Bull put spread and margin

WklyOptions

Well-known member
Make the time to study basic options topics please! You can visit CBOE.com!

If the price of the stock goes below the short strike of my spread, am I put the stock?

NineIron,

Are you making the time and effort to at least visit CBOE.com and look over its library of tutorial videos and webinars? :confused:

And also on YouTube - tons of good videos on very basic options questions and strategy items? :idea:

If you don't make the time to educate yourself systematically - and put in the necessary effort and focus to really learn your trading tools - there is very little chance to succeed in the trading endeavor! (n)

You must make the effort to really study and jump into whatever is your passion - and trading (especially options-based) requires an extremely strong passion in order to succeed. :cool:

With regards to your specific question:

1. You are "put" the stock at $X price if the stock expires < $X, and you happen to be holding a short put with strike price $X at expiry.

If the stock price goes to $X prior to expiry - your open trade on the short put will not result in conversion to long stock usually while there is still some time value on that short put option.

Regards,

WklyOptions
 

NineIron

Junior member
NineIron,

Are you making the time and effort to at least visit CBOE.com and look over its library of tutorial videos and webinars? :confused:

And also on YouTube - tons of good videos on very basic options questions and strategy items? :idea:

If you don't make the time to educate yourself systematically - and put in the necessary effort and focus to really learn your trading tools - there is very little chance to succeed in the trading endeavor! (n)

You must make the effort to really study and jump into whatever is your passion - and trading (especially options-based) requires an extremely strong passion in order to succeed. :cool:

With regards to your specific question:

1. You are "put" the stock at $X price if the stock expires < $X, and you happen to be holding a short put with strike price $X at expiry.

If the stock price goes to $X prior to expiry - your open trade on the short put will not result in conversion to long stock usually while there is still some time value on that short put option.

Regards,

WklyOptions

Thanx. Yes, I've spent about 200+ hours watching videos and reading. OIC.com, CBOE.com, Dough.com, etc. I started off knowing next to nothing, literally. At least now I know enough to know what to ask. Not only do you have to learn the process but, also another language. Problem with videos and articles is....you can't ask follow up questions. That's why I'm so happy I found this forum. I have no one to talk to about trading. No one.
By the way, I should have sold the spread further OTM. Fortunately, the price started going back up.
Thanx again.
 

NineIron

Junior member
Feel free to talk Options with me any time day or night, im an active trader.

Wonderful. Thanx. Like any language, it's easier to pick it up when your talking with someone rather than trying to learn from a book.
I've got my first weekly trade on SPY that expires tomorrow. It's an Iron Condor and the short put strike is 191. Trading at the close today at 191.03. But, I'm inclined to see if it expires above my strike rather than roll it or buy it back. Any thoughts?
 

lloydbee

Well-known member
I'm inclined to see if it expires above my strike rather than roll it or buy it back. Any thoughts?

Why do that? With the Futures currently down it looks like you might get your wish.

Trouble is now there is not much time left for adjustments to take effect, an adjustment last night before close could have possibly saved this trade or better yet Monday. I hope and imagine it's a virtual one so try to learn from it. There is a lot more things that could have been done to save this trade but here is a couple of my basic ones.

SLIGHT BULLISH DAY:
I would close the spread at what you think is the high.

DECENT BEARISH DAY:
If it looks like being a big or moderate down day I would opt for an adjustment on what you think is the high of the morning of buying the short back asap, then run the long closing it out at what you think is the low of the day.
 
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NineIron

Junior member
Why do that? With the Futures currently down it looks like you might get your wish.

Trouble is now there is not much time left for adjustments to take effect, an adjustment last night before close could have possibly saved this trade or better yet Monday. I hope and imagine it's a virtual one so try to learn from it. There is a lot more things that could have been done to save this trade but here is a couple of my basic ones.

SLIGHT BULLISH DAY:
I would close the spread at what you think is the high.

DECENT BEARISH DAY:
If it looks like being a big or moderate down day I would opt for an adjustment on what you think is the high of the morning of buying the short back asap, then run the long closing it out at what you think is the low of the day.

This is real money. Rookie mistake. During the day yesterday, it looked like the SPY was rallying but, by the time I took another peek it was at about 191.10. Now, at 191.02 will I have time to buy back that short strike as soon as the market opens?
 

lloydbee

Well-known member
Currently $191.50 with decay you might get out of it at breakeven or slightly either side.
 

