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Okay, guys. Here's a perfect opportunity to show you how to adjust a trade. Let me just
show you where you are. We have had a tremendous run on the Dow Jones Industrial in the last
couple of days. We are up to 156, and then we went up just a point or two yesterday.
We didn't do much. But now we are up significantly today. In fact, the Dow is up almost 200 points.
So, we put our positions down here. We have had a tremendous run-up. This is on our iron
condor. We were short calls, and we were long calls up here. Our spread, when we put it
on, was about 40 cents. Now, we're getting killed. It's about $1, so we're losing 60
cents on that.
This is where knowledge comes in, and understanding what you can do with your positions. This
was a resistance level. We blasted through that. We'll probably go back up and hit this
13,000 level, which is the next major level that I've seen. We have our position on the
SPY, so let's take a look at the SPY for a minute.
A gap opened down here. We had a big up day. We had put our position in, down around here.
Then we had another huge gap open here, which is right against one of our resistance points,
right here on the SPY. Whether or not this is actually going to hold, or pull back or
not, I have no idea.
At this point, I don't try to predict price. We just try to manage our trades. On the SMP,
the price level that we want to take a look at is right in here. We have a little bit of
room to move, up around the 1400 level, before we start to see some pain.
In this position, we are short the 139s, and we are long the 141s. Right now, they're trading
at 106. We have lost about 55 points on that. This is where adjustments are so critical.
We can roll our position up to the 143, 145 position. We're going to take another 53 cent credit here. I can show
you what that will do to our position.
What it will do here is, we're just going to roll that position up. We're taking these
two off, and we're putting on a higher credit spread. What that does, is it just extends
our breakeven point, all the way up to 144. 144 would bring us just above this 1400 level.
We could bring it right back up there. It doesn't hurt our position. Our breakeven is
right here, at about 139. We can get back into the position, with almost the same breakeven.
We are able to maintain our position, and our profitability, and extend our breakeven
out to 144.
You don't really have to get hurt, if you know what to do ahead of time. That's why
I always say, "Trade with confidence," because knowledge is power, in this business.
We lost 50 cents so far, in this position. We are just going to roll it up to the next
credit spread, just up and out a little bit farther, and take in some more credit. We're
going to maintain our position that way.
That's what we're going to do. That's how you adjust a position that is going against
you. This is on an iron condor. That is how you don't get hurt. You lost 40, 50 cents
on this one, but you're getting the credit back on this one. If necessary, if this market
continues to run up, we will continue to roll this position up, so we don't get hurt before
expiration. That's all you really have to do.
You sell that as a loss of 50 cents, but you are gaining a 50 cent credit on this one.
It's really a wash.
We rolled our position out, and now we are looking a little bit better. Our breakeven
has moved up to about 144. Our price is at 138. We have quite a run here that we can
go through. And we actually took a little profit in. We have $80 in profit here, and
our graph is looking really good.
All we did was close out the shorter position, as I showed you - the short vertical spread.
We rolled it out for a credit to the higher spread. That's how you don't get hurt. If
you know what to do, you can spread out your breakevens.
We can tighten this up a little bit, if we want to.