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Adjusting Bear Call Spread

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  • metagunny
    I did one part of an Iron Condor, the bear call spread. I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115.
    Message 1 of 30 , Jan 12, 2010
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      I did one part of an Iron Condor, the bear call spread.

      I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.

      My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?

      Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.

      I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.

      Is there a better way to adjust this trade besides buying it back?

      What else are my options?

      Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.

      Thanks in advance.
    • comedynight2000
      You have lots of ways to adjust a losing vertical. I ll mention a few but you really need to decide on what, how, and when before entering the trade.
      Message 2 of 30 , Jan 13, 2010
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        You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel

        --- In OptionClub@yahoogroups.com, "metagunny" <justin@...> wrote:
        >
        > I did one part of an Iron Condor, the bear call spread.
        >
        > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
        >
        > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
        >
        > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
        >
        > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
        >
        > Is there a better way to adjust this trade besides buying it back?
        >
        > What else are my options?
        >
        > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
        >
        > Thanks in advance.
        >
      • Meuter Gisbert
        Well, it depends on your forecast of the market! You could have turned it into a butterfly or you could have bought spy shares in increments to hedge. But
        Message 3 of 30 , Jan 13, 2010
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          Well, it depends on your forecast of the market!
          You could have turned it into a butterfly or you could have bought spy shares in increments to hedge. But there are more possibilities and probably better ones too.

          gis
           


          On Tue, Jan 12, 2010 at 9:16 PM, metagunny <justin@...> wrote:
          I did one part of an Iron Condor, the bear call spread.

          I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115.  I did this about 3 weeks ago, and I closed out the position yesterday.

          My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?

          Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.

          I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.

          Is there a better way to adjust this trade besides buying it back?

          What else are my options?

          Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.

          Thanks in advance.



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        • JP
          There is no right or wrong way to adjust the trade; but to begin with I would play with conventional adustments such as verticals, flies, condors and bwbs;
          Message 4 of 30 , Jan 13, 2010
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            There is no right or wrong way to adjust the trade; but to begin with I would play with 'conventional' adustments such as verticals, flies, condors and bwbs; before getting more creative; for example;

            Your original position was; -1 114c / +1 115c

            - Buying a +1 114c/-1 115c vertical closes out the position
            - Buying a +1 114c/-2 115c/+1 116c butterfly leaves -1 115c/+1 116c
            - Buying a +1 114c/-1 115c/-1 116c/ +1 117c condor leaves -1 116c/+1 117c
            - Buying a +1 114c/-2 115c/+1 117c bwb leaves -1 115c/+1 117c

            Hope this helps
            Cheers
            James


            --- In OptionClub@yahoogroups.com, "metagunny" <justin@...> wrote:
            >
            > I did one part of an Iron Condor, the bear call spread.
            >
            > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
            >
            > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
            >
            > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
            >
            > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
            >
            > Is there a better way to adjust this trade besides buying it back?
            >
            > What else are my options?
            >
            > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
            >
            > Thanks in advance.
            >
          • metagunny
            I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level. However, I m seeing, mathematically, what
            Message 5 of 30 , Jan 13, 2010
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              I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.

              However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?

              The box adjustment seems interesting. What effect does that have?

              Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.

              Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?

              If I do the box, will that mean I let them all expire and it breaks even from that point on?

              I missed the webinar today, and I'm really hoping they archived it.

              --- In OptionClub@yahoogroups.com, "comedynight2000" <comedynight2000@...> wrote:
              >
              > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
              >
              > --- In OptionClub@yahoogroups.com, "metagunny" <justin@> wrote:
              > >
              > > I did one part of an Iron Condor, the bear call spread.
              > >
              > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
              > >
              > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
              > >
              > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
              > >
              > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
              > >
              > > Is there a better way to adjust this trade besides buying it back?
              > >
              > > What else are my options?
              > >
              > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
              > >
              > > Thanks in advance.
              > >
              >
            • metagunny
              Thanks James That is an interesting way to look at it. Ideally, I d like to get the same position on top, but at the highest possible strike price for the
              Message 6 of 30 , Jan 13, 2010
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                Thanks James

                That is an interesting way to look at it.

                Ideally, I'd like to get the same position on top, but at the highest possible strike price for the calls sold.

                I think the last one, the bwb does that? What is a bwb?

                What are your thoughts on just buying back the position, and putting it back on?

                --- In OptionClub@yahoogroups.com, "JP" <jp@...> wrote:
                >
                > There is no right or wrong way to adjust the trade; but to begin with I would play with 'conventional' adustments such as verticals, flies, condors and bwbs; before getting more creative; for example;
                >
                > Your original position was; -1 114c / +1 115c
                >
                > - Buying a +1 114c/-1 115c vertical closes out the position
                > - Buying a +1 114c/-2 115c/+1 116c butterfly leaves -1 115c/+1 116c
                > - Buying a +1 114c/-1 115c/-1 116c/ +1 117c condor leaves -1 116c/+1 117c
                > - Buying a +1 114c/-2 115c/+1 117c bwb leaves -1 115c/+1 117c
                >
                > Hope this helps
                > Cheers
                > James
                >
                >
                > --- In OptionClub@yahoogroups.com, "metagunny" <justin@> wrote:
                > >
                > > I did one part of an Iron Condor, the bear call spread.
                > >
                > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                > >
                > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                > >
                > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                > >
                > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                > >
                > > Is there a better way to adjust this trade besides buying it back?
                > >
                > > What else are my options?
                > >
                > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                > >
                > > Thanks in advance.
                > >
                >
              • JP
                A bwb is a broken wing butterfly .... there is plenty of discussion about bwb s in both this and other forums ..... not certain what you mean by just buying
                Message 7 of 30 , Jan 14, 2010
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                  A bwb is a broken wing butterfly .... there is plenty of discussion about bwb's in both this and other forums ..... not certain what you mean by "just buying back the position, and putting it back on?" ... maybe you give more details of the proposed trade ...

                  Cheers
                  James


                  --- In OptionClub@yahoogroups.com, "metagunny" <justin@...> wrote:
                  >
                  > Thanks James
                  >
                  > That is an interesting way to look at it.
                  >
                  > Ideally, I'd like to get the same position on top, but at the highest possible strike price for the calls sold.
                  >
                  > I think the last one, the bwb does that? What is a bwb?
                  >
                  > What are your thoughts on just buying back the position, and putting it back on?
                  >
                  > --- In OptionClub@yahoogroups.com, "JP" <jp@> wrote:
                  > >
                  > > There is no right or wrong way to adjust the trade; but to begin with I would play with 'conventional' adustments such as verticals, flies, condors and bwbs; before getting more creative; for example;
                  > >
                  > > Your original position was; -1 114c / +1 115c
                  > >
                  > > - Buying a +1 114c/-1 115c vertical closes out the position
                  > > - Buying a +1 114c/-2 115c/+1 116c butterfly leaves -1 115c/+1 116c
                  > > - Buying a +1 114c/-1 115c/-1 116c/ +1 117c condor leaves -1 116c/+1 117c
                  > > - Buying a +1 114c/-2 115c/+1 117c bwb leaves -1 115c/+1 117c
                  > >
                  > > Hope this helps
                  > > Cheers
                  > > James
                  > >
                  > >
                  > > --- In OptionClub@yahoogroups.com, "metagunny" <justin@> wrote:
                  > > >
                  > > > I did one part of an Iron Condor, the bear call spread.
                  > > >
                  > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                  > > >
                  > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                  > > >
                  > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                  > > >
                  > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                  > > >
                  > > > Is there a better way to adjust this trade besides buying it back?
                  > > >
                  > > > What else are my options?
                  > > >
                  > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                  > > >
                  > > > Thanks in advance.
                  > > >
                  > >
                  >
                • praesto12
                  What is IB?  Richard ________________________________ From: JP To: OptionClub@yahoogroups.com Sent: Thu, January 14, 2010 3:52:49 AM
                  Message 8 of 30 , Jan 16, 2010
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                    What is IB?
                     
                    Richard



                    From: JP <jp@...>
                    To: OptionClub@yahoogroups.com
                    Sent: Thu, January 14, 2010 3:52:49 AM
                    Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                     

                    A bwb is a broken wing butterfly .... there is plenty of discussion about bwb's in both this and other forums ..... not certain what you mean by "just buying back the position, and putting it back on?" ... maybe you give more details of the proposed trade ...

