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BookingAlpha Option Trading Advisory

Tuesday, October 28, 2014

November 2014, RUT Credit Call Spread adjustment

Today I had to make an adjustment to my infamous RUT 1150/1160 Credit Call spread.

I made the adjustment when the 1150 Call reached the 30 deltas, and RUT was trading around 1124. I deployed new capital using the 1180/1185 Calls.

Buy to Close 2 RUT November 1150 Call @9.80
Sell to Close 2 RUT November 1160 Call @6.50
Debit: 3.30  ($660 in 2 contracts per leg). Originally received 1.00 credit, so this is a $460 loss.

My new Credit Call spread right after that
Sell to Open 4 RUT November 1180 Call @2.49
Buy to Open 4 RUT November 1185 Call @1.94
Credit: 0.55 ($220 in 4 contracts per leg)
Max Risk: 4.45 ($1780 in 4 contracts per leg)

Notice that even though I'm playing twice the number of contracts, I didn't increase my position size because I cut the width of the strikes in half. My maximum risk is $1780, whereas the maximum risk on the original position was $1800. I played the 5 point wide version because the 1180/1190 was giving me $200 credit (a little less).

I was relieved. I thought I was over with this mess that the November expiration cycle  has been but RUT just kept fucking us all, rallying 25 more points the rest of the day. To the point that my 1180 short Calls are close to reaching the 30% probability tomorrow if we hit 1155 - 1157. If that were to happen, yes, you guessed it, I will adjust without hesitation selling the 1210/1220 Credit Call spread. RUT has rallied 10.5% in 13 days. This is historical, this is out of this world and I'm really really eager to see how other option sellers have done this month once they post their returns. If only more of them did :(  (sigh)

RUT chart after market close:
(Click on image to enlarge)

November RUT 970/980 Credit Put Spread
$120 credit. 23 days to expiration. Not a problem.

November SPX 1685/1690 Credit Put Spread
$120 credit. 23 days to expiration. Not a problem.

November RUT 1180/1185 Credit Call spread
$220 credit. 23 days to expiration. May need to adjust tomorrow in what would be the third adjustment of the month. Sad but true.

December SPX 1750/1760/2070/2080 Iron Condor
$340 credit. 51 days to expiration. Still very young and far from being threatened.

If you're getting burned, go have good sex tonight. Life is more than losing money selling options.


Check out 2014 Track Record

Related Articles:
RUT 1180/1185 Call spread closed for a loss. Adjusted with new SPX 2050/2060


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