What to do with (Sept) SPX put position?

Discussion in 'Options' started by wartrace, Jun 22, 2009.

  1. wartrace


    (These are all September puts- one of each)

    +945 put
    +920 put
    - 880 put
    - 800 put

    I was hoping to buy back the 880 put today but never did thinking the market might go up a bit this week after a 3% drop.

    I was thinking about buying back the 880 and selling another 800 to offset the cost. It would cost me 2400 dollars & commision at the close today.

    Is it worth it if you have a negative outlook to buy back the 880 now or close out the 920\880 positions at the same time if it hits the 880 strike?

    The IV for the 880 is 30.52 & 800 is 34.3 so I'd be selling a higher IV strike.

    Any advice for a newby? If I buy back the 880 with no offsetting sale I will still be below 3% of my trading capital on the SPX index options.
  2. Your position looks like a fairly unbalanced, and very tight iron condor. This is a recipe for a bit of trouble especially when you have a September position since it is quite likely that you will run through at least one of your short strikes making noticeable paper losses at the very least. I'm very curious as to why your put spread was so much wider than your call spread. Let me know what you're thinking and I think that I may be able to help with the adjustment strategy, if it makes any serious sense. It would also help to know where you stand on the credits you have obtained, and how much risk you can tolerate. Then I can give you some ideas.
  3. wartrace


    The way it started was a vertical bear put spread 945 bought & sold an 880 put to offset it. I did that when it was bouncing off of the 950 level. I bought the 920 and sold the 800 about a week later.

    I do not have any calls in this trade. (sorry if I wasn't clear- I'm a newby)

    I own a 945 put & a 920 put. I sold an 880 put & an 800 put to offset the buys.
  4. My apologies. You actually were quite clear. I simply misread your post.

    As I see it, you are clearly making money on this position. If you really want to do something about the 880 only, which could limit your profits, I'd suggest the following: Possibly roll the 880 down to an 850 or 860. This will cost you money, however.

    In my position, I'd sell the 945, which is worth a lot more today than when you bought it, and buy back the 880, which has also gained in value, but probably has gained less since it has yet to go into the money (as I write, anyway). Then you still have a 920-800 spread which could make you a lot of money if the market drops to 800, and it is probably now bought and paid for (although I admit that I don't know what you paid in the first place).

    I always like to be in a position where I am guaranteed to not lose over my initial entry, and where there is the potential for further, perhaps generous gains if you are right.

    Best wishes.