i agree that adjusting down or up is not the brightest move, although it has worked for many years in my trading. i continue to search for a better way to "repair". when you close a bad trade; it must take some strong discipline to not open new positions immediately.
Domestic, is rolling/repairing really any different that closing a trade and taking the loss, waiting and re-evaluating, and putting on a new trade?
Mark, You are not the minority. I agree with you in your decision making process. Rally, Consider yourself a new portfolio manager, someone gives you his portfolio, and ask you to manage the portfolio from now on. What do you look at? I will look at the risk, potential return, and other opportunities and adjust the portfolio. I don't care about the current p&l, or the initial cost. I only care how to make money from now on.
andy, i dont enjoy overpaying in edge any more than the next trader but sometimes its a cost we just have to eat. Unfortunately, unless you have a robust signal, the -edge can eat up a nice chunk of your expectancy. If its too big of a deal, you could look at the es options for inside quotes or cut size and trade less legs (naked).
Rally, it's not too big of a deal... just not pleasant. Do you base your stops on support/resistance levels of the underlying (I recall the charts you used to post with RSI and stochs to show o/b and o/s) or do you use an ATR based stop such that the stop is outside the market noise? I read an earlier post of yours stating you are "30 deltas on the sell side". Please explain.
I meant that i generally avoid selling options that carry less than 30 deltas. Under current vols thats about 25 points OTM on the SPX.
Interesting! Why reference a 'hard coded' delta related to current vols when vols are variable and change day to day? Wouldn't it be more relevant to reference a variable of current IV, like 1st or 2nd StDev calc based upon current IV combined with days to Expire? But then again, I'm convinced I'm still in over my head here. D
Do you ever go substantially more than 30 deltas on the sell side (such as selling an ATM credit spread)?
Just curious Mark. Using a synthetic analog to your rationale would you also never sell/close a long stock position based on a trailing stop loss or a stop loss? In my logic system the initial "unearned" credit/premium received is important in managing the position since it establishes and brackets the magnitude of the risk-reward span. Some traders use a threshold exit criteria/methodology (e.g. 50% ) on a losing (or winning) position to preserve trading capital or to partially sell winning positions for a risk free ride on the house. I therefor don't think it can be properly or logically generalized that initial premium/credit is fully irrelevant. TS