Benji
Panjang

Short Put Spread in High IV

NASDAQ:COST   COSTCO WHOLESALE CORPORATION - COMMON STOCK
High IV in $COST

Sept 15 140/155 Put Spread for $2.03.


2x stop loss, 50% win mgmt.
Dagangan aktif: Added another put here at the $150 strike, for $1.14 db.

Komen: Closed the $150 strike put today for 28% win in few days, filled at $.82. Just reducing some risk here in COST, as my notional is essentially $15k
Dagangan ditutup secara manual: On vacation, taking a few trades off. Filled the $155 put spread trade @ $1.49 to close.
Awesome, thanks for the detailed feedback.
Balas
On first look, appears a very aggressive trade for a modest credit, i.e. downside potential of $1297. I see that you have the stop loss in place, however is it guaranteed to get you out in a hurry if needed?
Cheers.
Balas
Benji Black-Krim
@Black-Krim,

Thanks for the comment. I just usually stick with a strategy of selling anywhere from .25-.35 delta on the put side and then assess the credit received on whether it's worth the play or not. I use the 2x stop loss and size accordingly, typically anywhere from 0.25-0.5% of my account per underlying.

You're right, the spread has $1,297 of potential loss, but I only buy the wings in this account (IRA) do reduce the buying power needed. A margin account would relieve me of that BPR.

The 2x stop loss is not guaranteed in a hurry, no. One way to counter act that is to trade far enough out in time, so that your gamma is not as much of a factor because enough theta will cover that up for you. If need be, I can immediately come in here and sell the call ontop of the put to create a straddle and reduce my deltas if I had to.
Balas
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