How to roll or manage in the money put credit spreads / when to cut your losses and move on

hey traders welcome back to tiffany trades options my name is tiffany and i love to trade stock options this is a follow-on video for the video that i published on february 19th if you go back and check that video you'll see that i opened up a trade using a tiblio recommendation which is right here this nvidia put credit spread and then i also decided to show you how i just select um regular put credit spreads based on my own personal selections which is this square put credit spread right here so both of these put credit spreads are in the money i admittedly do not let my spreads get this close to expiration i personally prefer to roll them out or manage them or close them when there's anywhere between seven to ten days left um i secretly was kind of hoping that this nvidia put spread would get assigned so that i could show you guys what happens if you were assigned on the short side of a put credit spread but that didn't happen and i only have a couple days left until expiration and so i'm going to walk you through how to manage in the money put credit spreads um there are a couple of things that you can do in this scenario i'm going to run through the three options for your consideration and i'm gonna then show you what i'm gonna decide to do with each of these these positions um so obviously the first thing that you can consider doing is you can just cut your losses and move on um this happens it's it's perfectly normal to have a losing trade every now and then it's a fact of life one thing that i want to say about that is don't overanalyze the why to be honest i mean stocks are going to have pullbacks the markets are going to have pullbacks sometimes your assessment of the direction that you think the stock is going to go doesn't work out and that's totally fine and that happens so in these in these scenarios you just cut the losses and then you just move on and so if you recall i opened this position in nvidia on february 19th i initially collected 129.69 in credit this is after the fees that were assessed during the week or the two weeks that we had of that pullback i actually tacked on a call credit spread to the position because i wanted to sort of lessen the pain so to speak because i wasn't sure at that time what i was going to do with the position and so one ways that you can mitigate your losses is to add call credit spreads to in the money put credit spreads and what i did is i added a call credit spread at the march 19th expiration the short side was 555 and the long side was 560 and i collected 106 dollars in credit initially and then the week started to stabilize and things were starting to sort of calm down and i decided that it would probably be my best interest just to close it and so i took it off a couple days later so in total i kept 61.42 in credit from the call credit spread so the total position for this nvidia put credit spread right now i've collected 191.11 in credit now if i close this position today and and if you are a tastyworks user this is the web browser platform if you want to close a position you simply select both legs you don't have to select control but like other platforms which is sometimes a little confusing so you just select both of these legs and then you have your options to close position close at profit roll position or group positions and so you simply want to select closed positions so if i close this position today i will be taking a dollar debit let you know adding on 29 cents in fees so 480 29 minus 191 dollars and 11 cents is a 289 dollar and 18 cent and that's not the end of the world it's not it's not a big deal to me to have to take a 300 loss this sometimes happens and and this is um this is one of the benefits and one of the reasons why i strongly advocate for put credit spreads is because you know ahead of time how much money is going to be on the table so initially my max loss was 370 and 31 cents and that's assuming that the put credit spread was going to close for exactly five dollars and i um didn't add on the on the call credit spread side and so when you when you think about the exposure at the beginning of a trade you know my my max loss my personal max loss would have been 370 dollars and 31 cents um opening that call credit spread gave me a little bit of buffer room right now the trade is waffling a little bit between 470 and 480 um so i'm actually if i close this now i'm taking less of a hit than what my initial max loss would have been i'm closing it for about 289 or so um and that's that's not that's not a huge sum of money and that's not a big deal and that's the benefit of having put credit spreads is because you know ahead of time what your personal max loss is going to be um and so when sometimes these things go wrong that's sort of like just what happens so the option is to cut the losses and move on and that is something that i thought about doing and the reason i thought about doing that is because the chart for nvidia it's not giving me a lot of confidence that nividi is going to get back above 5 55 obviously before expiration so i need to do something about that but i'm also not sure of its long-term outlook because i sold the put credit spread here on february 19th and at the time it was at 607 and then we had our downturn for the few weeks and it got down to 462. so that's about 140 150 difference in the price stock price and now it's back to 527 yesterday it was doing pretty well and i had some um high hopes that maybe it would get there but now i'm not sure you know i don't have the same sort of bullish outlook on nvidia that i do on square and so um the strong leaning right now is just to cut my losses and move on and i'll show you a larger and this is why you know um it has sort of its run up and then it kind of cools off a little bit a little bit of run up cool off run up cool off and i feel like that's kind of where it's going right now and and i don't know necessarily if i want to stay in this trade much longer than i currently have um so when you are analyzing stocks i mean take a look at the charts and it's you know technical analysis can be perceived in various ways and and really i just sort of look at trends and see how the stock has been trending over time that is 180 day time period