                    Cheers
                    James

                    --- In OptionClub@yahoogro ups.com, "metagunny" <justin@...> wrote:
                    >
                    > Thanks James
                    >
                    > That is an interesting way to look at it.
                    >
                    > Ideally, I'd like to get the same position on top, but at the highest possible strike price for the calls sold.
                    >
                    > I think the last one, the bwb does that? What is a bwb?
                    >
                    > What are your thoughts on just buying back the position, and putting it back on?
                    >
                    > --- In OptionClub@yahoogro ups.com, "JP" <jp@> wrote:
                    > >
                    > > There is no right or wrong way to adjust the trade; but to begin with I would play with 'conventional' adustments such as verticals, flies, condors and bwbs; before getting more creative; for example;
                    > >
                    > > Your original position was; -1 114c / +1 115c
                    > >
                    > > - Buying a +1 114c/-1 115c vertical closes out the position
                    > > - Buying a +1 114c/-2 115c/+1 116c butterfly leaves -1 115c/+1 116c
                    > > - Buying a +1 114c/-1 115c/-1 116c/ +1 117c condor leaves -1 116c/+1 117c
                    > > - Buying a +1 114c/-2 115c/+1 117c bwb leaves -1 115c/+1 117c
                    > >
                    > > Hope this helps
                    > > Cheers
                    > > James
                    > >
                    > >
                    > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                    > > >
                    > > > I did one part of an Iron Condor, the bear call spread.
                    > > >
                    > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                    > > >
                    > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                    > > >
                    > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                    > > >
                    > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                    > > >
                    > > > Is there a better way to adjust this trade besides buying it back?
                    > > >
                    > > > What else are my options?
                    > > >
                    > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                    > > >
                    > > > Thanks in advance.
                    > > >
                    > >
                    >


                  • comedynight2000
                    The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal.
                    Message 9 of 30 , Jan 16, 2010
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                      The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)

                      --- In OptionClub@yahoogroups.com, "metagunny" <justin@...> wrote:
                      >
                      > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                      >
                      > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                      >
                      > The box adjustment seems interesting. What effect does that have?
                      >
                      > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                      >
                      > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                      >
                      > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                      >
                      > I missed the webinar today, and I'm really hoping they archived it.
                      >
                      > --- In OptionClub@yahoogroups.com, "comedynight2000" <comedynight2000@> wrote:
                      > >
                      > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                      > >
                      > > --- In OptionClub@yahoogroups.com, "metagunny" <justin@> wrote:
                      > > >
                      > > > I did one part of an Iron Condor, the bear call spread.
                      > > >
                      > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                      > > >
                      > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                      > > >
                      > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                      > > >
                      > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                      > > >
                      > > > Is there a better way to adjust this trade besides buying it back?
                      > > >
                      > > > What else are my options?
                      > > >
                      > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                      > > >
                      > > > Thanks in advance.
                      > > >
                      > >
                      >
                    • Meuter Gisbert
                      Richard, best go give the whole phrase so one knows the context, IB probably refers to the broker Interactive Brokers gis
                      Message 10 of 30 , Jan 17, 2010
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                        Richard,

                        best go give the whole phrase so one knows the context,
                        IB probably refers to the broker Interactive Brokers

                        gis

                        On Sat, Jan 16, 2010 at 7:12 PM, praesto12 <Praesto12@...> wrote:


                        What is IB?
                         
                        Richard



                        From: JP <jp@...>
                        To: OptionClub@yahoogroups.com
                        Sent: Thu, January 14, 2010 3:52:49 AM
                        Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                         

                        A bwb is a broken wing butterfly .... there is plenty of discussion about bwb's in both this and other forums ..... not certain what you mean by "just buying back the position, and putting it back on?" ... maybe you give more details of the proposed trade ...

                        Cheers
                        James

                        --- In OptionClub@yahoogro ups.com, "metagunny" <justin@...> wrote:
                        >
                        > Thanks James
                        >
                        > That is an interesting way to look at it.
                        >
                        > Ideally, I'd like to get the same position on top, but at the highest possible strike price for the calls sold.
                        >
                        > I think the last one, the bwb does that? What is a bwb?
                        >
                        > What are your thoughts on just buying back the position, and putting it back on?
                        >
                        > --- In OptionClub@yahoogro ups.com, "JP" <jp@> wrote:
                        > >
                        > > There is no right or wrong way to adjust the trade; but to begin with I would play with 'conventional' adustments such as verticals, flies, condors and bwbs; before getting more creative; for example;
                        > >
                        > > Your original position was; -1 114c / +1 115c
                        > >
                        > > - Buying a +1 114c/-1 115c vertical closes out the position
                        > > - Buying a +1 114c/-2 115c/+1 116c butterfly leaves -1 115c/+1 116c
                        > > - Buying a +1 114c/-1 115c/-1 116c/ +1 117c condor leaves -1 116c/+1 117c
                        > > - Buying a +1 114c/-2 115c/+1 117c bwb leaves -1 115c/+1 117c
                        > >
                        > > Hope this helps
                        > > Cheers
                        > > James
                        > >
                        > >
                        > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                        > > >
                        > > > I did one part of an Iron Condor, the bear call spread.
                        > > >
                        > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                        > > >
                        > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                        > > >
                        > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                        > > >
                        > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                        > > >
                        > > > Is there a better way to adjust this trade besides buying it back?
                        > > >
                        > > > What else are my options?
                        > > >
                        > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                        > > >
                        > > > Thanks in advance.
                        > > >
                        > >
                        >





                      • Jim Hergenreder
                        I would be interested in the box explanation.     Thanks, Jim Hergenreder   ________________________________ From: comedynight2000
                        Message 11 of 30 , Jan 17, 2010
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                          I would be interested in the box explanation.  
                           
                          Thanks,
                          Jim Hergenreder
                           

                          From: comedynight2000 <comedynight2000@...>
                          To: OptionClub@yahoogroups.com
                          Sent: Sat, January 16, 2010 6:57:12 PM
                          Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                           

                          The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)

                          --- In OptionClub@yahoogro ups.com, "metagunny" <justin@...> wrote:
                          >
                          > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                          >
                          > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                          >
                          > The box adjustment seems interesting. What effect does that have?
                          >
                          > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                          >
                          > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                          >
                          > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                          >
                          > I missed the webinar today, and I'm really hoping they archived it.
                          >
                          > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                          > >
                          > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                          > >
                          > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                          > > >
                          > > > I did one part of an Iron Condor, the bear call spread.
                          > > >
                          > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                          > > >
                          > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                          > > >
                          > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                          > > >
                          > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                          > > >
                          > > > Is there a better way to adjust this trade besides buying it back?
                          > > >
                          > > > What else are my options?
                          > > >
                          > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                          > > >
                          > > > Thanks in advance.
                          > > >
                          > >
                          >

                        • comedynight2000
                          OK, I ll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work.
                          Message 12 of 30 , Jan 18, 2010
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                            OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.

                            I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.

                            If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.

                            At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.

                            Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                            Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                            My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.

                            Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical....I hope this helps...Joel

                            --- In OptionClub@yahoogroups.com, Jim Hergenreder <jimhergenreder@...> wrote:
                            >
                            > I would be interested in the box explanation.  
                            >  
                            > Thanks,
                            > Jim Hergenreder
                            >  
                            >
                            > ________________________________
                            > From: comedynight2000 <comedynight2000@...>
                            > To: OptionClub@yahoogroups.com
                            > Sent: Sat, January 16, 2010 6:57:12 PM
                            > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                            >
                            >  
                            > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                            > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                            >
                            > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                            > >
                            > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                            > >
                            > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                            > >
                            > > The box adjustment seems interesting. What effect does that have?
                            > >
                            > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                            > >
                            > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                            > >
                            > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                            > >
                            > > I missed the webinar today, and I'm really hoping they archived it.
                            > >
                            > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                            > > >
                            > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                            > > >
                            > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                            > > > >
                            > > > > I did one part of an Iron Condor, the bear call spread.
                            > > > >
                            > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                            > > > >
                            > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                            > > > >
                            > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                            > > > >
                            > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                            > > > >
                            > > > > Is there a better way to adjust this trade besides buying it back?
                            > > > >
                            > > > > What else are my options?
                            > > > >
                            > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                            > > > >
                            > > > > Thanks in advance.
                            > > > >
                            > > >
                            > >
                            >
                          • lynnaemmiller@aol.com
                            What s the diff between a vert spread and a fly ? Thx. Sent from my Verizon Wireless BlackBerry ... From: comedynight2000 Date:
                            Message 13 of 30 , Jan 18, 2010
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                              What's the diff between a vert spread and a "fly"?
                              Thx.

                              Sent from my Verizon Wireless BlackBerry


                              From: "comedynight2000" <comedynight2000@...>
                              Date: Mon, 18 Jan 2010 23:24:59 -0000
                              To: <OptionClub@yahoogroups.com>
                              Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                               

                              OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.

                              I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.

                              If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.

                              At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.

                              Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                              Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                              My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.

