Re: Handling Whipsaws


Jul 19, 2015

 


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#4191 Jul 19, 2015

Hi Tyler,

Been following this thread with interest. ��So what happens when your calls go ITM, you go inverted by selling ATM puts and then the market whipsaws back down and your ATM puts become deep ITM puts? ��In an earlier post, you said you would just do everything in reverse. ��Does this mean you would now start selling ATM calls? ��Or do you continue to sell OTM calls? ��On a big down move, I am assuming that even selling OTM calls might mean you still inverted.

What about premium collected after a big whipsaw? ��Are you still looking to collect .39% on every roll?��

Also, regarding rolling ITM options, do you try to roll them out if possible in addition to reducing short units? ��By rolling out, I mean rolling ITM calls up a strike or two (and ITM puts down a strike a two). It seems the first priority is to reduce ITM units by 10% on each roll but do you try to roll ITM units out if possible to increase their chances of becoming OTM faster when the markets comes back?



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#4193 Jul 19, 2015

One more question about managing an inverted position -- when inverted and the market is between your short strikes so that your short calls and short puts are BOTH ITM, do you just continue rolling for .39% credit and reducing units on BOTH sides until the units go away or expire OTM?



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