"how you repair if the stock opens 30 monday..account would be wiped out.. think smart"
how you repair if the stock opens 30 monday..account would be wiped out.. think smart
-----Original Message-----
From: BearcatbobSI1 <rbboyda@gmail.com >
To: ConservativeOptionStrategies@ yahoogroups. com
Sent: Sat, Feb 27, 2010 9:09 am
Subject: [ConservativeOptionStrategies] Re: Credit Spreads
Here is an example. For calculation purposes lets use a hundred contracts. <b>I did not do 100.</b>
I first entered a Feb Bull Put Spread Short Feb $23 and long Feb $22 a net credit of $.25. For a 100 contract a cash credit of $2500. Then I became worried that NBR would close Feb below 23 so I did a repair job. I rolled the short Feb $23 to a March $23 for a net credit of $.40. I also sold the long Feb $22 also for $.40. As a result, I havested $.25 + $.40 + $.40 = $1.05. This represents a net cash yield of $10,500.
The downside is that I now have a NP position in NBR with Mar 23s. NBR is now trading at $22.04 so I have a risk position - but one I am comfortable with. I may buy OTM puts to derisk the position - I have not decided as I believe NBR is a good company and I have the margin capabiity in the account to handle the position.
Bob
--- In ConservativeOptionStrategies@ , "optionsmike" <michael@...> wrote:yahoogroups. com
>
> Hi Robert,
> I must say I've never done a roll to repair a credit spread gone bad. Do you have a specific example or two? I usually write them so far out of the money that I don't get into that position (but my reward is low too). Thanks!
>
> Michael
> www.safe-options-trading-income.com
>
> --- In ConservativeOptionStrategies@ , Robert Boyda <rbboyda@> wrote:yahoogroups. com
> >
> > In interpret Bull Put Spreads to be Credit Spreads. I buy the further OTM
> > Put and sell a closer OTM or ITM Put for a net credit.
> >
> > I do this quite a bit and track them religiously.
> >
> > I have learned to do them in an account where I have significant margin
> > capability so that I can roll them if they go bad. I will roll the short
> > position for another credit and then sell the long put - which has
> > appreciated for more cash. If I think theresulting NP exposure is too much
> > I will enter another long OTM put and restablish the spread.
> >
> > Bob
> >
> > On Fri, Feb 26, 2010 at 8:50 PM, optionsmike <
> > michael@> wrote:
> >
> > >
> > >
> > > Hello to all,
> > > Does anyone in the Group do credit spreads? If so, how do you limit your
> > > risk and close your trade? I like writing them and generally close them out
> > > early if I can get halfway back to zero from where I established the
> > > position.
> > >
> > > Michael
> > > www.safe-options-trading-income.com
> > >
> > >
> > >
> >
>
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