In general, things look pretty good. We are still a little short on Deltas, and a hard move up would hurt us, but I've done two things to mitigate this. First, I sold a Put spread on the 975/950 for $1.10. That of course, gives us some extra Deltas. The second thing I did you won't be able to see in this picture. I decided it was time to start accumulating some long stock. Of course, none of us know when the bottom will come, but companies like GE, Intel, AT&T, and many others have been beaten down to incredible values. Taking some long positions (and I took enough to flatten the Deltas you see here) I think will pay off in the long run.
Long stock aside, I still will attempt to manage this to a profitable conclusion. My plan is the following:
If we move up hard, I will again buy another insurance call to stop the bleeding. I can pay for this with the put spread I just sold.
If things move down, as I believe they will, we will again be nicely centered.
If things move down so hard that it threatens the put side, I will again buy insurance on that side; but I think this is the least likely scenario.
In some ways I wish I had stuck to the plan and not sold the extra calls until they reached the 14 Delta. It would have been a more solid conclusion. I felt like price had hit resistance and was acting exactly like it should so I took a bit of a gamble, and I still really believe in my analysis that I posted recently. This really wasn't a huge deal and the cost difference will be very little, but I kick myself everytime I don't follow the plan exactly.
Good Trading...
Hi Bill,
ReplyDeleteGreat Blog¡¡¡
Got a question:
Your MM is hard. About your top of 2% of the indvidual loss in an Ic, you mean that if the difference between the trade price and the mark price is higer than the 2% you exit the trade?
Thans, Antonio
Antonio,
ReplyDeleteI'm not sure I understand your question completely. The 2% loss limit is what I use when I'm calculating my risk to enter a trade. In other words, I am not willing to lose more than 2% of my total account on any single trade. While this trade is down a bit, it's not near that level yet. Hope that helps.
Sorry if I confuse you, my question wasn´t for this trade. I ´m asking about the way you do when your credit was of 0,5$ and for example now to purchase the option the price you must pay is 1,oo$ and those o,5 differnce is the 2% top of loss ¿do you exit the trade or do anything else?
ReplyDeleteThanks
No, I wouldn't exit if a single leg of the trade, or a single option is beyond 2%. I would only exit if it reached a point where the entire group of trades is beyond 2% of my account value.
ReplyDelete