                              Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel

                              --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ ...> wrote:
                              >
                              > I would be interested in the box explanation.  
                              >  
                              > Thanks,
                              > Jim Hergenreder
                              >  
                              >
                              >____________ _________ _________ __
                              > From: comedynight2000 <comedynight2000@ ...>
                              > To: OptionClub@yahoogro ups.com
                              > Sent: Sat, January 16, 2010 6:57:12 PM
                              > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                              >
                              >  
                              > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                              > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                              >
                              > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                              > >
                              > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                              > >
                              > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                              > >
                              > > The box adjustment seems interesting. What effect does that have?
                              > >
                              > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                              > >
                              > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                              > >
                              > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                              > >
                              > > I missed the webinar today, and I'm really hoping they archived it.
                              > >
                              > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                              > > >
                              > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                              > > >
                              > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                              > > > >
                              > > > > I did one part of an Iron Condor, the bear call spread.
                              > > > >
                              > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                              > > > >
                              > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                              > > > >
                              > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                              > > > >
                              > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                              > > > >
                              > > > > Is there a better way to adjust this trade besides buying it back?
                              > > > >
                              > > > > What else are my options?
                              > > > >
                              > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                              > > > >
                              > > > > Thanks in advance.
                              > > > >
                              > > >
                              > >
                              >

                            • comedynight2000
                              A fly is just lingo for a butterfly which is a bull vertical at two strikes and a bear vertical at two strikes where one strike overlaps. So a 40 45 50 fly
                              Message 14 of 30 , Jan 18, 2010
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                                A fly is just lingo for a butterfly which is a bull vertical at two strikes and a bear vertical at two strikes where one strike overlaps. So a 40 45 50 fly could be constructed by long the 40 call, short the 45 call (bull vertical); short the 45 call, long the 50 call (bear vertical). A fly can be all calls, all puts or a mixture.


                                --- In OptionClub@yahoogroups.com, lynnaemmiller@... wrote:
                                >
                                > What's the diff between a vert spread and a "fly"?
                                > Thx.
                                > Sent from my Verizon Wireless BlackBerry
                                >
                                > -----Original Message-----
                                > From: "comedynight2000" <comedynight2000@...>
                                > Date: Mon, 18 Jan 2010 23:24:59
                                > To: <OptionClub@yahoogroups.com>
                                > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                >
                                > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                >
                                > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                >
                                > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                >
                                > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                >
                                > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                >
                                > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                >
                                > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical....I hope this helps...Joel
                                >
                                > --- In OptionClub@yahoogroups.com, Jim Hergenreder <jimhergenreder@> wrote:
                                > >
                                > > I would be interested in the box explanation.  
                                > >  
                                > > Thanks,
                                > > Jim Hergenreder
                                > >  
                                > >
                                > >________________________________
                                > > From: comedynight2000 <comedynight2000@>
                                > > To: OptionClub@yahoogroups.com
                                > > Sent: Sat, January 16, 2010 6:57:12 PM
                                > > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                > >
                                > >  
                                > > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                                > > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                > >
                                > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                > > >
                                > > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                > > >
                                > > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                > > >
                                > > > The box adjustment seems interesting. What effect does that have?
                                > > >
                                > > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                > > >
                                > > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                > > >
                                > > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                > > >
                                > > > I missed the webinar today, and I'm really hoping they archived it.
                                > > >
                                > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                > > > >
                                > > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                > > > >
                                > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                > > > > >
                                > > > > > I did one part of an Iron Condor, the bear call spread.
                                > > > > >
                                > > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                > > > > >
                                > > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                > > > > >
                                > > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                > > > > >
                                > > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                > > > > >
                                > > > > > Is there a better way to adjust this trade besides buying it back?
                                > > > > >
                                > > > > > What else are my options?
                                > > > > >
                                > > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                > > > > >
                                > > > > > Thanks in advance.
                                > > > > >
                                > > > >
                                > > >
                                > >
                                >
                              • Meuter Gisbert
                                A butterfly is betting on a sideways market, whilst a vertical is betting on an up or down move. gis ... A butterfly is betting on a sideways market, whilst a
                                Message 15 of 30 , Jan 18, 2010
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                                  A butterfly is betting on a sideways market, whilst a vertical is betting on an up or down move.

                                  gis


                                  On Mon, Jan 18, 2010 at 7:29 PM, <lynnaemmiller@...> wrote:


                                  What's the diff between a vert spread and a "fly"?
                                  Thx.

                                  Sent from my Verizon Wireless BlackBerry


                                  From: "comedynight2000" <comedynight2000@...>
                                  Date: Mon, 18 Jan 2010 23:24:59 -0000
                                  Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                                   

                                  OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.

                                  I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.

                                  If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.

                                  At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.

                                  Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                                  Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                  My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.

                                  Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical....I hope this helps...Joel

                                  --- In OptionClub@yahoogroups.com, Jim Hergenreder <jimhergenreder@...> wrote:
                                  >
                                  > I would be interested in the box explanation.  
                                  >  
                                  > Thanks,
                                  > Jim Hergenreder
                                  >  
                                  >
                                  >________________________________
                                  > From: comedynight2000 <comedynight2000@...>
                                  > To: OptionClub@yahoogroups.com
                                  > Sent: Sat, January 16, 2010 6:57:12 PM
                                  > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                  >
                                  >  
                                  > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                                  > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                  >
                                  > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                  > >
                                  > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                  > >
                                  > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                  > >
                                  > > The box adjustment seems interesting. What effect does that have?
                                  > >
                                  > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                  > >
                                  > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                  > >
                                  > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                  > >
                                  > > I missed the webinar today, and I'm really hoping they archived it.
                                  > >
                                  > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                  > > >
                                  > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                  > > >
                                  > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                  > > > >
                                  > > > > I did one part of an Iron Condor, the bear call spread.
                                  > > > >
                                  > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                  > > > >
                                  > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                  > > > >
                                  > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                  > > > >
                                  > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                  > > > >
                                  > > > > Is there a better way to adjust this trade besides buying it back?
                                  > > > >
                                  > > > > What else are my options?
                                  > > > >
                                  > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                  > > > >
                                  > > > > Thanks in advance.
                                  > > > >
                                  > > >
                                  > >
                                  >




                                • Jim Hergenreder
                                  Your box explanation helps a lot ...... I will keep this email for future reference.   Thanks, Jim Hergenreder   ________________________________ From:
                                  Message 16 of 30 , Jan 18, 2010
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                                    Your box explanation helps a lot ...... I will keep this email for future reference.
                                     
                                    Thanks,
                                    Jim Hergenreder
                                     
                                    From: comedynight2000 <comedynight2000@...>
                                    To: OptionClub@yahoogroups.com
                                    Sent: Mon, January 18, 2010 4:24:59 PM
                                    Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                                     

                                    OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.

                                    I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.

                                    If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.

                                    At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.

                                    Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                                    Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                    My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.

                                    Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel

                                    --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ ...> wrote:
                                    >
                                    > I would be interested in the box explanation.  
                                    >  
                                    > Thanks,
                                    > Jim Hergenreder
                                    >  
                                    >
                                    > ____________ _________ _________ __
                                    > From: comedynight2000 <comedynight2000@ ...>
                                    > To: OptionClub@yahoogro ups.com
                                    > Sent: Sat, January 16, 2010 6:57:12 PM
                                    > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                    >
                                    >  
                                    > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                                    > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                    >
                                    > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                    > >
                                    > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                    > >
                                    > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                    > >
                                    > > The box adjustment seems interesting. What effect does that have?
                                    > >
                                    > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                    > >
                                    > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                    > >
                                    > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                    > >
                                    > > I missed the webinar today, and I'm really hoping they archived it.
                                    > >
                                    > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                    > > >
                                    > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                    > > >
                                    > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                    > > > >
                                    > > > > I did one part of an Iron Condor, the bear call spread.
                                    > > > >
                                    > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                    > > > >
                                    > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                    > > > >
                                    > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                    > > > >
                                    > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                    > > > >
                                    > > > > Is there a better way to adjust this trade besides buying it back?
                                    > > > >
                                    > > > > What else are my options?
                                    > > > >
                                    > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                    > > > >
                                    > > > > Thanks in advance.
                                    > > > >
                                    > > >
                                    > >
                                    >

                                  • Gayatri Maskeri
                                    Great explanation - Thanks Joel! Chet. ________________________________ From: Jim Hergenreder To: OptionClub@yahoogroups.com Sent:
                                    Message 17 of 30 , Jan 18, 2010
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                                      Great explanation - Thanks Joel!
                                      Chet.


                                      From: Jim Hergenreder <jimhergenreder@...>
                                      To: OptionClub@yahoogroups.com
                                      Sent: Mon, January 18, 2010 9:40:57 PM
                                      Subject: Re: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                                       

                                      Your box explanation helps a lot ...... I will keep this email for future reference.
                                       
                                      Thanks,
                                      Jim Hergenreder
                                       
                                      From: comedynight2000 <comedynight2000@ yahoo.com>
                                      To: OptionClub@yahoogro ups.com
                                      Sent: Mon, January 18, 2010 4:24:59 PM
                                      Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread

                                       

                                      OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.

                                      I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.

                                      If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.

                                      At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.

                                      Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                                      Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                      My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.

