Credit spreads - when things go wrong !

29 ביוני 2020

Here is an example of a 'paper trade' that went wrong - and trying to roll the strike down; to recover loss
and lose only brokerage.

initial entry - June 22 Bull put spread with Sold 12.19 July 15 / buy 11.76 - for net credit $700 at around underlying of 13.00

Roll down position of options to avoid being exercised at expiry ( as European sold leg)

second entry - buy rolling down ( and not out to Aug) we have sold 10.68 Jul / buy 10.25 - for net of 0.00 ( after loss of -$900 on initial entry exit)

This is merely a recovery of loss second leg....if this is the worst outcome without being 'execised' and being forced to take delivery of stock at 10.68 then it's a good outcome to lose 6 legs of brokerage at about $30 each =- $180