3 ways I attempted rescue my losing option position

In my last post, I mention about my losing Spotify position that almost wipe out all my options gain. As you could have imagined, this week I spend my time adjusting and putting on positions that could salvage the situations.

I have reduced my max loss from 870 to 609 and increase my max gain from 130 to 379. Not that I think that Spotify will turn profitable but there are still 35 days to expiration, the prices might fall below 330 USD Though, not many tickers seem to be dropping.

My current greeks in this position are:

Delta Gamma Theta Vega
-1.46 (Beta weighting of -0.14) -0.16 6.59 -4.39

Recall that my initial greeks for my Spotify position are:

Delta Gamma Theta Vega
-4.73 (Beta weighting of -0.36) -0.09 2.26 -4.39

I'm trying to turn my Spotify positions into a slightly bullish one while capturing the time decay before I hit 21 days to expiration on my initial positions.

Hypothetically, I break my choices into 2 categories:

  • Benefit from the bullish trend of Spotify and harvest some credits to reduce loss
  • Manage the tested side of the iron condor and roll up with debit

The put/call ratio of Spotify still indicates a bullish trend. However, the volume of Spotify did not seems to be increasing drastically except for during the rally.

Here are 3 things that I did to rescue my positions after I leg into an iron condor as mention in my previous blog post.

Roll up bull put spread of 250P/-260P to 280P/-290P

On the initial opening of the position, I collected a credit of $1.16. And another $1.36 credit when I roll up. This is done to mitigate risk in a way that it reduces my max loss. However, this may potentially restrict the probability of profit as we are moving the break-even strike price from around 255 to 285. However, since the Spotify rally, it is a risk of a low probability that I'm willing to undertake.

Open a bull put spread of 280P/-290P with 8 days to expiration at a credit of 0.40.

Again, this is another position that I open to reduce my max loss by collecting credit upfront. However, because of an additional position, it will increase my exposure to the risk in the movement of the underlying. The worst-case scenario is for Spotify to drop drastically within the 8 days, only to rally upwards pass the strike price again after that.

However, for that to happen, it will mean that Spotify will have a 14% drop in the next 8 days, only to experience a 20% increase within the next 20 days.

Trying to open a condor position at the call side, to close -330C/340C and open -350C/360C at 1.20 debit

As of this writing, both my call options are in the money and the bid/ask spread of these 2 calls are about $1 - $1.50. Putting in an order of $2 and more doesn't make sense to me for now, as the total credit receive is about $4.

This will once again increase my max loss to $800, though with a higher probability of profit.

This position is not filled yet and I do not see a point in putting in more money to manage the position as of yet. As an option will lose the extrinsic value over time, especially if volatility starts to decrease. The condor position might become cheaper to enter. I might choose to roll up this leg of the position if the strike price of Spotify did not shoot pass 360.

Or I could potentially look into buying a butterfly to close the -330C/340C and open a -340C/350C around a similar price.

That's it for now. Till my next portfolio update.

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