Help With Adjusting Short Credit Spread

Discussion in 'Options' started by HealthPro, Apr 9, 2019.


  1. You wont go into the why of how come you held a position that has moved 23 points against you, that has moved almost 10% in the wrong direction?

    and people wonder why they fail at trading....
     
    #11     Apr 12, 2019
  2. kj5159

    kj5159


    I totally agree with you. I'm particularly interested in the relationship between the prices of option contracts with the same expiry and different strikes (mostly vertical spreads but just looking at segments of the chain itself rather than a particular vertical spread).

    I have nothing concrete yet, haven't had the time to fully devote to understanding it but I'm highly convicted that the need/whatever to keep vertical spreads (any number of strikes) at certain prices creates pricing differences that wouldn't exist if for some reason the options all traded independently (obviously impossible and rediculous but it's useful in the breakdown of the problem to be solved).

    So for instance you have an XYZ Dec 19 $100 call trading at $5 and the $105 call at $4, say you enter the trade now (long or short doesn't matter) and a few months down the road in say September, the spread will still be $1 or very close to it, while the options have deteriorated significantly, they might be at $1.50 and $2.50. To me this seems very out of whack although I haven't been able to look into it yet so I have no idea why.
     
    #12     Apr 30, 2019