I sold one ES AUG 2008 1075 Put and given the dark friday we just saw, should I cover this position? Obviously I don't think things are going to be that (it would be a catastrophe if the S&P falls to below 1200!) but any advice is very much appreciated. Thanks!
You sold an AUG08 1075Put, the market drops and you come here for advice? Was polling ET part of your game plan? If it was, listen to what people have to say (and most likely close the position at the market bottom). If it wasn't, just follow your plan. If you don't have one, well ... :eek:
August 1075P on ESU8 is trading at 3.9 pt. That's $200. You shorted that for ~$200? I dont understand....
i dont understand what you guys are saying. You are trying to make $200 on a way otm put holding it for 2 months.
When it comes to options you are supposed to ask questions first and do the trade second. More than one trader has been blown out by shorting S&P puts. If you are going to play the short index put game you need to understand that the only time to go short is after a significant multiday jump in implied volatility. Shorting index puts with low implied volatility is plumb crazy due to the terrible risk/reward ratio.
It does help (peace of mind) to have a plan in advance when/if trade goes against you. Right now the delta is about .06 so the probability of expiring at 1075 is around 6%. NOT expiring is 94%. Remember when volatility increases the cost of your way out of the money option typically goes up. How much did you get for it and what was the delta at the time? One way to hedge your ES future put is to short 1 ESU8, however that will put you more negative than you want to be, but that is certainly a way to balance the deltas. Another option if you think the market will continue to go down is look at buying a 1100 put July ESU8 creating a diagonal. If the market does go down strongly then you can cash that out closer to July expiration and let theta do its thing for Aug. You have a lot of time and many ways to do this.. creat a put fly by buying the 1100 then selling another 1075 and buying a 1050 then you have no worries but probably no profit either good luck...probabilities are on your side...just no black swan protection!
Someone would need to drop a nuclear bomb for us to see 1000 in the spooz by August. I would say sell more, not sure what the vix is at but it must of gone up after friday lol. Seeing that you only sold 1 contract, I don't think it will make you or break you, just bore you to death staring at that position for the next 3 months. Muhhahahaahhaahaha.