                                      Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel

                                      --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ ...> wrote:
                                      >
                                      > I would be interested in the box explanation.  
                                      >  
                                      > Thanks,
                                      > Jim Hergenreder
                                      >  
                                      >
                                      > ____________ _________ _________ __
                                      > From: comedynight2000 <comedynight2000@ ...>
                                      > To: OptionClub@yahoogro ups.com
                                      > Sent: Sat, January 16, 2010 6:57:12 PM
                                      > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                      >
                                      >  
                                      > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                                      > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                      >
                                      > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                      > >
                                      > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                      > >
                                      > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                      > >
                                      > > The box adjustment seems interesting. What effect does that have?
                                      > >
                                      > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                      > >
                                      > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                      > >
                                      > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                      > >
                                      > > I missed the webinar today, and I'm really hoping they archived it.
                                      > >
                                      > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                      > > >
                                      > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                      > > >
                                      > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                      > > > >
                                      > > > > I did one part of an Iron Condor, the bear call spread.
                                      > > > >
                                      > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                      > > > >
                                      > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                      > > > >
                                      > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                      > > > >
                                      > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                      > > > >
                                      > > > > Is there a better way to adjust this trade besides buying it back?
                                      > > > >
                                      > > > > What else are my options?
                                      > > > >
                                      > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                      > > > >
                                      > > > > Thanks in advance.
                                      > > > >
                                      > > >
                                      > >
                                      >


                                    • JP
                                      Joel Hi, Can I just check that you have got your calculations correct, as I cannot quite work out how you have legged into the fly for a credit... You said
                                      Message 18 of 30 , Jan 19, 2010
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                                        Joel

                                        Hi, Can I just check that you have got your calculations correct, as I cannot quite work out how you have legged into the fly for a credit...

                                        You said "Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65."

                                        If I can summarise the 3 trades you have illustrated;

                                        - Long 114/115 call vertical for (0.29) debit
                                        - Long 114/115 put vertical for (0.49) debit
                                        - Short 115/116 call vertical for 0.44 credit

                                        This would leave you with

                                        - Long the 114/115/116 call Fly
                                        - Long the 114/115 put vertical
                                        - Total net debit of (0.34)

                                        Does this amke sense?
                                        Cheers
                                        James








                                        --- In OptionClub@yahoogroups.com, "comedynight2000" <comedynight2000@...> wrote:
                                        >
                                        > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                        >
                                        > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                        >
                                        > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                        >
                                        > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                        >
                                        > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                        >
                                        > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                        > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                        >
                                        > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical....I hope this helps...Joel
                                        >
                                        > --- In OptionClub@yahoogroups.com, Jim Hergenreder <jimhergenreder@> wrote:
                                        > >
                                        > > I would be interested in the box explanation.  
                                        > >  
                                        > > Thanks,
                                        > > Jim Hergenreder
                                        > >  
                                        > >
                                        > > ________________________________
                                        > > From: comedynight2000 <comedynight2000@>
                                        > > To: OptionClub@yahoogroups.com
                                        > > Sent: Sat, January 16, 2010 6:57:12 PM
                                        > > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                        > >
                                        > >  
                                        > > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                                        > > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                        > >
                                        > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                        > > >
                                        > > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                        > > >
                                        > > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                        > > >
                                        > > > The box adjustment seems interesting. What effect does that have?
                                        > > >
                                        > > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                        > > >
                                        > > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                        > > >
                                        > > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                        > > >
                                        > > > I missed the webinar today, and I'm really hoping they archived it.
                                        > > >
                                        > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                        > > > >
                                        > > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                        > > > >
                                        > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                        > > > > >
                                        > > > > > I did one part of an Iron Condor, the bear call spread.
                                        > > > > >
                                        > > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                        > > > > >
                                        > > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                        > > > > >
                                        > > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                        > > > > >
                                        > > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                        > > > > >
                                        > > > > > Is there a better way to adjust this trade besides buying it back?
                                        > > > > >
                                        > > > > > What else are my options?
                                        > > > > >
                                        > > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                        > > > > >
                                        > > > > > Thanks in advance.
                                        > > > > >
                                        > > > >
                                        > > >
                                        > >
                                        >
                                      • Gayatri Maskeri
                                        Hi James, You are forgetting the profit from the two positions - ($1 -(sum of cost of the 2 trades) = 1 - (.29+.49) = $.22 Chet.
                                        Message 19 of 30 , Jan 19, 2010
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                                          Hi James,
                                          You are forgetting the profit from the two positions - ($1 -(sum of cost of the 2 trades) = 1 - (.29+.49) = $.22

                                          Chet.

                                          From: JP <jp@...>
                                          To: OptionClub@yahoogroups.com
                                          Sent: Tue, January 19, 2010 9:17:58 AM
                                          Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                                           

                                          Joel

                                          Hi, Can I just check that you have got your calculations correct, as I cannot quite work out how you have legged into the fly for a credit...

                                          You said "Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65."

                                          If I can summarise the 3 trades you have illustrated;

                                          - Long 114/115 call vertical for (0.29) debit
                                          - Long 114/115 put vertical for (0.49) debit
                                          - Short 115/116 call vertical for 0.44 credit

                                          This would leave you with

                                          - Long the 114/115/116 call Fly
                                          - Long the 114/115 put vertical
                                          - Total net debit of (0.34)

                                          Does this amke sense?
                                          Cheers
                                          James

                                          --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ ...> wrote:
                                          >
                                          > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                          >
                                          > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                          >
                                          > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                          >
                                          > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                          >
                                          > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                          >
                                          > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                          > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                          >
                                          > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel
                                          >
                                          > --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ > wrote:
                                          > >
                                          > > I would be interested in the box explanation.  
                                          > >  
                                          > > Thanks,
                                          > > Jim Hergenreder
                                          > >  
                                          > >
                                          > > ____________ _________ _________ __
                                          > > From: comedynight2000 <comedynight2000@ >
                                          > > To: OptionClub@yahoogro ups.com
                                          > > Sent: Sat, January 16, 2010 6:57:12 PM
                                          > > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                          > >
                                          > >  
                                          > > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                                          > > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                          > >
                                          > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                          > > >
                                          > > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                          > > >
                                          > > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                          > > >
                                          > > > The box adjustment seems interesting. What effect does that have?
                                          > > >
                                          > > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                          > > >
                                          > > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                          > > >
                                          > > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                          > > >
                                          > > > I missed the webinar today, and I'm really hoping they archived it.
                                          > > >
                                          > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                          > > > >
                                          > > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                          > > > >
                                          > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                          > > > > >
                                          > > > > > I did one part of an Iron Condor, the bear call spread.
                                          > > > > >
                                          > > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                          > > > > >
                                          > > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                          > > > > >
                                          > > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                          > > > > >
                                          > > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                          > > > > >
                                          > > > > > Is there a better way to adjust this trade besides buying it back?
                                          > > > > >
                                          > > > > > What else are my options?
                                          > > > > >
                                          > > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                          > > > > >
                                          > > > > > Thanks in advance.
                                          > > > > >
                                          > > > >
                                          > > >
                                          > >
                                          >


                                        • Chris Adler
                                          ________________________________ From: Jim Hergenreder To: OptionClub@yahoogroups.com Sent: Mon, January 18, 2010 9:40:57 PM
                                          Message 20 of 30 , Jan 19, 2010
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                                            From: Jim Hergenreder <jimhergenreder@...>
                                            To: OptionClub@yahoogroups.com
                                            Sent: Mon, January 18, 2010 9:40:57 PM
                                            Subject: Re: [TheOptionClub.com] Re: Adjusting Bear Call Spread

                                             

                                            Your box explanation helps a lot ...... I will keep this email for future reference.
                                             
                                            Thanks,
                                            Jim Hergenreder
                                             
                                            From: comedynight2000 <comedynight2000@ yahoo.com>
                                            To: OptionClub@yahoogro ups.com
                                            Sent: Mon, January 18, 2010 4:24:59 PM
                                            Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread

                                             

                                            OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.

                                            I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.

                                            If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.

                                            At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.

                                            Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                                            Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                            My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.

