Option Trading Articles: [ConservativeOptionStrategies] Re: Adjustment of current SPY diagonal leapspread position

Tuesday, April 13, 2010

[ConservativeOptionStrategies] Re: Adjustment of current SPY diagonal leapspread position

mike,
a general rule is to make as few adjustments as possible especially first week or two. however, there was only like $20 time value remaining and i could capture over $520 for the same expiration month so i made the adjustment. also i think the market is a little high here so i capture some of the profits in my leaps. i generally don't make adjustments until wed/thurs of expiration week. if the time value of itm short calls falls below 0.25 per share i will look at my position and analyze possible adjustments. i really want to warn people to be cautious making adjustments prior to expiration week as the market often punishes you by changing direction. drjoe

--- In ConservativeOptionStrategies@yahoogroups.com, mike xue <michaelxue88@...> wrote:
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> Dr. Joe,
> Â
> Why you sell new April10 120Â call not May since only 4-5 days left expiration? I asked you the adjust question about a week ago because the quick moving up of SPY, and you said should do less adjustment. I guess my question is when you should do adjustment, ie.Â how much time valueÂ left is considered too little so we should adjust positions?
> Â
> Thanks,
> Â
> MikeÂ
>
> --- On Mon, 4/12/10, joe & leigh <gass20@...> wrote:
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> From: joe & leigh <gass20@...>
> Subject: [ConservativeOptionStrategies] Adjustment of current SPY diagonal leapspread position
> To: ConservativeOptionStrategies@yahoogroups.com
> Date: Monday, April 12, 2010, 10:27 AM
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> Â
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> new position established 03/09/2010 spy, an etf and adjustment
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> initial leap position had a delta of 0.9 so i sold at ratio of 9:10 and sold short call atm
> the short call had almost no time value today remaining so i btc the short call position, stc 1 long leap position to cover most of the cost ...then sold the april 120 atm short call.....ratio of 7:9 thereby maintaining upside protection.. ...drjoe
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> 04/12/2010 Sell To Open 7 SPY Apr10 120 Call $0.77 $523.96
> 04/12/2010 Buy To Close 9 SPY Apr10 114 Call $6.05 ($5,460.05)
> 04/12/2010 Sell To Close 1 SPY Dec12 80 Call $41.94 $4,178.97
> 03/09/2010 Sell To Open 9 SPY Apr10 114 Call $2.18 $1,946.92
> 03/09/2010 Buy To Open 10 SPY Dec12 80 Call $36.30 ($36,315.11)
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