lazy_eyed_ladykiller
Junior member
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Hey guys, I have been playing with debit spreads the last couple weeks. Both call and put spreads (bull call, bear put). I have been noticing that while I am risking less money from the opening, I am also less making money.
For example, what ends up happening is, I end up right, the stock moves in the predicted direction, my long option starts gaining value but so does my short option. Once I calculate the new value of the spread, while obviously higher, is no where near where it would be if I had just went long the option and once coms are factored in, I am really left with next to no gains. Usually the spreads are about a month out, but I am hitting my targets or the options are going ITM in just a few days.
I think it would be better for me to just go long the option, then aggressively trade in the position depending on where it goes. For example, if I am incorrect and the stock starts dropping on my call, I might then make it into a tight spread to recoup some losses or even a tight credit spread if it goes completely awry.
Thoughts?
For example, what ends up happening is, I end up right, the stock moves in the predicted direction, my long option starts gaining value but so does my short option. Once I calculate the new value of the spread, while obviously higher, is no where near where it would be if I had just went long the option and once coms are factored in, I am really left with next to no gains. Usually the spreads are about a month out, but I am hitting my targets or the options are going ITM in just a few days.
I think it would be better for me to just go long the option, then aggressively trade in the position depending on where it goes. For example, if I am incorrect and the stock starts dropping on my call, I might then make it into a tight spread to recoup some losses or even a tight credit spread if it goes completely awry.
Thoughts?
