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The Complete Beginner's Guide To Managing Losing Credit Spreads
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- Опубликовано: 7 апр 2023
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Have a credit spread that is trading against you and is starting to lose money?
Then watch this video to see how you can turn your losing credit spreads around.
In this video, I'll share with you exactly what you need to do when you have a credit spread that is not behaving the way you want it to be, and what the optimal way to manage it to have the highest chance of success with the credit spread in the long run.
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#creditspreads #bullputspread #bearcallspread
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I love this guy. In all his videos, he explains everything very well. Huge thumbs up!
There is a thing that I call “Average Up”, from the moment you decide to open positions DO NOT ever open all at once. Open them in groups of higher and higher credit limit-orders which end up being a very very efficient Credit Spreads-then follow his advice. Thanks for the video
I just did that today, the position moved a little against me, so I sold more contracts for higher premium, still making sure to manage my risk and not overleverage myself. Basically just scaling in to a position
Adding to the same position? Or a position further out?
@@krisw7625further out, increase the chance of expiring worthless
@@krisw7625same
Outstanding Commentary!!! Thank You!!!
Great explanations of spreads. Thanks for the insight!!
☺️
Thank you for this video. I’ve been looking for a video that addresses managing credit spreads and you video is very helpful.
you are the best teacher, way better than the ones i paid for before finding you. Thanks a lot man and keep up the good work. If you ever hold a life class, i want in. Cheers!
You're welcome 👍 And thanks for your support, appreciate it ☺️
Glad I found this channel. Awesome info. Going to just have fun setting iron condors and spreads.
👍
Thank you for your videos! They are awesome. It is really appreciated all the hard work that you do.
You're welcome 🤗
Very informative video. Now I have a better idea as to when to roll losing trades. You explain everything so clearly. Thanks!
You're welcome 👍
this video added value to my understanding on WHEN TO TAKE ACTION TO REAPAIR A LOSING POSITION CREDIT SPREAD, thanks!!
You're welcome 👍
Thanks Davis, I always look forward to your videos as it always makes a lot sense unlike other youtubers and I've watched hundreds. I've been trading quite a bit of credit spreads after watching your videos and have got very good results so far from what you teach! Please also make videos on how to manage other strategies as I'm learning tons from it. Thx!!
Very nice! And sure, will be creating a series on managing losing trades for other strategies as well 👍
@@optionswithdavis Can't wait, thank you!
What an incredible video!
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Good video. Your assertion that you will have losing trades is right on.
Well explained . superb video . Thanks.
I always asked myself where is the right time to roll or not the position.
I think that 21 days is the right time to analyze the situation, I were assigned at 15 days to expiration.
If is possible to roll with a credit is right to do it, instead close the position.or going inverted ATM
You're welcome 👍
It can be a bit scary closer to expiration looking at a massive red.
Would you consider adding to the short strike and buying same size closer to ATM thus creating a small debit spread to reduce max loss, bump up max gain, as well as reduce gamma risk?
Great video Davis, well explained. Best.
Thanks for another awesome video Davis!! I always panicked when the stock touches my short strike. Now I know what to do and when to sit on my hands and do nothing. Can you also do a video on rolling credit spreads? Keep up the awesome work and keep the videos coming!
You're welcome and sure 👍
Great vid, thx!
Great video. What’s your magical expiration date ? I like weekly
Every time I am at a loss of credit spread I usually turn it into an iron condor to lower my loss and basically you using the same capital you used for “losing” other spread.
Watch this:
Part 1 - ruclips.net/video/3Z8gcBCePSs/видео.html
Part 2 - ruclips.net/video/i4dkoe7NTJU/видео.html
How would you adapt this for 0DTE credit spreads?
Hello, thanks for your great job. In one of your videos, which you published 4 months ago - you mentioned always managing position at 21 DTE. I wonder if you meant managing only losing position at 21 DTE, or regardless whether it is losing or profitable? Even if it is only 10% profit of credit - is it better to close it at 21 DTE? Wonder what studies say about it. Thanks for an answer.
P.S.: In this video you say do nothing if position is profitable regardless whether it is 21 DTE, or not
Great video. I believe you said in a video 2 months ago that is the stock price reaches your short strike that you should close at 21 days. Here you say to to nothing until it reaches your breakeven. What is your preference?
Excellent video on trade mechanics, Davis! 👍👍Would be interesting to include the profit target discussion in the video. My preference is 80%, would be curious to know yours.
I loved thos video. Great graphic explanation.
Thanks for another excellent video Davis!!
You're welcome 👍
My issue with options is that it ties up your margins and your money for the DTE which could be up to 60 days or more even sometimes Which prevents you from proceeding with other opportunities as they arise, so I believe in a very short term options to keep opportunities open and accounts available and for a quick rollover if needed, any comments are welcome please?🎉
Thank you Davis, great as always. Could you explain other strategies as calendar spreads and double diagonals please
You're welcome 👍 And thanks for the suggestion. I seldom use those strategies but will consider creating a video on them in the future.
