jedgraham, welcome! If I were you, I would NOT close it. The stock went down yesterday, but looks stronger this morning – and your spread is below the recent support level. I think it’s probably safe to leave this on. I am in a weekly 675/680 spread, and I left it open yesterday.
On option spreads like this, the key thing is to set up your spread below the support level – that makes it much more likely that you’ve put on a safe trade that would expire worthless. I hope that helps!!
Thanks for the reply. I really wrestled with this. The advice I followed in the past did not work, so I decided not to follow that advice. Previous advice was to buy back the put to close and ride the put option down. However when I did that the stock would promply turn just as soon as I buy to close and go highter. I lost a lot of money doing that. So I followed Dans advice to avoid the big loser. So I sold the spread and came out with 30 dollar profit. I agree with you also. Dow theory would go along with your theory. Apple is in accumulation, or participation, now going into a pull back, not distribution. So we need to see consolidation before distribution. So what this means is Apple will likely do a bounce back. So I think you are right, and I did buy the spread below support for that reason. But the main reason I sold the spread is I just did not like it, I got out with 30 bucks in profit. Also I did buy the 680 call per Dan’s recommendations, then I sold the 700 call, creating a debit spread. Wow what a genious that is. So now if Apple goes down more, then I can buy back the call for profit. At some point we hope to catch the bounce back up and make money on the 680 call. Anyway thanks, I am just writing because I learn as I write. If you seen anything wrong with my theory let me know as God knows one can learn enough when it comes to options.
I totally agree with you. And like you – I have made the same fumble with put spreads before. I think, honestly, that what I have figured out is that my reaction time wasn’t good enough – I waited too long, stared at the screen too long, and by the time I decided to close out one side and let the other work, the pullback was about done. That has been the hardest thing for me to digest with options – that waiting too long to see that you need to take action is always, ALWAYS extremely painful.
And like you – I learn so much more when I force myself to write out my thoughts. It’s one way the Forum has been really good to me – by taking the time to write out what I am doing (or want to do) I have to think about it all much deeper. It’s a healthy process.
tmauer – I agree with you. I have calls for October and for January in AAPL. The question is whether the value of those calls gets recovered by the price movement before the time erosion of those options becomes too high. Personally – I believe it will (which is why my money is where my mouth is).
Remember, as Tom Sosnoff often points out, the probability of touching your short strike is about twice the probability of finishing OTM, so you can expect your short to be tested now and then.
I am new, so decided to do the 660/670 spread. So now i own the spread, should I close it even though I just bought it?
jedgraham, welcome! If I were you, I would NOT close it. The stock went down yesterday, but looks stronger this morning – and your spread is below the recent support level. I think it’s probably safe to leave this on. I am in a weekly 675/680 spread, and I left it open yesterday.
On option spreads like this, the key thing is to set up your spread below the support level – that makes it much more likely that you’ve put on a safe trade that would expire worthless. I hope that helps!!
Thanks for the reply. I really wrestled with this. The advice I followed in the past did not work, so I decided not to follow that advice. Previous advice was to buy back the put to close and ride the put option down. However when I did that the stock would promply turn just as soon as I buy to close and go highter. I lost a lot of money doing that. So I followed Dans advice to avoid the big loser. So I sold the spread and came out with 30 dollar profit. I agree with you also. Dow theory would go along with your theory. Apple is in accumulation, or participation, now going into a pull back, not distribution. So we need to see consolidation before distribution. So what this means is Apple will likely do a bounce back. So I think you are right, and I did buy the spread below support for that reason. But the main reason I sold the spread is I just did not like it, I got out with 30 bucks in profit. Also I did buy the 680 call per Dan’s recommendations, then I sold the 700 call, creating a debit spread. Wow what a genious that is. So now if Apple goes down more, then I can buy back the call for profit. At some point we hope to catch the bounce back up and make money on the 680 call. Anyway thanks, I am just writing because I learn as I write. If you seen anything wrong with my theory let me know as God knows one can learn enough when it comes to options.
I totally agree with you. And like you – I have made the same fumble with put spreads before. I think, honestly, that what I have figured out is that my reaction time wasn’t good enough – I waited too long, stared at the screen too long, and by the time I decided to close out one side and let the other work, the pullback was about done. That has been the hardest thing for me to digest with options – that waiting too long to see that you need to take action is always, ALWAYS extremely painful.
And like you – I learn so much more when I force myself to write out my thoughts. It’s one way the Forum has been really good to me – by taking the time to write out what I am doing (or want to do) I have to think about it all much deeper. It’s a healthy process.
I am still holding the Aapl Oct 680 calls and figured that we would get the bounce well before option expiration. Does anybody agree with this?
tmauer – I agree with you. I have calls for October and for January in AAPL. The question is whether the value of those calls gets recovered by the price movement before the time erosion of those options becomes too high. Personally – I believe it will (which is why my money is where my mouth is).
Remember, as Tom Sosnoff often points out, the probability of touching your short strike is about twice the probability of finishing OTM, so you can expect your short to be tested now and then.