hcgdavis 3:44 pm on Wednesday, October 3, 2018
Tags: Fuzzy ( 414 )

MU #fuzzy Rolled 30 DTE…

Rolled 30 DTE 50 call out to 44 DTE for 0.43 credit. Cb now 8.67. Briefly had a break even, need a few more rolls to put it solidly in the profit column.

hcgdavis 4:24 pm on Wednesday, October 3, 2018

@smasty160

I am really interested in what they are doing at option pit for losing trades. Read the book and get the mechanics but when I emailed Mark about it he kind of responded that he would just close a losing trade at a pre-determined loss and reset or move on.

I am sure they have some losing trades, are they ratio-ing, closing, hedging, rolling, or moving?

We all know there is no 1 trade you can do to fix a losing trade, just curious how they are managing after reading the book and talking with Mark. In the book he is suggesting one way but in person recommending something else.
- smasty 4:45 pm on Wednesday, October 3, 2018
  
  Hi Chris, That is a great question! First of all Mark hates adjusting, so I can understand him giving you that answer. The real answer though is they embed hedges in the setup that protect against a big move opposite of your trade direction. For example, they are big on on directional butterflies, take a look at the attached pic: This is a downside directional fly on QQQ, but part of the potential profit is sacrificed to add some upside calls in case your directional assumption is wrong. Note the flatness of the T1 line. Ideally this would have a better theta profile….but that’s a huge way they design. They are also big on leveraging volatility and skew in trades. So unbalanced ratio flies that take advantage of skew are big in their repertoire. Lots of calendars as a way of building long inventory at a discount.
  Think of how many times ICs get blown out through the upside….they will take 1/2 of the max profit on an IC and buy calls (inside the tent) to protect against that blowout.
  - smasty 4:53 pm on Wednesday, October 3, 2018
    
    The embedded hedges aren’t meant to save a trade, but to lessen the impact of a wrong directional assumption. This way you can hang a little longer to see if there is a reversal in your favor. Or if there is a total blowout in the wrong direction, say a buyout (or an overnight trade resolution 🙂 )…then you make money on the hedge.
  - MamaCash 5:21 pm on Wednesday, October 3, 2018
    
    Didn’t realize that Mark didn’t like adjustments. I’m in his camp but find that they’re better than bailing at times.
  - hcgdavis 6:39 pm on Wednesday, October 3, 2018
    
    Makes sense, that is kind of what I was getting from the book. Floor trader trick