OPTIONS TRADE MANAGEMENT TIP: WATCH FOR POST-TEST OPPORTUNITIES
Okay, so you didn't anticipate a breach of one side of your setup, you couldn't roll it out for a credit when it did breach, and/or you just overlooked the fact that the setup was in breach (hey, I've done that). All is not lost ... .
Going forward, look for opportunities (dips/bounces in price) to roll your tested sides out and away from current price and, naturally, act on them when you have the chance.
In this regard, it helps to have a checklist of sorts (mental or otherwise) when your open your portfolio and look at your exiting setups. (Because I'm a premium seller, most of my checklist applies to premium selling setups like short strangles, iron condors/flies and credit spreads.) With each setup, ask yourself:
1) Is the setup in breach, about to breach, or is everything "peachy keen" with the setup? If it is in breach or about to breach, what can I do about it? (Look at all possibilities, including rolling out and away for a credit; rolling out and away for a debit which is financed in part or in whole by an oppositional side setup; conversion of an iron condor to an iron fly; going temporarily "inverted", etc.).
2) Can I profitably adjust the setup's overall delta intratrade (i.e., using the same expiry) and receive a credit for doing so? Is there enough time to make it worthwhile? (I generally don't adjust deltas in the setup by rolling short puts up/short calls down if there are less than 25 days left until expiry; it usually isn't worth it ... ).
3) Should I consider taking a particular setup off even though it's not at least at 50% max profit in order to free up the buying power for newer, greater probability, and more profitable plays? (This is purely a matter of discretion and trader judgment; sometimes, I just want to take a particular trade off because it isn't moving much, and I want to get into something in which I am more interested, that has higher volatility, etc.).
4) With covered calls in particular, is it time to close out the short call and sell a "new" one further out in time to reduce the cost basis in your underlying further (I'm fairly positive that when the short call reaches .05 that it's fairly worthless and that you're not going to get much benefit out of waiting for it to go from 5 cents to "no bid" or to worthless expiry; close it out or roll it out to a new expiry to further reduce cost basis).
Further Resources on Trade Management: TastyTrade/DoughTV videos, particularly the "Market Measures," "Anatomy of a Trade," and "Good Trade/Bad Trade" segments.
Going forward, look for opportunities (dips/bounces in price) to roll your tested sides out and away from current price and, naturally, act on them when you have the chance.
In this regard, it helps to have a checklist of sorts (mental or otherwise) when your open your portfolio and look at your exiting setups. (Because I'm a premium seller, most of my checklist applies to premium selling setups like short strangles, iron condors/flies and credit spreads.) With each setup, ask yourself:
1) Is the setup in breach, about to breach, or is everything "peachy keen" with the setup? If it is in breach or about to breach, what can I do about it? (Look at all possibilities, including rolling out and away for a credit; rolling out and away for a debit which is financed in part or in whole by an oppositional side setup; conversion of an iron condor to an iron fly; going temporarily "inverted", etc.).
2) Can I profitably adjust the setup's overall delta intratrade (i.e., using the same expiry) and receive a credit for doing so? Is there enough time to make it worthwhile? (I generally don't adjust deltas in the setup by rolling short puts up/short calls down if there are less than 25 days left until expiry; it usually isn't worth it ... ).
3) Should I consider taking a particular setup off even though it's not at least at 50% max profit in order to free up the buying power for newer, greater probability, and more profitable plays? (This is purely a matter of discretion and trader judgment; sometimes, I just want to take a particular trade off because it isn't moving much, and I want to get into something in which I am more interested, that has higher volatility, etc.).
4) With covered calls in particular, is it time to close out the short call and sell a "new" one further out in time to reduce the cost basis in your underlying further (I'm fairly positive that when the short call reaches .05 that it's fairly worthless and that you're not going to get much benefit out of waiting for it to go from 5 cents to "no bid" or to worthless expiry; close it out or roll it out to a new expiry to further reduce cost basis).
Further Resources on Trade Management: TastyTrade/DoughTV videos, particularly the "Market Measures," "Anatomy of a Trade," and "Good Trade/Bad Trade" segments.
