I was long AAPL Dec 80 / 90 bull call spread for a debit of 8.5 (BEP 88.5). The spread moved very slowly and didn't show much profit until this past week or so. Then the underlying stock moved against me and I rode this position into a loss at expiration. What's the best way to prevent this from happening with a spread? Should I just get out whenever the underlying is below BEP regardless of how much value is left in the short leg? The problem with spread is like you just sit there and wait for a month and you never know whether the position will become profitable or not until expiration. Would I be better off just long ITM options instead of using spreads? Thanks!
(1) It might have been a little better to do the 85/90 spread instead. With the 80/90, you were potentially risking 8.5 to make 1.5, generally not a good trade-off. (2) You could have also combined a 90/95 put-debit-spread for downside protection. (3) As you said in your own words......."One-by-one-at-the-money-debit-spreads require patience and a high frustration tolerance". Develop a strategy that has more outright movement behavior.
But the 80/90 spread has a higher probability that it won't expire worthless unless some castatrophy that causes AAPL to drop below 80.
You're focusing on probabilities, I'm focusing on total risk. (4) You could have rolled out of the 80/call up into the 85/call as a risk reduction measure to take some of your money off of the table too.
This was a good position to have and looks like your small loss - $0.80 - came on the last day, just bad luck. I can't see any improvements to make. Another ET member had a similiar GOOG position, 460/480 debt call spread at $15.50 and it worked out for him. GOOG closed at $480.00
I'm that ET member. I closed the position at $19.80. I was lucky with 1 trading day away from disaster. GOOG gapped down 17pts on Monday. I think I'm done with spreads. Holding a position for 4 weeks to let it work itself out is just asking for trouble.