nicely. After this trade, other than our professional relationship, we became good friends as well. Sometimes being in a losing trade and managing it the best possible way is all it takes to leave a good imprint on your boss. Just sharing my experience.
Just having a good discussion with you. So, your appeal will not be fruitless. I don't trade like this normally. This is very out of the regular, very experimental trade for me.
I had 0.25% risk from each 90, 90.25, 90.5, 90.75, 91, 91.25, 91.5, 91.75 and 92, for a total of 2.25% risk at an average price of 91. I have covered this 2.25% risk at 96 for a loss of 11.25%. So, total booked PL = 7.43% - 11.25% = -3.82%. So, I have now cut the original trade risk by more than half. I am going to keep the remaining risk on as of now.
Currently, I still have following risk: 1% risk from average price of 93.25 (0.25% risk at 92.5, 93, 93.5 and 94). 1% risk from 93.5 that I added. So, MTM PL with usdjpy at 96 is -(2.75%+2.5%) = -5.25%. And total booked PL = -3.82%.
a) I did not learn anything new. Fyi, I have been a vol trader for years for various tier 1 banks, though not much on the equity side and as I insisted how you managed the delta on this calendar spread was plain wrong, it would have usually gotten you fired. b) Some are in this market to make money, others to make friends. Each one to his own.
so you are still going to bed each night with losing positions on the book. Experimental or not, its just the wrong approach. I do not mean to be condescending but this is how 99% of the retail crowd trades and they mostly lose money, why you wanna be part of them. Why not cutting it all and start over. Next time you cut losers short and you run winning positions a lot longer, rather than the other way around.