I made a loss again. But its one that i’m glad i didn’t take any risk. When you are trading options its already pretty high risk. You don’t want too much emotion involved.
I basically laid out the following IC with 42 days to expiry: 930C/920C/760P/750P for a $2.00 profit minus commission.
This correction really tested the system. on 26th July, the delta for the sell put is already overing around 0.17 region. Thats pretty close to the 0.20 to buy back to close. Naturally, i deliberate whether to close. However, i decided to close for a 3.5% loss because firstly, it has broken its channel and secondly the ADX and previous 3 red candlesticks does not look very favorable.
If i don’t close, i might need to buy back at a higher cost. it proved to be a good decision cause it feel by a huge amt in RUT sense that day. had i wait for the next day, I would have taken a bigger loss.
subsequently i open a 870/860 call spread at $0.45 to actually end in profit before commission.
I have burst my margin limits so most likely for September i won’t be putting any spread.
A good lesson with a good ending.
Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Fee-only Wealth Advisory firm Providend.
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His investment broker of choice is Interactive Brokers, which allows him to invest in securities from different exchanges all over the world, at very low commission rates, without custodian fees, near spot currency rates.
You can read more about Kyith here.