At what delta will you roll your call spread down? Or do you look for a certain value of the call spread before rolling down?
Benji
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@dluxe23, I differ a little bit from what TW teaches. To me, it does not make sense to keep shorting something after that "trade" or portion of the trade has passed. I would take the call spread off if we dropped another 5-10% and there was nothing left in the short call, but I wouldn't roll it down. From that point, the market has changed its personality quite a bit, so I would just continue to work with one side of risk.
If you watch many of the MMs or trade reviews, they roll themselves all over the place, up and down, chasing the market constantly. If you see where the market ends up at the end of the sequence, it was exactly in their profit zones. Sure, it's easy to see that now in hindsight, but if you're truly monitoring your trading, why would you continue to let that happen? To me, I am making changes to how I'm managing based on a series of wrong-doings like that.
So to answer your question, I am not chasing down with the calls because all the risk is back to the upside after a stock moves downward.
dluxe23
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@Benji, Well I mostly use JL in the same scenario as this.....big drop with some IV. If the stock continues to fall and you have already lost on your put then I would agree with your decision. I would decide this around the 21 DTE (if possible of course) The JL should collect more than the width of the call spread so technically there is no risk to the upside. I would also close the trade before 50% if it runs right back up.....the putis the richest option on the chain so you can get out pretty easily in most cases.