                                            Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel

                                            --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ ...> wrote:
                                            >
                                            > I would be interested in the box explanation.  
                                            >  
                                            > Thanks,
                                            > Jim Hergenreder
                                            >  
                                            >
                                            > ____________ _________ _________ __
                                            > From: comedynight2000 <comedynight2000@ ...>
                                            > To: OptionClub@yahoogro ups.com
                                            > Sent: Sat, January 16, 2010 6:57:12 PM
                                            > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                            >
                                            >  
                                            > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider.. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call. Often
                                            > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                            >
                                            > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                            > >
                                            > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                            > >
                                            > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                            > >
                                            > > The box adjustment seems interesting. What effect does that have?
                                            > >
                                            > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                            > >
                                            > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                            > >
                                            > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                            > >
                                            > > I missed the webinar today, and I'm really hoping they archived it.
                                            > >
                                            > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                            > > >
                                            > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do.. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                            > > >
                                            > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                            > > > >
                                            > > > > I did one part of an Iron Condor, the bear call spread.
                                            > > > >
                                            > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                            > > > >
                                            > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                            > > > >
                                            > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                            > > > >
                                            > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                            > > > >
                                            > > > > Is there a better way to adjust this trade besides buying it back?
                                            > > > >
                                            > > > > What else are my options?
                                            > > > >
                                            > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                            > > > >
                                            > > > > Thanks in advance.
                                            > > > >
                                            > > >
                                            > >
                                            >


                                          • JP
                                            Chet ... I don t think I have .... but just in case can you tell me what you reckon the profit at expiry would be if the market finished at 116 or above ...
                                            Message 21 of 30 , Jan 19, 2010
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                                              Chet ... I don't think I have .... but just in case can you tell me what you reckon the profit at expiry would be if the market finished at 116 or above ... cheers, James

                                              --- In OptionClub@yahoogroups.com, Gayatri Maskeri <gcmaskeri@...> wrote:
                                              >
                                              > Hi James,
                                              > You are forgetting the profit from the two positions - ($1 -(sum of cost of the 2 trades) = 1 - (.29+.49) = $.22
                                              >
                                              >
                                              > Chet.
                                              >
                                              >
                                              > ________________________________
                                              > From: JP <jp@...>
                                              > To: OptionClub@yahoogroups.com
                                              > Sent: Tue, January 19, 2010 9:17:58 AM
                                              > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                              >
                                              >
                                              > Joel
                                              >
                                              > Hi, Can I just check that you have got your calculations correct, as I cannot quite work out how you have legged into the fly for a credit...
                                              >
                                              > You said "Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65."
                                              >
                                              > If I can summarise the 3 trades you have illustrated;
                                              >
                                              > - Long 114/115 call vertical for (0.29) debit
                                              > - Long 114/115 put vertical for (0.49) debit
                                              > - Short 115/116 call vertical for 0.44 credit
                                              >
                                              > This would leave you with
                                              >
                                              > - Long the 114/115/116 call Fly
                                              > - Long the 114/115 put vertical
                                              > - Total net debit of (0.34)
                                              >
                                              > Does this amke sense?
                                              > Cheers
                                              > James
                                              >
                                              > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ ...> wrote:
                                              > >
                                              > > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                              > >
                                              > > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                              > >
                                              > > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                              > >
                                              > > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                              > >
                                              > > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                              > >
                                              > > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                              > > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                              > >
                                              > > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel
                                              > >
                                              > > --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ > wrote:
                                              > > >
                                              > > > I would be interested in the box explanation. Â
                                              > > > Â
                                              > > > Thanks,
                                              > > > Jim Hergenreder
                                              > > > Â
                                              > > >
                                              > > > ____________ _________ _________ __
                                              > > > From: comedynight2000 <comedynight2000@ >
                                              > > > To: OptionClub@yahoogro ups.com
                                              > > > Sent: Sat, January 16, 2010 6:57:12 PM
                                              > > > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                              > > >
                                              > > > Â
                                              > > > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call.
                                              > Often
                                              > > > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                              > > >
                                              > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                              > > > >
                                              > > > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                              > > > >
                                              > > > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                              > > > >
                                              > > > > The box adjustment seems interesting. What effect does that have?
                                              > > > >
                                              > > > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                              > > > >
                                              > > > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                              > > > >
                                              > > > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                              > > > >
                                              > > > > I missed the webinar today, and I'm really hoping they archived it.
                                              > > > >
                                              > > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                              > > > > >
                                              > > > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                              > > > > >
                                              > > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                              > > > > > >
                                              > > > > > > I did one part of an Iron Condor, the bear call spread.
                                              > > > > > >
                                              > > > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                              > > > > > >
                                              > > > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                              > > > > > >
                                              > > > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                              > > > > > >
                                              > > > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                              > > > > > >
                                              > > > > > > Is there a better way to adjust this trade besides buying it back?
                                              > > > > > >
                                              > > > > > > What else are my options?
                                              > > > > > >
                                              > > > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                              > > > > > >
                                              > > > > > > Thanks in advance.
                                              > > > > > >
                                              > > > > >
                                              > > > >
                                              > > >
                                              > >
                                              >
                                            • JP
                                              Just in case anyone was trying to replicate the trade below; Chet emailed me directly, and after a couple of iterations, has acknowledged that the position
                                              Message 22 of 30 , Jan 25, 2010
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                                                Just in case anyone was trying to replicate the trade below; Chet emailed me directly, and after a couple of iterations, has acknowledged that the position described below executed for a net debit of (0.34) and there was no 'fly for a credit' created.

                                                Hope that clarifies
                                                Cheers
                                                James

                                                --- In OptionClub@yahoogroups.com, "JP" <jp@...> wrote:
                                                >
                                                > Chet ... I don't think I have .... but just in case can you tell me what you reckon the profit at expiry would be if the market finished at 116 or above ... cheers, James
                                                >
                                                > --- In OptionClub@yahoogroups.com, Gayatri Maskeri <gcmaskeri@> wrote:
                                                > >
                                                > > Hi James,
                                                > > You are forgetting the profit from the two positions - ($1 -(sum of cost of the 2 trades) = 1 - (.29+.49) = $.22
                                                > >
                                                > >
                                                > > Chet.
                                                > >
                                                > >
                                                > > ________________________________
                                                > > From: JP <jp@>
                                                > > To: OptionClub@yahoogroups.com
                                                > > Sent: Tue, January 19, 2010 9:17:58 AM
                                                > > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                                > >
                                                > >
                                                > > Joel
                                                > >
                                                > > Hi, Can I just check that you have got your calculations correct, as I cannot quite work out how you have legged into the fly for a credit...
                                                > >
                                                > > You said "Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65."
                                                > >
                                                > > If I can summarise the 3 trades you have illustrated;
                                                > >
                                                > > - Long 114/115 call vertical for (0.29) debit
                                                > > - Long 114/115 put vertical for (0.49) debit
                                                > > - Short 115/116 call vertical for 0.44 credit
                                                > >
                                                > > This would leave you with
                                                > >
                                                > > - Long the 114/115/116 call Fly
                                                > > - Long the 114/115 put vertical
                                                > > - Total net debit of (0.34)
                                                > >
                                                > > Does this amke sense?
                                                > > Cheers
                                                > > James
                                                > >
                                                > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ ...> wrote:
                                                > > >
                                                > > > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                                > > >
                                                > > > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                                > > >
                                                > > > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                                > > >
                                                > > > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                                > > >
                                                > > > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                                > > >
                                                > > > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                                > > > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                                > > >
                                                > > > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel
                                                > > >
                                                > > > --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ > wrote:
                                                > > > >
                                                > > > > I would be interested in the box explanation. Â
                                                > > > > Â
                                                > > > > Thanks,
                                                > > > > Jim Hergenreder
                                                > > > > Â
                                                > > > >
                                                > > > > ____________ _________ _________ __
                                                > > > > From: comedynight2000 <comedynight2000@ >
                                                > > > > To: OptionClub@yahoogro ups.com
                                                > > > > Sent: Sat, January 16, 2010 6:57:12 PM
                                                > > > > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                                > > > >
                                                > > > > Â
                                                > > > > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call.
                                                > > Often
                                                > > > > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                                > > > >
                                                > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                                > > > > >
                                                > > > > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                                > > > > >
                                                > > > > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                                > > > > >
                                                > > > > > The box adjustment seems interesting. What effect does that have?
                                                > > > > >
                                                > > > > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                                > > > > >
                                                > > > > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                                > > > > >
                                                > > > > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                                > > > > >
                                                > > > > > I missed the webinar today, and I'm really hoping they archived it.
                                                > > > > >
                                                > > > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                                > > > > > >
                                                > > > > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                                > > > > > >
                                                > > > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                                > > > > > > >
                                                > > > > > > > I did one part of an Iron Condor, the bear call spread.
                                                > > > > > > >
                                                > > > > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                                > > > > > > >
                                                > > > > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                                > > > > > > >
                                                > > > > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                                > > > > > > >
                                                > > > > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                                > > > > > > >
                                                > > > > > > > Is there a better way to adjust this trade besides buying it back?
                                                > > > > > > >
                                                > > > > > > > What else are my options?
                                                > > > > > > >
                                                > > > > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                                > > > > > > >
                                                > > > > > > > Thanks in advance.
                                                > > > > > > >
                                                > > > > > >
                                                > > > > >
                                                > > > >
                                                > > >
                                                > >
                                                >
                                              • David Steele
                                                James can you make some risk graphs showing how you could have used the box spread for this trade. i need some practical application on using some of these
                                                Message 23 of 30 , Jan 27, 2010
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                                                  James can you make some risk graphs showing how you could have used the box spread for this trade. i need some practical application on using some of these adjustments for the bear call.

