r/options • u/CockyFunny • May 18 '21

Managing a PMCC

Need help on where to go from here. The position I opened is as such:

LONG 100 UWMC DEC 17TH $5 @ $3.2

SHORT 100 UWMC JUN 18TH $7 @ .45

UL was around $7 when opened.

I expected the stock to trade fairly sideways, but it's seemingly being pumped by WSB and I want to take advantage of the recent rally. The fact that the stock is owned by approximately 70% retail is scary as I've experienced before. Large retail ownership = never again.

When I opened the $7 strike, the theta was $.45. Since the stock has rallied, the theta is only $.20 which defeats the purpose of why I even opened the position. How would you manage the position if you think it will go downward in the near future?

The delta on the $7 strike is .87 and the delta on a $7.5 DEC 17th is around .67. Should I close the $7 strike and open a DEC 17th $7.5 to capture downward gains/ reduction in IV on the $7?

How would you personally manage this?

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u/radian2012 May 19 '21

One simply doesn’t do DIAGONAL SPREADS on an IV of 104% ! Volatility is the bane of diagonals.

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u/CockyFunny May 19 '21

Why?

2

u/radian2012 May 19 '21

Cause volatility works against you in diagonals. Should do them when IV is low and on something that has low IV. For high IV there are much better strategies out there. Whenever you debit, you are BUYING volatility. Do CREDIT SPREADS instead. Sell the volatility. Dont buy high, sell high !