MamaCash 1:10 pm on Wednesday, January 23, 2019
Tags: SPX1dte ( 1,714 )

SPX 1dte picture perfect

SPX Jan23 IC 2595/2600/2680/2685 Put/Call expired. Sold 6 lots at .45 yesterday, 4 in one account and 2 in another. After two harrowing days of defending ICs that breached or nearly breached the short side, today’s closing risk profile was gratifying.

#spx1dte

geewhiz112 4:03 pm on Wednesday, January 23, 2019

Gratifying but it takes neels of sterve. 😉
Well done
- MamaCash 4:57 pm on Wednesday, January 23, 2019
  
  Not really. I was prepared to defend on a breach of the short puts.😏
hcgdavis 6:11 pm on Wednesday, January 23, 2019

I agree, I think the butterfly conversion will be the best defense for these. I re-opened the short 117 calls on EXPE. It then went immediately against me so I BTO the 116/117 debit spread creating the butterfly. Cut my max loss from 2000 down to $600. While not a winner 600 loss will be much easier to manage than a 2000 loss and if I get really lucky and it pins at 117 on Friday, I actually make $1700.

I think this may be the better way to defend than delta neutral and risking a reversal.

Did not have time to post today, update tomorrow after trading.
- MamaCash 8:19 pm on Wednesday, January 23, 2019
  
  Of course, you don’t need a pin to make some money. If price is anywhere near the profit tent on expiration day, you will be rewarded with a profit, even if small. But you must close early. Don’t let it expire.😏 As you say, much better than a $2000 loss.
  - MamaCash 9:08 am on Thursday, January 24, 2019
    
    @hcgdavis, I’m looking at guidelines for when to add defense. If the short delta is higher than 30 at the close the day before expiration, that looks like it might be a good time. Of course, you have to balance that decision with key support/resistance and numerous other considerations. I don’t like adding defense in panic mode so would prefer to know ahead of time how to respond to various price levels. Have you thought about this?
    - mortlightman 9:23 am on Thursday, January 24, 2019
      
      Love to see you lay this out so we all may use it.
      - MamaCash 9:29 am on Thursday, January 24, 2019
        
        We’re working on it. Will continue to share as we refine.
    - hcgdavis 10:05 am on Thursday, January 24, 2019
      
      I have given this a lot of thought but do not have a hard delta number. I will say on strangles I would usually do something when the short option delta hit 30 but even that did not work on the black swan days. But I would cover, roll, adjust, or move the strikes when a delta 16 option hit 30. Aug. 24, 2015 nothing worked!
      
      I think with credit spreads probably best to do something between 30-40 delta. Anything before that wasting money. Anything after 40 probably too late and at that point just controlling losses.
      
      I think the initial adjustment should be to butterfly it. Then you define your p/l limits. If it keeps going buy back a few of the short options at the middle butterfly strike. That would be a lot cheaper than an outright back ratio like I did last week. Also a reversal would not be as bad as the wings on either side control losses as well.
      
      But the butterfly defense seems to be the cheapest and most adjustable way to reduce the risk.
      
      I will set one up tomorrow and see how these guidelines work.
      - MamaCash 10:24 am on Thursday, January 24, 2019
        
        Agree. The fly is the most gentle defense in terms of cost/timing and also the easiest to adjust if needed. If I’m convinced the trade is going against me, I want to lock in a small loss. A fly works.

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