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Hi all!
I was curious to find out about what traders usually do in the following
case. I hope as many as possible among you will respond, and I'll post
the results over the week end:
To respond, please hit "respond to message" and answer "option1" or
"option2" in the text body. That's all you need to do. Thank you in
advance for your participation
Question is:
You regularly trade options, by shorting puts in stocks you have defined
as being trending up. You trade ten stocks for every quarterly expiry,
and your average trade is about $1200 in profits. You are currently in a
short put options trade in a stock you believe in, however, due to an
unexpected crisis at a competitor, your position has been hurt, you are
losing $3500 at the moment.
You are facing the following alternative, which one do you chose?
Option1: Take immediate loss of $3500, and wait for expiry to move on to
next stock.
Option2: Manage the position, by rolling it to the next expiry (and
forego the possibility to trade another stock that meets criteria),
knowing you have 40% chances to end up losing only $1900 in three months
(ie recoup $1600), and that if it doesn't work out still, you'll be down
$4500, (at which point you might still roll your position to the next
expiry)
Pick your choice...
Gwenn
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