                                                  --- On Mon, 1/25/10, JP <jp@...> wrote:

                                                  From: JP <jp@...>
                                                  Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                                  To: OptionClub@yahoogroups.com
                                                  Date: Monday, January 25, 2010, 3:35 AM

                                                   
                                                  Just in case anyone was trying to replicate the trade below; Chet emailed me directly, and after a couple of iterations, has acknowledged that the position described below executed for a net debit of (0.34) and there was no 'fly for a credit' created.

                                                  Hope that clarifies
                                                  Cheers
                                                  James

                                                  --- In OptionClub@yahoogro ups.com, "JP" <jp@...> wrote:
                                                  >
                                                  > Chet ... I don't think I have .... but just in case can you tell me what you reckon the profit at expiry would be if the market finished at 116 or above ... cheers, James
                                                  >
                                                  > --- In OptionClub@yahoogro ups.com, Gayatri Maskeri <gcmaskeri@> wrote:
                                                  > >
                                                  > > Hi James,
                                                  > > You are forgetting the profit from the two positions - ($1 -(sum of cost of the 2 trades) = 1 - (.29+.49) = $.22
                                                  > >
                                                  > >
                                                  > > Chet.
                                                  > >
                                                  > >
                                                  > > ____________ _________ _________ __
                                                  > > From: JP <jp@>
                                                  > > To: OptionClub@yahoogro ups.com
                                                  > > Sent: Tue, January 19, 2010 9:17:58 AM
                                                  > > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                                  > >
                                                  > >
                                                  > > Joel
                                                  > >
                                                  > > Hi, Can I just check that you have got your calculations correct, as I cannot quite work out how you have legged into the fly for a credit...
                                                  > >
                                                  > > You said "Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65."
                                                  > >
                                                  > > If I can summarise the 3 trades you have illustrated;
                                                  > >
                                                  > > - Long 114/115 call vertical for (0.29) debit
                                                  > > - Long 114/115 put vertical for (0.49) debit
                                                  > > - Short 115/116 call vertical for 0.44 credit
                                                  > >
                                                  > > This would leave you with
                                                  > >
                                                  > > - Long the 114/115/116 call Fly
                                                  > > - Long the 114/115 put vertical
                                                  > > - Total net debit of (0.34)
                                                  > >
                                                  > > Does this amke sense?
                                                  > > Cheers
                                                  > > James
                                                  > >
                                                  > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ ...> wrote:
                                                  > > >
                                                  > > > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                                  > > >
                                                  > > > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                                  > > >
                                                  > > > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                                  > > >
                                                  > > > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                                  > > >
                                                  > > > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                                  > > >
                                                  > > > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                                  > > > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                                  > > >
                                                  > > > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel
                                                  > > >
                                                  > > > --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ > wrote:
                                                  > > > >
                                                  > > > > I would be interested in the box explanation. Â
                                                  > > > > Â
                                                  > > > > Thanks,
                                                  > > > > Jim Hergenreder
                                                  > > > > Â
                                                  > > > >
                                                  > > > > ____________ _________ _________ __
                                                  > > > > From: comedynight2000 <comedynight2000@ >
                                                  > > > > To: OptionClub@yahoogro ups.com
                                                  > > > > Sent: Sat, January 16, 2010 6:57:12 PM
                                                  > > > > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                                  > > > >
                                                  > > > > Â
                                                  > > > > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116 call.
                                                  > > Often
                                                  > > > > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                                  > > > >
                                                  > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                                  > > > > >
                                                  > > > > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                                  > > > > >
                                                  > > > > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                                  > > > > >
                                                  > > > > > The box adjustment seems interesting. What effect does that have?
                                                  > > > > >
                                                  > > > > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                                  > > > > >
                                                  > > > > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                                  > > > > >
                                                  > > > > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                                  > > > > >
                                                  > > > > > I missed the webinar today, and I'm really hoping they archived it.
                                                  > > > > >
                                                  > > > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                                  > > > > > >
                                                  > > > > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                                  > > > > > >
                                                  > > > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                                  > > > > > > >
                                                  > > > > > > > I did one part of an Iron Condor, the bear call spread.
                                                  > > > > > > >
                                                  > > > > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                                  > > > > > > >
                                                  > > > > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                                  > > > > > > >
                                                  > > > > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                                  > > > > > > >
                                                  > > > > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                                  > > > > > > >
                                                  > > > > > > > Is there a better way to adjust this trade besides buying it back?
                                                  > > > > > > >
                                                  > > > > > > > What else are my options?
                                                  > > > > > > >
                                                  > > > > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                                  > > > > > > >
                                                  > > > > > > > Thanks in advance.
                                                  > > > > > > >
                                                  > > > > > >
                                                  > > > > >
                                                  > > > >
                                                  > > >
                                                  > >
                                                  >


                                                • JP
                                                  David No need for risk graphs; whenever you have a box spread on; your position is effectively flat; and your P/L is flatlining at whatever the locked in
                                                  Message 24 of 30 , Jan 28, 2010
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                                                    David

                                                    No need for risk graphs; whenever you have a box spread on; your position is effectively flat; and your P/L is flatlining at whatever the locked in profit or loss is.

                                                    Try sticking the following into whatever platform you are using;

                                                    +114/-115 call vertical for (0.29) debit
                                                    -114/+115 put vertical for (0.49) debit

                                                    The only reason you would end up with a box spread is if you had effectively closed the corrosponding call spread with its equivalent put spread due to tighter spread prices at that time.

                                                    Until you are really comfortable with box spreads and synthetics, I would encourage you to trade call spreads against call spreads and put spreads against put spreads.

