Monday, January 4, 2010

RE: [TheOptionClub.com] Re: BWB adjustment plan

 

There was no flaw. There never is a flaw with an initial position since they are all basically random and have the same expectancy. It all comes down to how you play it going forward – especially if the position gets threatened. As things hover around your short strike, it gets very nerve wracking and you either have to decide to gut it out or look for ways to give yourself other chances. I gave just a couple suggestions out of a whole universe of possible decisions. In the end, whatever works, works.

 

From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of Joey Huckabee
Sent: Monday, January 04, 2010 10:48 AM
To: OptionClub@yahoogroups.com
Subject: RE: [TheOptionClub.com] Re: BWB adjustment plan

 


I can tell by the comments that the initial placement of the position was flawed and if I wanted to pursue the 89 support level of TLT (which was the reason for the initial trade) I should have used some other option strategy instead of a BWB.

In hindsight I did not really feel that great about the risk / reward picture and the chart (other than the support).

lesson learned... lets hope it sticks.

Joey


/*]]>*/ --> -->
On January 2, 2010 at 8:56 PM mcatolico <mcatolico@mindspring.com> wrote:


 

Don't know how active or aggressive you are but I'd add a ladder here: -10
90p/+10 89p/+10 88p for zero debit which you should be able to get (maybe
even for a slight credit). That leaves -20 89/+10 88/+20 87.

Depending on how things play out this gives you a few outs. 1) if tlt moves
back higher you just wait it through and buy back your risk(or ignore it)
expiration week. 2) if tlt drifts toward 89 you either double down of sorts
via something like a -10 89/+20 88 backspread for even or revert back to
your original position by selling back the ladder (either the +10 90/-10
89/-10 88 or +10 90/-10 89/-10 87 depending on prices with the idea of
adding a credit or adjusting for zero additional debit). 3) on a big gap or
swift move down to and through 89, sell out the extra gamma from the ladder
by selling the atm strike at the time (e.g. at 88 add +20 89/-40 88/+10 87
for $0 or better) and then work to fight the remaining short otm vertical.

-----Original Message-----

>
> Hey gang,
>
> Just wanted to pull some thoughts on a trade I have in play, right now I
am not planning on doing anything but wanted to know if I am missing
something... like being able to adjust the trade to make it better.
>
> TLT
>
> +10 TLT Jan 2010 90 PUT
> -30 TLT Jan 2010 89 PUT
> +20 TLT Jan 2010 87 PUT
>
> trade initiated at a 0.35 credit.
>
> thanks for any input.
>
> Joey
>

rce.

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