Tuesday, August 18, 2009

Re: [TheOptionClub.com] Adjusting Spreads

 

Hi Jeff, the only book that I have come across which directly addresses adjustments is "The Option Trader Handbook - Strategies and Trade Adjustments" by George Jabbour and Phillip Budwick.

Apart from that, Michael C has written a wonderful paper on adjustments that is available in the files section of this group.

Coming back to your trade, given that aug expiration is so close, you will have to take some chance here....

Have you considered adding (+1 160 P/-2 155 P / -1 150 P) ladder @ 0.20/0.25 Debit to net into (-1 155 P/-1 150 P). If GS stays above 155 at Aug expiration, you may still be able to get out with a little profit. Of course, you need to feel comfortable with the downside risk here.

Viky


 
 

On Tue, Aug 18, 2009 at 12:11 AM, jeff_williamsen <jeff@williamsen.net> wrote:
 

I have read many books on trading options. One subject that is rarely covered, if ever, is adjusting a trade. Help me to understand how I can adjust this trade, that may be going bad this week.

GS Bull Put Spread
STO AUG 160 @ 1.86
BTO AUG 155 @ .84
Credit 1.02

Currently if I were to close
BTC AUG 160 @ 3.85
STC AUG 155 @ 1.67
Debit 2.18

I figure my options are to roll down or reverse position. I would like some thoughts from this group, as I am a bit of a beginner on these types of spreads.

- Jeff


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