NineIron

Junior member
Currently $191.50 with decay you might get out of it at breakeven or slightly either side.

I bought it back before the market opened. I paper traded for 6 months but, never really paid much attention to the details. Real money tends to get your attention!
 

Mr Fox

Established member
Feel free to talk Options with me any time day or night, im an active trader.

I don't trade options, or know what they are, but may I just say, I think your above post is to me, what forums should be about.
(y)
Well done that man.

Best
John.
 

lloydbee

Well-known member
I bought it back before the market opened.QUOTE]

I don't know how you managed to 'buy it back' before the market opened as Option orders aren't filled before or after hours but I hope your trade turned out ok. I take it you mean you placed an order to BTC.

It was a nice pop on SPY today off the support that's for sure so.

2014-8-8-SPY_zps3e5d23b7.jpg
[/URL][/IMG]
 
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lloydbee

Well-known member
I don't trade options, or know what they are, but may I just say, I think your above post is to me, what forums should be about.
(y)
Well done that man.

Best
John.

Thanks John, it comes down to the fact that I am just crazy about trading Options. I always get so excited talking about them. You could say I am a little passionate about them :D
 

NineIron

Junior member
I bought it back before the market opened.QUOTE]

I don't know how you managed to 'buy it back' before the market opened as Option orders aren't filled before or after hours but I hope your trade turned out ok. I take it you mean you placed an order to BTC.

It was a nice pop on SPY today off the support that's for sure so.

2014-8-8-SPY_zps3e5d23b7.jpg
[/URL][/IMG]

I called TD support and they said that I could place order before the market opened. I guess it filled immediately at the open. As it turns out I could have stayed with the trade but, better safe than sorry.
 

lloydbee

Well-known member
I called TD support and they said that I could place order before the market opened. I guess it filled immediately at the open. As it turns out I could have stayed with the trade but, better safe than sorry.

Don't guess, you need to know about your trade. You should know exactly what time it was filled, for how much and how(market or limit). You can most definitely place orders when the markets are closed but... just don't place 'Market' orders pre-market (or at all really), you are best to always place 'Limit' orders. I always plot my trade entries and exits on my charts using the 'text' tool.

I have a rule for trading Verticals where if it goes ATM or towards and looks like it could go ITM I cut it no matter what. Basically I cut the positions that would/could become stressful. Sure that trade would have worked out but one day it wont and it is better to cut it on a 'maybe' than have it become a big losing trade.

Back when Weekly options first came out some friends and I were trading them very aggressively and they would often ring me asking "What should I do" and they would often ignore my advice through their own inexperience and just leave the trade to play out. Sometimes they would survive, other times I saw them take massive losses that were totally not necessary:( :( :mad:

A couple of cases I remember, one was a friend trading SLV, he had a Put Spread go against him, it was -7k down when he called and so I laid out an adjustment plan for Wed. I called him at the end of the week super excited as I had his trade locked in my Virtual account and I saw his 10k Spread position after my adjustments climb to a nice little 64k profit so I was expecting to hear him turn his 7k loser into making maybe 10k-20k... but no he said after he hung up he didn't really understand and so just left it to run before closing it out on Friday.

Another trader had a similar SPY Vertical go against him, he waited till it was 4 days down called me for adjustment advice or ideas, through his inexperience didn't understand after hanging up and so left it, did nothing 'HOPING' it would come back and 2 weeks later copped a +20k loss...

:cry: I was like WTF why didn't you call me back and get me to explain further. :sneaky:

So the best thing to do is to adjust OR exit even if you do find the trade would of worked out just fine.
 
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NineIron

Junior member
Don't guess, you need to know about your trade. You should know exactly what time it was filled, for how much and how(market or limit). You can most definitely place orders when the markets are closed but... just don't place 'Market' orders pre-market (or at all really), you are best to always place 'Limit' orders. I always plot my trade entries and exits on my charts using the 'text' tool.

I have a rule for trading Verticals where if it goes ATM or towards and looks like it could go ITM I cut it no matter what. Basically I cut the positions that would/could become stressful. Sure that trade would have worked out but one day it wont and it is better to cut it on a 'maybe' than have it become a big losing trade.

