I got confuse by the calculation of credit collected. Lets say today MSFT trading at 20$ and i sold strangle at 15 put and 25 call for 2.00$ credit and the breakeven is 13 put, 27 call. MSFT move down from 20$ to 14$ and its 1$ ITM of short put. here is the question, i roll down the call side from 25 to 20 to defending the position. the credit i collected would be Buy back 25 call for 0.50$ and sell 20 call for 1.00. Total 0.50$ credit collected how do i calculate this? should i sum up the full credit of short call? which is 3.00$. the initial credit 2.00$ and 1.00$ for the defending call roll or 2.50$. Inital 2.00$ and 0.50$ ? so i could use the full credit collected to subtract the wide of strikes when it goes inverted
2.50 (minus any commissions you're paying for the initial trade plus commissions on the two legs (buying back the 25s and selling the 20s)). Also keep in mind this is your credit collected, not your profit - it just is your profit if you hold to expiration and MSFT settles between 15 and 20.