My long term look:
With the recent gradual roll downs how do things look?
Debit spreads currently:
01 7600-7425
15 7600-7450
03 7600-7475
10 7600-7505
01 7600-7600
Yes, account is down off all time highs a little now but at expiration these are all nicely profitable. Even in a worse case scenario backwardation there will always be somewhere to roll down for a credit even if it’s a year out.
I get questions about when I would consider closing the positions. My answer has always been my heir will close them when I’m gone but I’ve been thinking a little more about that.
Here’s the scenario where I might consider closing everything:
In a slow gradual dropping market allowing good rolling down of the daily sales there could possibly come a point where the LEAPS are worth exactly what I’ve paid for them (including roll ups). Then the market stabilizes without the V shaped recoveries we’ve been getting used to. At that point all the daily sales go worthless eventually. Then LEAPs are at breakeven and every bit of the premium I’ve received becomes 100 percent profit.
That is the situation where I would maybe consider closing everything.
Long story short, If the LEAPs are at breakeven and I’m out of all my daily sales I’d consider locking everything in and reloading on a bounce and VIX drop.
Options Bistro 