Guys, as an outsider to this discussion let me interject some reason and sanity You are arguing over opinion on whether the initial credit is relevant in making a follow-up decision. It is a great discussion but the bottom line is still an opinion and each person must trade with their own outlook...
piccon, this implies you do mostly call credit spreads on RUT (since you say RUT moves faster than SPX on the way down and slower than SPX on the way up)?
nice to see more of you all looking at rut or er2 (much better margin/risk management). i think coach is even studying that index.
daytrading the er2 futures themselves. The er2 options have .50 wide spreads even ATM on average so not good for flipping intraday. You could use them for credit spreads but I have not done so yet. ER2 is a volatile index so lots of rewards with swift risks. It is tempting to do size since it is $100 a point or $10 a tick (.10) but it can swing a point against you pretty fast.
Mark, I am so surprised that they don't understand your risk management process. Your logic is so obvious to me, and I thank you for the clarification and confirmation. Let me try to see if I can explain it. As a risk manager, you have three possible choices in managing your existing position. 1. close your position 2. hedge your position 3. do nothing Your choice should depend on your market outlook, the risk and reward potential. Your current p&l and/or initial cost should have no role in this decision making process.