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Friday, October 17, 2014

Credit Put Spread roll up for profit and new credit received

Today I closed the SPX 1595/1600 Credit Put spread for 0.15 debit. This spread was entered 2 days ago as an adjustment. Here are the details of that entry.

I originally obtained 0.30 credit. Closing for 0.15 debit results in a 0.15 profit, or $75 for the model portfolio in 5 contracts per leg.

Right after that I sold the SPX 1685/1690 November Credit Put spread for 0.30 credit. 4 contracts per leg this time:

Sell 4 SPX November 1690 Put @7.70
Buy 4 SPX November 1685 Put @7.40
Credit: 0.30  ($120)
Max risk: 4.70 ($1880)
Days to expiration: 34

This was a quick maneuver where my goal was to obtain additional credit. As a result, I locked in a $75 gain, and sold a new position for $120 credit which increases my potential total return to $195 for the model portfolio. I also played fewer contracts on the new spread, freeing up some of the margin that was being required by the old position.

I normally sell Puts in the middle of a market fall. That was not the case today, but I saw it as a good opportunity and the 1690 area looks relatively safe to me.

A chart of SPX after market close today
(Click on image to enlarge)

Current positions after this trade:

November RUT 970/980 Credit Put Spread
$120 credit. 89% probability of success and 34 days to expiration. Now part of 970/980/1150/1160 Iron Condor. Will adjust if RUT goes down to 1030 next week.

November RUT 910/920 Credit Put Spread
This position was opened as part of the adjustment to the 1020/1030/1234/1240 October Iron Condor. $201 credit. 98% probability of success, 34 days to expiration. Opened for 0.67 credit. Closing it for 0.20 debit will totally cover the loss on the October Iron Condor. I want to close it for that price, but may end up happy with 0.30 debit or so in order to take risk off the table and free up that margin.

November RUT 1150/1160 Credit Call spread
$200 credit. 34 days to expiration. Will help me mitigate the excessive downside exposure on the portfolio should the market keep falling.

November SPX 1685/1690 Credit Put Spread
The trade described in this article. $120 credit. 94% probability of success, 34 days to expiration.

On a related note the October RUT 1230/1240 Bear Call Spread expired today for max profit. I initially received 1.10 credit there, so this position brought a $220 profit for the model portfolio (and not 1.00 as I incorrectly said on Twitter). This win helps me mitigate the recent hardships.

Check out 2014 Track Record

Related Articles:
Weekend Portfolio Analysis (October 25, 2014)

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1 comment:

  1. I like this trade. I have a feeling that we will encounter some more volatility this month but hopefully not as bad as this week. I will be watching my positions carefully this month for possible adjustments.

    This has been a rough 3 weeks but we were able to manage our positions successfully with minimal damage. This is a testament to our safe and conservative credit spread strategy. Good luck next week.

    You can follow me on Twitter @lienjonathan where I tweet my 90% probability credit spread trades in real-time for free.