Hi Davis I have a question. Early assignment means close both the sell put and buy pull or can be just the sell put alone? Meaning I have the purchase the 100shares.
so waiting until the last day where all the time value is gone would be bad? I've never been too sure about those tasty trade numbers. I've been waiting to the last day as frequently there is a reversal and no need to roll or if no reversal buy back and move to later date etc
I normally do about every two week spreads
A great video, but maybe I found it too late. I have one ITM which expire tomorrow (Dec 29). It's UPS, which is at $156.87 right now. I have the long at 155 and the short at 157.5. So, I'm not sure how to act with this one today when the market opens. It is still running. Should I close the trade now or what would be the best approach here?
Awesome video, thanks😊
You're welcome ☺️
Thanks Davis for the fantastic video. Will dividends have an effect on the 21-day rule?
Not really but it may prevent you from being assigned on the short leg of a call spread if it's ITM. Watch this: ruclips.net/video/d8zD8GjHoTg/видео.html
Great video!! I get that it doesn’t make sense for buyers to exercise early, but, in my experience, humans do a lot of things that don’t make sense. Do we know empirically how frequently people do exercise early? I would love to see those stats.
Hi Davis, on the graph you are showing with the green and purple lines, what is the vertical y-axis representing?
The PnL.
Great video thanks! Can you tell us which software you use to generate the PnL graphs
You're welcome 👍 It's the TD Ameritrade platform.
Just a question... Let's imagine that I opened a call credit spread and the market starts rallying and the price touches my short strike and is directing towards the long one. Could I make a box to reduce the overall risk? I mean, if I open a put credit spread, same DTE and exactly on the same strikes, the premium received from the sale should be subtracted to the maximum loss, right? So we could say that we can use a box to manage a losing spread. (Also an Iron condor or an iron butterfly could be possible)
@@user-mf2fd6dq8x I coulda/woulda, cos I was about to do it, and thank God I didn't. I still placed that trade in paper trading and is not going well so far... I'll try to fix it with an iron condor/butterfly and then a box a see what happens...
Very Interesting. Tx a lot
You're welcome 👍
What is 21 days to expiration. please explain.
Another awesome sharing! Thanks!
You're welcome 👍
Hi David, what happens when we have a loss on expiry? Do we need to purchase the stocks? Thx for explaining
When any position is in, or even near the money on expiry you MUST close the position. This is VERY important! Because, you can only trade up to 04:00pm - but options can be exercised till 05:30pm. A wild swing in the aftermarket can wipe your account!
Once again , people should not be fear about getting assigned because the broker hold enough capital right?
21 days out of how many days? What about if the expiration period is 28 days weekly options - half of 28 is 14 days?
21 dte means 21 days left to expiration. Generally, I stick to 45 - 60 dte on entry. That's when the implied volatility is historically overstated compared to the actual volatility, hence the edge. I explain that here: ruclips.net/video/z0ZpIplIbbY/видео.html
If you feel the trend will continue, what if you close the short position, but keep the long position?
Quick question, how come when I open a credit spread trade the first day I am losing money but the stock price is not close to my strike price? Should I let time decay on that option?
Don’t use all your pre-allocated money to open all the spreads at once rather in groups of 2-5-3 with limit-order of collecting higher credits. Most likely at the end you will have an efficient trade because it’s almost impossible to always time the market precisely but this way you can eliminate that correct timing. Alway ask for more than current offering credits and it almost always gets filled eventually during the day.
Mr. Davids, I paid $10 to buy a 5pt wide SPX Butterfly. The price passed the BE point from the low side since I was not able to get out. Will I get a trouble? Thanks, in advance.
The butterfly is generally a low risk high reward defined risk trade with a low win rate. So even if SPX crashes, the most you could lose is what you paid for it. And since its on SPX, there's no early assignment risk. I'd just hold it to expiration since it's the risk you've already accepted upon entry. Furthermore, the butterfly is a very slow spread, meaning you'd only be able to realize most of the profits near expiration.
Gold mine ⭐️⭐️⭐️
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hi I have a little question. : if you put options on spy or qqq, it is most likely that we won't get more than 10 % ROI with a DTE of 45 days . So isn't it more profitable to invest passively in the etf knowing that the average of ROI is about 10% after 50 years? thanks for your great videos
You are comparing 10% in 45 days versus 10% anually
@@Kingnothing3277 10% in 45 dte on spy? Unfortunately it doesn't exist
great vid!
Thanks ☺️
How does max loss work? If you let it expire itm do you take max loss?
yes both legs itm is max loss. you never want it to get to max loss thats why they manage at 21 days
i cant roll credit spread on robinhood.. i had to closed my credit spread for $1200 lost on nvidia..if i didnt, i would have lost more. not worth it..
You have to close it and then open another one for more net credit
bad skill if the price break down your BE, maybe there will never bounce. so you will have a huge loss.
You can still get assigned at 180
Sounds like Raynor
Midnight trader loves tasty as do I
My friend you have verry good content in your channel. Have you though about a discord channel? I am in!!
Thanks 👍