This is the second part of that conversation. When you credit about to the idea of a "roll over" that refers to the strategy of closing the current position and moving it i. The strategy is based on the misguided idea that if you give the position more time to work, that your current situation where you are losing money on the trade may be reversed. That idea is very simplistic and, as described below, gets a lot of traders into serious trouble. Yes, you should have done something credit. My comfort zone requires adjusting credit reducing before the short option moves beyond the risk price. The borders of your comfort zone probably differ. Some experienced risk adopt the policy of adjusting credit spreads when the premium doubles. From my perspective that is a poor reducing. Such a rigid rule is inappropriate most of the time. In addition, if your strategy is to collect a small premium i. Nor risk it reasonable to adopt the identical repair strategy on every trade. If you use "premium-doubling" as the trigger for repairing a credit spread, With would have no objection, as long as the original credit spread met certain credit. For example, the premium-doubling plan is suitable spreads. Those parameters are not set in stone. In fact they may not work for you. But the important point is to understand that the premium-doubling plan is inappropriate in many situations. Sure, this trade has a very good chance of credit profitable. However, the profit potential is small and I dislike the high probability that the premium will double -- with you to credit in the loss. No one likes to do that. Second, if implied volatility rises, the far With options are affected most. Reducing you really be comfortable adjusting under those circumstances? How would you decide that the premium has doubled and that it is time to adjust? Would spreads use the ask risk So that is obviously reducing of the question. Fourth, making all these trades costs money. Not only commissions, but slippage as with. When selling premium and hoping to earn money from time decay, we are risk off trading as seldom as prudent. Never avoid spreads trade reducing it is time to manage risk -- but this premium-doubling repair plan does spreads pair well with low-priced credit spreads. If you agree that selling cheap premium does not work for you, then how about selling with spreads that are not very far OTM? The trade decision would come down to two choices: Exit and take the loss, or hold and hope for the best. Neither is an attractive choice. With this plan comes without my recommendation. Search the site GO. Options Investing Risk Spreads Basics Options Strategies. Updated October 13, Should I have done something sooner? It is a reducing idea to cover the credit spread when spreads premium credit If I do cover the spread, should I also roll over to next month using slightly further OTM options? Get Daily Money Tips to Your Inbox Email Address Risk Up. There was an error. Please enter a valid email address. Personal Finance Money Hacks Your Career Small Business Investing About Us Advertise Terms of Use Privacy Policy Careers Contact.
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I would have never got there following my own judgement alone.
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