                                                    Cheers
                                                    James

                                                    --- In OptionClub@yahoogroups.com, David Steele <dsteele_24@...> wrote:
                                                    >
                                                    > James can you make some risk graphs showing how you could have used the box spread for this trade. i need some practical application on using some of these adjustments for the bear call.
                                                    >
                                                    > --- On Mon, 1/25/10, JP <jp@...> wrote:
                                                    >
                                                    >
                                                    > From: JP <jp@...>
                                                    > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                                    > To: OptionClub@yahoogroups.com
                                                    > Date: Monday, January 25, 2010, 3:35 AM
                                                    >
                                                    >
                                                    >  
                                                    >
                                                    >
                                                    >
                                                    > Just in case anyone was trying to replicate the trade below; Chet emailed me directly, and after a couple of iterations, has acknowledged that the position described below executed for a net debit of (0.34) and there was no 'fly for a credit' created.
                                                    >
                                                    > Hope that clarifies
                                                    > Cheers
                                                    > James
                                                    >
                                                    > --- In OptionClub@yahoogro ups.com, "JP" <jp@> wrote:
                                                    > >
                                                    > > Chet ... I don't think I have .... but just in case can you tell me what you reckon the profit at expiry would be if the market finished at 116 or above ... cheers, James
                                                    > >
                                                    > > --- In OptionClub@yahoogro ups.com, Gayatri Maskeri <gcmaskeri@> wrote:
                                                    > > >
                                                    > > > Hi James,
                                                    > > > You are forgetting the profit from the two positions - ($1 -(sum of cost of the 2 trades) = 1 - (.29+.49) = $.22
                                                    > > >
                                                    > > >
                                                    > > > Chet.
                                                    > > >
                                                    > > >
                                                    > > > ____________ _________ _________ __
                                                    > > > From: JP <jp@>
                                                    > > > To: OptionClub@yahoogro ups.com
                                                    > > > Sent: Tue, January 19, 2010 9:17:58 AM
                                                    > > > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                                    > > >
                                                    > > >
                                                    > > > Joel
                                                    > > >
                                                    > > > Hi, Can I just check that you have got your calculations correct, as I cannot quite work out how you have legged into the fly for a credit...
                                                    > > >
                                                    > > > You said "Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65."
                                                    > > >
                                                    > > > If I can summarise the 3 trades you have illustrated;
                                                    > > >
                                                    > > > - Long 114/115 call vertical for (0.29) debit
                                                    > > > - Long 114/115 put vertical for (0.49) debit
                                                    > > > - Short 115/116 call vertical for 0.44 credit
                                                    > > >
                                                    > > > This would leave you with
                                                    > > >
                                                    > > > - Long the 114/115/116 call Fly
                                                    > > > - Long the 114/115 put vertical
                                                    > > > - Total net debit of (0.34)
                                                    > > >
                                                    > > > Does this amke sense?
                                                    > > > Cheers
                                                    > > > James
                                                    > > >
                                                    > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ ...> wrote:
                                                    > > > >
                                                    > > > > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                                    > > > >
                                                    > > > > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                                    > > > >
                                                    > > > > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                                    > > > >
                                                    > > > > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                                    > > > >
                                                    > > > > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                                    > > > >
                                                    > > > > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                                    > > > > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                                    > > > >
                                                    > > > > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel
                                                    > > > >
                                                    > > > > --- In OptionClub@yahoogro ups.com, Jim Hergenreder <jimhergenreder@ > wrote:
                                                    > > > > >
                                                    > > > > > I would be interested in the box explanation. Â
                                                    > > > > > Â
                                                    > > > > > Thanks,
                                                    > > > > > Jim Hergenreder
                                                    > > > > > Â
                                                    > > > > >
                                                    > > > > > ____________ _________ _________ __
                                                    > > > > > From: comedynight2000 <comedynight2000@ >
                                                    > > > > > To: OptionClub@yahoogro ups.com
                                                    > > > > > Sent: Sat, January 16, 2010 6:57:12 PM
                                                    > > > > > Subject: [TheOptionClub. com] Re: Adjusting Bear Call Spread
                                                    > > > > >
                                                    > > > > > Â
                                                    > > > > > The box is a tad complicated to explain, but basically it allows you to lock in the current profit or loss while positioing yourself for a possible reversal. I can explain more depth if interested but would rather point out four other adjustments to consider. First, simply buy a DITM call to defend your short call. For example, if short the 114 and long the 115 call, buy the 113 call, however please be aware that this adjustment shifts your position from bearish to bullish. Three other adjustments are: you can roll up to a higher strike, giving you more protection, roll out to a farther month, giving you more time, or roll up and out. Specifically: buy back the 114, sell 115 and then sell the 115 again, and buy the 116 (this was also astutely mentioned by James as a butterfly adjustment)or buy back your Januarys and sell the same strikes in February, or buy back the January 114 and 115 spread and sell the February 115 and buy the February 116
                                                    > call.
                                                    > > > Often
                                                    > > > > > the up and out alternative, the last one, can be done for little or no debit or sometimes a slight credit. I hope this helps! :) ....Joel (There are many other possible adjustments too such as selling a bullish put spread below the current price. The list goes on but this should give you some good things to check on.....)
                                                    > > > > >
                                                    > > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                                    > > > > > >
                                                    > > > > > > I agree. Going into the position, my strategy was to close out the position, and put it back on at a higher level.
                                                    > > > > > >
                                                    > > > > > > However, I'm seeing, mathematically, what is the best way to adjust this postion? Is there one?
                                                    > > > > > >
                                                    > > > > > > The box adjustment seems interesting. What effect does that have?
                                                    > > > > > >
                                                    > > > > > > Basically, with this type of position, if the market goes up, it's probably losing a little bit of money, but what I really care about is the price going above the strike price of the calls I sold. It can even go a little above that price, and not lose money, because of the net credit.
                                                    > > > > > >
                                                    > > > > > > Is that thinking correct? The best way to manage this trade is to make sure I never suffer the max loss of the difference between strike prices, plus my credit?
                                                    > > > > > >
                                                    > > > > > > If I do the box, will that mean I let them all expire and it breaks even from that point on?
                                                    > > > > > >
                                                    > > > > > > I missed the webinar today, and I'm really hoping they archived it.
                                                    > > > > > >
                                                    > > > > > > --- In OptionClub@yahoogro ups.com, "comedynight2000" <comedynight2000@ > wrote:
                                                    > > > > > > >
                                                    > > > > > > > You have lots of ways to adjust a losing vertical. I'll mention a few but you really need to decide on what, how, and when before entering the trade. Obviously, you can simply close it out; keeps things simple. Another is buying the opposite put vertical, buy the 114 sell the 115 which creates a box and gives you time to see what the market will do. There are several ways to adjust the box once the market has tipped its hand so to speak. For example if the market continued against you, bullish you have a winning put vertical and you can sell the higher put vertical, say sell the 115 and buy the 116 to adjust that part of your position into a fly. Third, you could have bought SPY.....Joel
                                                    > > > > > > >
                                                    > > > > > > > --- In OptionClub@yahoogro ups.com, "metagunny" <justin@> wrote:
                                                    > > > > > > > >
                                                    > > > > > > > > I did one part of an Iron Condor, the bear call spread.
                                                    > > > > > > > >
                                                    > > > > > > > > I sold the SPY Jan 10 Call with a strike of 114, and bought the SPY Jan 10 Call with a strike of 115. I did this about 3 weeks ago, and I closed out the position yesterday.
                                                    > > > > > > > >
                                                    > > > > > > > > My question is: Once the SPY hit 114 or close to it, what is the best way to adjust this trade?
                                                    > > > > > > > >
                                                    > > > > > > > > Yesterday I closed it out and bought back the position, buying to close what I sold and selling to close what I bought.
                                                    > > > > > > > >
                                                    > > > > > > > > I then did the same trade but at the 116 and 117 strike prices, to try to get back some of the loss.
                                                    > > > > > > > >
                                                    > > > > > > > > Is there a better way to adjust this trade besides buying it back?
                                                    > > > > > > > >
                                                    > > > > > > > > What else are my options?
                                                    > > > > > > > >
                                                    > > > > > > > > Of course, today the SPY dropped back below 114 so I should have waited, but I'm not worried about that.
                                                    > > > > > > > >
                                                    > > > > > > > > Thanks in advance.
                                                    > > > > > > > >
                                                    > > > > > > >
                                                    > > > > > >
                                                    > > > > >
                                                    > > > >
                                                    > > >
                                                    > >
                                                    >
                                                  • Jim Ranum
                                                    Hi Joel, Mind if I ask a question about this old post you did on a Box? I follow everything up to the point you said: Once I have the box on, if market moves
                                                    Message 25 of 30 , Jul 7, 2010
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                                                      Hi Joel,

                                                       

                                                      Mind if I ask a question about this old post you did on a Box?

                                                      I follow everything up to the point you said:

                                                      Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                                                       

                                                      If you sell the 115/116 vertical, how would you have a fly? Wouldn’t you just have the Put vertical left? If the price is higher and all you have left is your Bear Put, aren’t you at  -.49 + .44 = -.05 ?

                                                      I’m missing how you get a fly out of this.

                                                       

                                                      Thanks for revisiting this.

                                                      Jim


                                                      From: comedynight2000 <comedynight2000@...>
                                                      To: OptionClub@yahoogroups.com
                                                      Sent: Mon, January 18, 2010 4:24:59 PM
                                                      Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                                       

                                                      OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.

                                                      I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.

                                                      If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.

                                                      At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.

                                                      Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.

                                                      Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                                      My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.

                                                      Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel


                                                    • ArthurS
                                                      Dear Jim: thanks for your question. It is good to have other eyes looking over your strategies. I could not realistically respond sooner as I just returned
                                                      Message 26 of 30 , Jul 18, 2010
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                                                        Dear Jim: thanks for your question. It is good to have other eyes looking over your strategies. I could not realistically respond sooner as I just returned a few days ago from an international trip to eastern Europe and I'm unpacking.

                                                        I had started my position with a long debit call vertical (bullish). When the market moved up, I could have simply closed out with a profit. However by buying the long put debit vertical, the new position was a box. The point I was trying to make is that from that position, I could adjust either the call or put side into a butterfly (without losing my locked in profit from the box), and without having to predict market direction. By selling a credit vertical against either debit vertical, I would increase my profit significantly, add no additional risk, and not have to be right on market direction. When you think about that, that is pretty significant.

                                                        Another way to look at this: I bought a debit call vertical. It became profitable. So I could simply sell the higher call vertical for a credit to lock in a butterfly at a net credit. If you can lock in butterflies for credits, consistently, you'll do very well at options. I believe this is why Charles Cottle insists on traders knowing the synthetics and the locking positions real well (conversion, reversal, box)......Joel

                                                        PS> there is a good article in Traders magazine where Cottle discusses how he boxed off several positions that started as verticals. If you google Cottle AAPL you will probably find it. Otherwise I will try to post the link or the PDF document itself.

                                                        PPS> there is another article by Philip Halperin in which he discusses a technique for locking in butterflies at credits.

                                                        PPPS> look for my previous message on the GOOG BWB for yet another way to lock in butterflies for credits. This is very realistic and do-able.

