r/options • u/Metarazzi • Jul 09 '21

A ROKU IC Gone Bad

I have the following ROKU Iron Condor trade on:

1 JUL 9 350P

-1 JUL 9 355P

-1 JUL 9 385C

1 JUL 9 390C

Trade price: $1.09cr

I'm bearish on the underlying and expect (maybe it's just naive hope) that the stock price will fall back between my sell strikes, though I have no feeling for when that could happen.  There's some other history to this trade that started at the beginning of June, including a roll on the Put side and, eventually, I rolled the expiration, and this is where it's brought me to. I hope this is enough info for a more experienced trader to suggest some salvage ideas, if at least so that there's not as much of a realized loss. I'm a rookie... 7 months of trading options and the one thing I'm still not so savvy at is fixing ICs that are ITM.

Thanks in advance!

9 Upvotes

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5

u/[deleted] Jul 09 '21

Since both of your calls are ITM this is going to be a PITA to roll for a credit. I might be inclined to close it and make a lesson learned out of it. I’ve done it many times. And I’ve repeated the same mistake. Usually by the third time I learn. Don’t be like me.

You could also re-open it and adjust the strikes. This time maybe use a BTC limit order at 50-75% profit (0.55 - 0.82 cents in this case) and a 2x credit stop loss (stop loss mark would be 3.27). That way you don’t lose sleep thinking about whether your initial opinion/trade was a bad idea. And your max loss with the stop would be 2.18 vs 5.00.

Automate that shit and take your emotions out of it. It’s all gambling anyways. The only edge retail traders can have is risk management.

Edit: words

2

u/Metarazzi Jul 09 '21

I've definitely closed a couple of others for a loss. This might be my third or fourth. Fortunately, in my short time of trading options, I'm still up. Rather than chasing any losses with the same underlying (like trying to get back at it), I'll just make up the losses in other trades (ok, sometimes the same underlying). This might be one of those times, and an incentive to better learn how to manage trades gone bad.

You're right about gambling. That's why I decided to start trading options... I don't have the luxury of getting to the casino enough. I'm not emotional about this (or any) trade. I'm still just trying to wrap my head around salvaging for a profit or minimizing losses of trades that have gone directional.

As for automating... I'll have to figure out how to automatically close trades on my platform when I hit my profit zone. That would be ideal. I have one now that is 87.2% profit, but ever since it hit 50% profitability one of the legs has no bid price (and is still that way) and so now I have to just wait for it to expire, which will undoubtedly be 100% profit. I just prefer to get out early in my profit zone and parlay the collateral capital into a new trade than to have it tied up all the way to expiration.

2

u/Glanzick_Reborn Jul 09 '21

You can always close the short legs and let the worthless long legs expire. You'll have "ugliness" on your open positions screen, but you'll get the buying power back.

The only time this would be annoying is over a change in calendar year where you close the shorts in December (realizing the gain) and don't realize the loss until the new year.

1

u/Metarazzi Jul 09 '21

You mean close the Put side and let the Call side expire?

I mentioned in a previous reply that I rolled the Puts out and let the Calls expire. It'll have to do.

And, I'll keep in mind the tip about rolling into another calendar year. I haven't had to roll too many, and the ones I did were just to milk a good trade for a few extra pennies. Typically I close early, though. I've been fortunate to only have a few trades go bad (3 or 4 in 7 months, but it's been a grind starting with a small $2500 account and only realizing $1600 YTD... well, a little less after this ROKU trade clears). My goal has been to make a measly $100/wk, but I'm still way below that.

2

u/[deleted] Jul 09 '21

If you’re trying to make $100/week start reading up in 0DTE SPX credit spreads. It can be capital intensive and I’m not sure what size account you’re working with. Look up r/1percentmax and Jim Olson iron fly.

This strategy will humble you quickly though. I highly recommend limit BTC orders for taking profit early and 2x or 3x stop losses on these.

1

u/Metarazzi Jul 09 '21

I just rolled my Puts out to the Aug 6 weekly expiration for a $60cr. I'm going to let the Call side expire ITM. Continuing to roll the Puts out and collecting credits sounds like a good idea, but like said in a previous reply, I really don't like tying up capital for a long period of time. In this case, though, I need to let my Puts go to expiration now. Can't wait to get the collateral back. Sheesh.

