Replies to post #2655 on Snack info board

[Outlaw]

Obviously "sarcastic", sorry bro that all your efforts are for nought!

Your good though...

[Lord DarkHelmet]

Because I was getting too close to Maximum loss of 50% too early,
I bought:

1 SPY Oct12 139 Call at $5.87.

It has a Delta around 81. My net Delta prior was near -166.

I cut my Delta's in about 1/2.

See the new PnL curve...



Still upside risk, but adjusting the spread, gives me some breather room on the downside. It injected more capital into the position though.

You may have problems doing the same. What is your day of entry and original prices on the legs? I will put your spread in and see what you may what to do. You should have to buffer so much delta, because my spread is scaled 15x's greater than yours. Because of that, I would assume you have a negative Delta around -11. That means you probably need to buy a +5 Delta Call to appropriately adjust. If that is true, you need to buy 1 contract of the Oct12 152 Call for about $0.11 / contract midpoint.

Let me know your entry prices and date of entry.

[Lord DarkHelmet]

SPY went down $0.82 or 0.81 SD today. Moving back in the right direction.

If it starts to go back up, the next adjustment would be to scale back the credit spread part of the butterfly 136(short) - 141(long).

Ex. Buy a 136 - 141 debit spread to cover the position partially. This would be the same as "selling to close" the 136-141 credit spread.

Since I have a 15-30-15 butterfly open, I would reduce the credit spread by 1/3, or buy 5 contracts of the 136-141.

This adds more capital to the position, but dramatically drops the Delta, and still provides enough room to profit. It does about double the capital in the position, which would be the downside. Currently, I have ~$1800 in the position after my 1st adjustment. If I bought the debit spreads x 5 contracts at these prices, my capital exposed would go up to ~$3500.

See what the position would look like after the adjustment (light green line)...



At 28 days from now...here is how the PnL curve would change...



You still have a chance for profit below $140.60, but you substantially cut the downside risk as evident by a flatting of the profit/loss curve on the upside.

No new adjustment needed right now. Just giving you a flavor of my next management technique, if one is actually needed.