Back when Weekly options first came out some friends and I were trading them very aggressively and they would often ring me asking "What should I do" and they would often ignore my advice through their own inexperience and just leave the trade to play out. Sometimes they would survive, other times I saw them take massive losses that were totally not necessary:( :( :mad:

A couple of cases I remember, one was a friend trading SLV, he had a Put Spread go against him, it was -7k down when he called and so I laid out an adjustment plan for Wed. I called him at the end of the week super excited as I had his trade locked in my Virtual account and I saw his 10k Spread position after my adjustments climb to a nice little 64k profit so I was expecting to hear him turn his 7k loser into making maybe 10k-20k... but no he said after he hung up he didn't really understand and so just left it to run before closing it out on Friday.

Another trader had a similar SPY Vertical go against him, he waited till it was 4 days down called me for adjustment advice or ideas, through his inexperience didn't understand after hanging up and so left it, did nothing 'HOPING' it would come back and 2 weeks later copped a +20k loss...

:cry: I was like WTF why didn't you call me back and get me to explain further. :sneaky:

So the best thing to do is to adjust OR exit even if you do find the trade would of worked out just fine.

Thanx. I'll start placing limit orders. I was taught to start thinking about bailing on the trade when the delta gets around 35. This trade was definitely a learning experience.
Again, thank you very much for your advice. I really appreciate it.
 

Windlesham1

Well-known member
NineIron- I've done the same-given sage advice and the person hasn't understood but they didn't want to say so at the time-options really are a mindset,which takes a while but I cannot imagine trading anything else. I think understanding options is like understanding su doku is not about maths-does that make sense?
 
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MobiusGrey

Junior member
Don't guess, you need to know about your trade. You should know exactly what time it was filled, for how much and how(market or limit). You can most definitely place orders when the markets are closed but... just don't place 'Market' orders pre-market (or at all really), you are best to always place 'Limit' orders. I always plot my trade entries and exits on my charts using the 'text' tool.

I have a rule for trading Verticals where if it goes ATM or towards and looks like it could go ITM I cut it no matter what. Basically I cut the positions that would/could become stressful. Sure that trade would have worked out but one day it wont and it is better to cut it on a 'maybe' than have it become a big losing trade.

Back when Weekly options first came out some friends and I were trading them very aggressively and they would often ring me asking "What should I do" and they would often ignore my advice through their own inexperience and just leave the trade to play out. Sometimes they would survive, other times I saw them take massive losses that were totally not necessary:( :( :mad:

A couple of cases I remember, one was a friend trading SLV, he had a Put Spread go against him, it was -7k down when he called and so I laid out an adjustment plan for Wed. I called him at the end of the week super excited as I had his trade locked in my Virtual account and I saw his 10k Spread position after my adjustments climb to a nice little 64k profit so I was expecting to hear him turn his 7k loser into making maybe 10k-20k... but no he said after he hung up he didn't really understand and so just left it to run before closing it out on Friday.

Another trader had a similar SPY Vertical go against him, he waited till it was 4 days down called me for adjustment advice or ideas, through his inexperience didn't understand after hanging up and so left it, did nothing 'HOPING' it would come back and 2 weeks later copped a +20k loss...

:cry: I was like WTF why didn't you call me back and get me to explain further. :sneaky:

So the best thing to do is to adjust OR exit even if you do find the trade would of worked out just fine.

Can I get you on speed dial please?
 

NineIron

Junior member
NineIron- I've done the same-given sage advice and the person hasn't understood but they didn't want to say so at the time-options really are a mindset,which takes a while but I cannot imagine trading anything else. I think understanding options is like understanding su doku is not about maths-does that make sense?

Thanx for the input. I've made a whopping 3 trades so far. All spreads. That's what I intend to focus on and mostly trading SPY and some other very liquid ETFs. Any advice for a very small account?
 

lloydbee

Well-known member
Thanx for the input. I've made a whopping 3 trades so far. All spreads. That's what I intend to focus on and mostly trading SPY and some other very liquid ETFs. Any advice for a very small account?

Get more capital... Just kidding... Small accounts can be tough to build up especially with low volatility.
If you are good at picking direction that (small account) can and will change but settle in to doing your spreads and depending on your broker and success rate you should be able to claw the account up.

I cut my teeth on spreads trading SPY back in 2010 when Weekly options came to light and managed to grow a small account trading nothing but SPY. I started trading 5x contract spreads and topped out trading just into the +200s contracts per single trade.

My advice - Don't get greedy, don't ignore market changes and know how to adjust when the trade turns against your spread.
 
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