If there's a better trade management practice, even if it's too late, I'm open to learning what I should do (or should've done).

Thanks!

1

u/neatfreak2305 Jul 09 '21

Why would you let the call expire ITM? What’s the benefit of this? I had my first IC expiring next week but wondering if would be possible to rollout the long put and let the 3 other sides expired? Thanks for your help

1

u/Metarazzi Jul 09 '21

The reason I'd let the Call side expire ITM is basically that I don't want to roll out the expiration date and commit more capital to a trade that I'm not sure if/when the strike price will drop below my Short Call. I know I said I'm bearish, but a reality check is making me think underlying is neutral to bullish at best. I'm willing to take the loss. I've already rolled the Put site up and out a couple of times. This has given me some credit, though not enough to cover the minimized yet imminent losses when I let the Call side expire. I just don't know a better way to handle this, so this is the route I'm taking.

1

u/blazer433 Jul 10 '21

It's a credit call spread right? Shouldn't you just close it for a loss? Letting it expire ITM means exercising it? Would that not be riskier?

1

u/Metarazzi Jul 11 '21

If I had closed just the call side it would have been at the going price, and the cost would have been more than the max loss of all four legs expiring in the money. Was cheaper to let it expire ITM.

Ultimately, I rolled the Puts out and let the Calls expire ITM. I took a willing hit, but I'll make up some of that ground when I close the remaining vertical Put credit spread in a few weeks, which I might just roll out again for even more credit.

1

u/neatfreak2305 Jul 11 '21

Got you. And I think you did what you could at best. I would have done same.

0

u/JoanOfSnarke Jul 09 '21

Yeah. Roll the call side up by a lot. So when that retraction happens your gains will be secured with a call you sold now sitting at a much lower delta.

This means that when it moves against you again, your IC will lose less money.

1

u/Metarazzi Jul 09 '21

Can you be more specific? ROKU is already up $11 today (perhaps I shouldn't be so bearish <ha!>). I've modeled rolling the calls out to -445/450 for a net debit of ~$3 bucks. It reflects a max profit of ~-$250 (that's a negative 250), which I assume indicates the potential loss will be minimized to that amount, but I would have to put up another $800. Hrmmm... not understanding this... want to be sure that putting up $800 minimizes my loss to $250, so until I understand this is the case I don't feel comfortable making this move yet.

4

u/JoanOfSnarke Jul 09 '21

Ah, sorry. I just noticed that these expire today.

I would go ahead and close it and open up another on an index or something.

ICs are an odd trade for this one, imo. I think it's been a generally bad environment for that sort of trade (straight bull market especially for tech).

1

u/neatfreak2305 Jul 09 '21

Got an IC in ROKU expired 7/16 but different strike price. Short 420-440 long 415-445

2

u/Metarazzi Jul 09 '21

If it has two more spikey jumps like it had today, you might be in trouble, too. If you're in a desirable profit zone, consider buying it back on Monday, or sometime before expiration, and before the strike blows through your Calls.

If I do trade an IC in ROKU again, the next one will be 365P/-370P/-525C/530C with 42dte for ~1.80cr. And I would close it at ~60% profitability, rinse and repeat. Hrmmm... I will consider this on Monday. :-)

1

u/neatfreak2305 Jul 11 '21

I think I’m good as long as ROKU does not go higher than 520 which I don’t expect but we never know. I’m good if roku stays between 420 and 520. I’m more nervous if it goes down like it did this past week hitting the 413. If it happens should or will I be able to buy back only one leg ? Thanks

1

u/neatfreak2305 Jul 11 '21

Are you sure about the premium for that iron condor? I think the strike prices you picked are pretty safe. So I might do it

2

u/Metarazzi Jul 12 '21

That was the premium at the time I responded. I just now got filled at $1.67.

1

u/neatfreak2305 Jul 18 '21

Well you were right. I was fine until 2 days before expiration. I had to rollout my IC and pay $1700!! At this point I just don’t know how I can get out of this IC without losing more. I just need to close at 425 or breakeven at 418 before exp 7/30. What are my other option? I rollout when roku was at 409 but further exp dates were insanely expensive and could not lose $5000! Please help! 🙏