For closing trades that go against you, when do most of you get out? Do you look at the margin requirement during the day or wait until after the close? I get that there are probably arguments to be made both ways but I'm curious how most of you are managing it. Cordier's book talks about some people preferring to wait until the exit conditions are met at the close so that hiccups in the intra-day don't force you out early. Obviously the trade-off to this is when the trade continues to go against you.
I've been watching my positions and placing orders during the day this first little while, but now starting to use the awesome XLS-SPAN by DudeTooth and wondering if it might be a little easier to just check and manage trades each evening after I can download the risk arrays for that day and track the positions there.
I know this was discussed a little bit in the past at least far as exiting losing trades, but I can't find the post.
I never look at margin requirement changes during the day. Like you said it could reverse.
During the day I am watching the change in premium price.
But if a position is going against me I look at the news to see why it is doing that. If it is a long term fundamental change then I may get out. But that depends on DTE, historical commodity volatility, distance option strike is from futures, spec position on DCOT reports, etc.
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For those who are experienced with the short strangle. After a short strangle is sold ( a far out of the money put and call) generally is it good to make adjustments or just monitor for conditions that will require an exit from a portion or all of the strangle? Does maintenance of delta within a certain range by buying or selling work well??
I sell about 4 to 5 of these each month. I look for an accumulation or distribution price action to justify even considering the trade or at the least slow moving trend action. After that I trade time, the shorter the better for me. But definitely a minimum of 28 DTE. Next it is probability, over 90% please. And last I look for some volatility to give me an adequate return for risk.
I manage my strangles aggressively. First by trading the futures every few days when there is an opportunity to scalp. This provides a buffer and some padding or extra profit.
But then when things don't go to plan I try to move quickly. So here is an example Soyabeans SQ14. I sold 1600 and 1260 at 65 DTE. We know what has happened recently in SQ14 with it last closing near 12.36.
So what did I do...well I saw the distribution pattern was ending and when it cross below the 75dma I sold 1460. Then when it confirmed the lower high falling below 1340 I sold 1420. Then when it broke below 1300 which I had believed would hold I sold 1320. And finally when it broke below 1265 I sold 1300 buying back the 1660 puts. So now the trade is all calls.
There are still 10 DTE. So the game is not finished.
What I am discovering through a few of my trading buddies is that I need to learn to use the greeks more to manage my trades and just selling options is not the only solution and that had I purchased some deep OTM puts as part of this campaign I might have come through further ahead.
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