                                                        --- In OptionClub@yahoogroups.com, "Jim Ranum" <amt2100@...> wrote:
                                                        >
                                                        > Hi Joel,
                                                        >
                                                        >
                                                        >
                                                        > Mind if I ask a question about this old post you did on a Box?
                                                        >
                                                        > I follow everything up to the point you said:
                                                        >
                                                        > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                                        >
                                                        >
                                                        >
                                                        > If you sell the 115/116 vertical, how would you have a fly? Wouldn’t you just have the Put vertical left? If the price is higher and all you have left is your Bear Put, aren’t you at -.49 + .44 = -.05 ?
                                                        >
                                                        > I’m missing how you get a fly out of this.
                                                        >
                                                        >
                                                        >
                                                        > Thanks for revisiting this.
                                                        >
                                                        > Jim
                                                        >
                                                        > _____
                                                        >
                                                        > From: comedynight2000 <comedynight2000@...>
                                                        > To: OptionClub@yahoogroups.com
                                                        > Sent: Mon, January 18, 2010 4:24:59 PM
                                                        > Subject: [TheOptionClub.com] Re: Adjusting Bear Call Spread
                                                        >
                                                        >
                                                        > OK, I'll explain the box in reference to a position I currently have and show values of nearby verticals so you can get a feel for how these adjustments work. I'll use Friday's closing prices though of course they will change tomorrow morning.
                                                        >
                                                        > I am long the SPY 114 115 call vertical (long 114 call short 115 call)which I opened a few days ago for a net debit of 0.29. Current value about .50, so I could close for a profit of .21.
                                                        >
                                                        > If unsure of direction, I could buy the 115 114 put vertical (long 115 put short 114 put for a net debit of about .49.
                                                        >
                                                        > At expiration the box must be worth the difference in strikes of 1.00 leaving a net profit of about 1 minus cost of call vertical and put vertical or 1-.29-.49 or .22 which closely matches my profit mentioned earlier of .21, in other words locking in that profit.
                                                        >
                                                        > Once I have the box on, if market moves higher I could sell the 115 116 call vertical (sell 115 long 116) for a credit of .44 which would leave me with a fly at a net credit of .21 +.44 or .65.
                                                        >
                                                        > Or, once box is on, and market moves lower i can sell the 114 113 put vertical (sell 114 put buy 113 put for a net credit of .44 also and again an adjusted fly is left with a net credit of .65.
                                                        > My point being that buying that put vertical to create the box allows me to lock in a current profit and adjust up or down from there.
                                                        >
                                                        > Also I need to correct my previous post. I meant to say that the 113 call could be bought and the 115 call sold resulting in long the 113 short 114 call or a bullish call vertical.... I hope this helps...Joel
                                                        >
                                                      • Ricky Jimenez
                                                        On Sun, 18 Jul 2010 10:41:02 -0000, ArthurS ... Could you give a more exact reference for the Halperin article? When I Googled him, I noticed he has some
                                                        Message 27 of 30 , Jul 18, 2010
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                                                          On Sun, 18 Jul 2010 10:41:02 -0000, "ArthurS"
                                                          <comedynight2000@...>u wrote:


                                                          >
                                                          >PS> there is a good article in Traders magazine where Cottle discusses how he boxed off several positions that started as verticals. If you google Cottle AAPL you will probably find it. Otherwise I will try to post the link or the PDF document itself.
                                                          >
                                                          >PPS> there is another article by Philip Halperin in which he discusses a technique for locking in butterflies at credits.
                                                          >
                                                          Could you give a more exact reference for the Halperin article? When
                                                          I Googled him, I noticed he has some stuff from the 90s on butterflies
                                                          but nothing recent. Thanks.
                                                        • Arthur Schwartz
                                                          http://www.btinternet.com/~phalperin/   Above is the link.  See the article on Closing a ratio spread; last page; paragraph beginning Moreover.....   where
                                                          Message 28 of 30 , Jul 18, 2010
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                                                            Above is the link.  See the article on Closing a ratio spread; last page; paragraph beginning "Moreover....."  where he talks about buying butterflies for a credit. 
                                                             
                                                            I was fortunate to meet Phillip in Moscow where he is a risk manager for Alpha Bank, one of the larger banks in Russia.  The way he explained it, is somewhat more complex than the article.  Take an underlying trading at 100.  He buys the 100 ATM straddle; sells the 90-110 (just OTM plus one strike) strangle three times; and waits.  His predetermined plan is to buy back the farther out strangle, twice , or at least one side of this double ratio spread, based on time decay or a move in the underlying.  for example a modest move up in the underlying allows him to buy the two 85 puts to lock in his put fly at a credit.  Then time decay and possibly a drop in the underlying allows him to close the call butterfly by buying the two 115 calls.  It is a dynamic trading strategy but only if you are willing to be naked short for a brief time.  There are significant risks yet the rewards are also great.....Joel 

                                                          • Ricky Jimenez
                                                            Thanks Joel. It seems that Halperin practices strategies related to the reverse iron condors I have talked about here, but a lot more sophisticated than
                                                            Message 29 of 30 , Jul 19, 2010
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                                                              Thanks Joel. It seems that Halperin practices strategies related to
                                                              the reverse iron condors I have talked about here, but a lot more
                                                              sophisticated than converting one side to a fly while selling the
                                                              other side. The latter method often gets you flies cheaper than you
                                                              can buy directly, but not always.

                                                              On Sun, 18 Jul 2010 21:13:56 -0700 (PDT), Arthur Schwartz
                                                              <comedynight2000@...> wrote:

                                                              >http://www.btinternet.com/~phalperin/

                                                              >Above is the link.  See the article on Closing a ratio spread; last page; paragraph beginning "Moreover....."  where he talks about buying butterflies for a credit. 

                                                              >I was fortunate to meet Phillip in Moscow where he is a risk manager for Alpha Bank, one of the larger banks in Russia.  The way he explained it, is somewhat more complex than the article.  Take an underlying trading at 100.  He buys the 100 ATM straddle; sells the 90-110 (just OTM plus one strike) strangle three times; and waits.  His predetermined plan is to buy back the farther out strangle, twice , or at least one side of this double ratio spread, based on time decay or a move in the underlying.  for example a modest move up in the underlying allows him to buy the two 85 puts to lock in his put fly at a credit.  Then time decay and possibly a drop in the underlying allows him to close the call butterfly by buying the two 115 calls.  It is a dynamic trading strategy but only if you are willing to be naked short for a brief time.  There are significant risks yet the rewards are also great.....Joel 
                                                              >
                                                              >
                                                              >
                                                            • Ricky Jimenez
                                                              On Sun, 18 Jul 2010 21:13:56 -0700 (PDT), Arthur Schwartz ... I hope you can help me out Joel since I have had similar ideas and would like to understand what
                                                              Message 30 of 30 , Jul 19, 2010
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                                                                On Sun, 18 Jul 2010 21:13:56 -0700 (PDT), Arthur Schwartz
                                                                <comedynight2000@...> wrote:

                                                                >http://www.btinternet.com/~phalperin/

                                                                >Above is the link.  See the article on Closing a ratio spread; last page; paragraph beginning "Moreover....."  where he talks about buying butterflies for a credit. 

                                                                >I was fortunate to meet Phillip in Moscow where he is a risk manager for Alpha Bank, one of the larger banks in Russia.  The way he explained it, is somewhat more complex than the article.  Take an underlying trading at 100.  He buys the 100 ATM straddle; sells the 90-110 (just OTM plus one strike) strangle three times; and waits.  His predetermined plan is to buy back the farther out strangle, twice , or at least one side of this double ratio spread, based on time decay or a move in the underlying.  for example a modest move up in the underlying allows him to buy the two 85 puts to lock in his put fly at a credit.  Then time decay and possibly a drop in the underlying allows him to close the call butterfly by buying the two 115 calls.  It is a dynamic trading strategy but only if you are willing to be naked short for a brief time.  There are significant risks yet the rewards are also great.....Joel 
                                                                >
                                                                >
                                                                I hope you can help me out Joel since I have had similar ideas and
                                                                would like to understand what is going on. Do you mean that on a move
                                                                up from 100, he goes from a 3:1 90/100 put ratio spread to a 2:3:1
                                                                85:90:100 asymmetric fly? I found the description, "buy back the
                                                                farther out strangle, twice," confusing. I suppose if the market
                                                                keeps going up, he gets killed. By the way, it took me a while to
                                                                realize that closing a fly doesn't mean closing out a fly position but
                                                                transforming a ratio to a fly.

                                                                I read the Halperin article carefully and have some complaints:

                                                                1. A more intuitive description, and one that generalizes to
                                                                complicated spreads, of how you "close a call ratio to a fly" is: In
                                                                order to guarantee the slope to the right of the closing strike is 0,
                                                                C + L - S = 0 where these are the respective number of long closing,
                                                                original long and short calls. If Kl, Ks, and Kc are the strikes at
                                                                the original long, short and closing calls,you guarantee that the
                                                                expiration payoff at the closing strike is 0 by,
                                                                (Kc - Kl)*L = (Kc - Ks)*S. This formula is equivalent to the one he
                                                                gives.

                                                                2. I find the key statement he makes unexplained and obscure:
                                                                "It was in this manner that I traded from the short side through the
                                                                EMS crisis of 1992 in Swissy (USD-CHF), selling volatility at 17% and
                                                                buying back at 22% or more, and made money in the process, without
                                                                spot hedging. If you continuously follow a process of acquiring long
                                                                butterflies at a credit, you will make money. In general, you will
                                                                make much of the credit from the short options spread, and every now
                                                                and then you will make money from the long inside options as well".

                                                                3. The article was copywrited in 1998 as he promised more in the next
                                                                installment, including actual applications to the FX and other OTC
                                                                markets. I suppose we shouldn't hold our breathes.

                                                                I certainly agree that it is nice to get long butterflies at a credit.
                                                                The trouble with double ratios, is that you may lose more on the other
                                                                portion of the trade while getting a free fly on one side. By the
                                                                way, a portfolio of cheap flies can be a money maker, even if most of
                                                                them expire worthless. I don't see the need to make them all risk
                                                                free.
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