Skip to Content

A Personal Options Trade That I Nearly Lost 100% of My Capital

Here is My Original Execution

I initiated a trade on the 11th of October which has 31 days roughly to expiry.

Normally I do not initiate with it so close to expiry because you cannot get USD 1.00 of credit on the risk you take.

However, the trade that I initiated on has an implied volatility of around 24%. That’s rather high enough for me to get USD 1.00 at least 12 days closer to expiry. sounds like a good deal.

However, I am not comfortable with the current market, so this Iron Condor is more of a test on the market trend.

Sell 930/920/760/750 at USD 1.00

What Happened Later

9 days later today, the price of RUT has fallen to 812 at Singapore time 10 pm today.

At that level, the DELTA for the put side is around 18. This is close to my get-out limit loss pt of DELTA of 20. This is when it gets tricky. I need to sleep.

If I sleep now and close the next day, which is Monday, I run a risk of it breaking 20. The trade-off for sleep (yes, sleep, it is that important to me, as it is for everyone if you don’t want to get diabetes lol!) is you might have to buy back at a vast costlier price.

I woke up at Sing time 7 am and got a shock to see RUT made a 26 pt downward move for the whole of yesterday! 3%!

The red line in the picture shows the level when I go to sleep. If I didn’t close I will get a nightmare in the morning then at night.

At the price now to buy back the put side, instead of buying back at USD 1.35, I can buy back at USD 2.40. so instead of a minor 3% loss. my loss can escalate to 140%!

This is where I advocate that you must put emotion out and execute the system that you come up with. If it doesn’t work well, evaluate it and refine it. This stop-loss has helped me in my August trade, now it has helped me again.

The key to trading is to execute, push out emotion and manage your risk.


This site uses Akismet to reduce spam. Learn how your comment data is processed.

This site uses Akismet to reduce spam. Learn how your comment data is processed.