Cool, I was able to leg into an MGM call debt spread for no risk. I was doing a spec. trade in MGM when it was at 6.50 for earnings. I just went out and bought the 8 calls for .20 Someone was selling a lot at 8 pushing the IV down to 75% when I bought then whenever the 7 and 9 where about 82-85% IV. However, MGM rallied up to 8.00 pretty easy and I saw the 9 calls trading for around .20 and I just couldnât resist and sold the 9s for .20 taking all risk off the table for this trade. If I would have waited until the EOD i could have gotten .25-.30 for that 9 however you never know what is going to happen next and I am happy with taking all risk off. Just would have been nicer to lock in .05-.10 and have no way of losing.
Mike, I look at the situation differently. You believe you have a no-risk situation. I believe you had a profit, refused to take it and instead, adjusted the position. You may end up with a larger profit, or the profit you reinvested may be permanently lost. But - again from my vantage point - too many traders don't recognize that a profitable position means money has been earned, and that it is YOUR MONEY. It's fine let it ride. aiming for more. But that is NOT RISK FREE. You are risking the profits (your money) that were already earned. Mark
Well my plan the entire time was to play it for earnings so this was a great way to play it. I see what you are saying but I wanted to by myself some more time for this trade.
Rather than adjust to a more passive spread just to avoid a loss, I would have taken the profit on the 8 calls and bot the 9 calls if bullish, the puts if bearish. Booking profits is always a good thing to do.