and it seems pretty clear i mean nvidia is bullish sort of um but it's not on the same playing field as square where it's literally just going up you know we have up here and then we had that recent downturn and it's going up again so nvidia probably going to cut my losses and move on but i'm going to talk to you about the other option one thing that you can do if you're confident that your put credit spread is going to recover you can simply roll the position out as is um doing this though will give you a debit which i do not do so i collected 129 for this put credit spread when i initially opened it and rolling it out for a debit would actually cost me about as much as i collected and that just doesn't seem reasonable the only times that i have seen where you rolling it out as is that will collect credit is when the position is not in the money but because this is an in the money position you're not going to be able to collect any credit by rolling it out as is and i do not recommend rolling out put credit spreads for a debit if i rolled it out as is i would my max profit would only be like 75 even considering both of the um both the put credit spread credit and then the call credit spread credit that i collected and so that is something that you can do but i do not recommend doing that for a debit and i'm not gonna do that here the third and final scenario that i do pretty regularly and i'm gonna do it on square in just a minute is you can roll it down in strikes so let's just say 540 and then you widen the position by five dollars or if you wanted to just do by two dollars and fifty cents you can do that but keeping in mind the creditor debit scenario right here so i'm gonna do by five dollars and then you send it out in time so you'll see that the credit collected for every expiration varies just a little bit it seems like it's a better deal to roll it down out and in time by two weeks or so and you can collect about one 30 in credit but notice that these bids and these asks are pretty wide so it's not certain that you're going to collect this much money the obvious con of this scenario is you are increasing your max potential loss and you need to think about that if that is something that you are considering doing are you willing to put more capital on the table to preserve the trade if you are confident that it's going to turn around if it does not turn around which has happened then your max loss is greater do you want to do that do you want to use more buying power and increase your max loss potential or do you want to just cut your losses and move on you could certainly try to collect a little bit more by moving it up in time i'm sorry moving it up in strikes and that's something to consider but the scenario there is trying to put yourself in a position where you're very confident that this is going to end up out of the money by the time it gets to april 1st rolling out down and widening the strikes is something that i do do and i do it pretty frequently but i only do it on positions where i have like you know roughly 85-90 certainty that the position is going to turn around going back to the chart it looks like nvidia has sort of kind of found its place in maybe the 500 to 540 route so i want to consider strikes that would get me out of the money by expiration and i'd probably need to move down to maybe five five 525 for my short side 520 for my long side or maybe 5 30 for my short side 525 for my long side but i'd even then i'm not confident that nvidia is going to stay above those strikes by the time it gets to the next expiration just based on how the stock has trended over the last couple of weeks and so i am going to cut my losses here it bothers me precisely zero percent to take a loss on live video i think that it's important for you guys to see that i am going to see now it's at 491 so my loss is just a little bit greater but that's totally fine too review and send it says i'm going to take a 361 dollar loss it'll increase my buying power by 6.70 and that's it that got filled immediately and it actually filled at 464 which is really cool so the fees for that are 30 cents 464 30 minus 191 11 is a 273.19 loss so all in that is not a huge dent to the tiffany trades options account all right so square is the other position that i had open for this account that i also opened the same day that i opened the nvidia trade the expiration expires next week next friday but because i'm here and i'm recording this for you i'm going to demonstrate how i'm going to manage this particular trade as well and this is a scenario where i am very confident that square is going to continue its bullish trend i have no problem in this particular position increasing my exposure by increasing my buying power as well as my potential max loss i am a big fan of square i think it's a great stock i love trading options around it and so for this particular position i am going to roll it out i'm going to roll it down and i'm going to widen the strikes to collect more credit so to do that in tastyworks you select both legs you select roll position and then i'm going to push this out to 30 to 45 days away which is consistent with how i would be if i opened a trade so expirations are right here you just push the plus sign for out in time all right so the furthest out it'll go is april 30th for 44 days the next monthly expiration after that is june 18th which is 93 days that's a little bit too far outside of my uh put credit spread selling window and i'm going to roll it down so if i rolled it out and just widened the strikes i could collect a pretty decent amount of credit but i also want to ensure that this position ends up out of the money by expiration so i'm going to roll this down from the short side from 260 to 250 and then i'm going to increase the widths of the strikes to 240 so this is now a 10 wide put credit spread i'm going to aim to collect about 150 145 in credit which is close-ish to the one-third rank this is 44 days away it's going to reduce my buying power by to an additional 354.60 and i'm hopefully going to collect 148 in credit and that filled also right away so now i have a new position in square that is a 10 wide put credit spread i've just collected 148 dollars in additional credit so the total additional credit for this trade is 145.40 so now for this put credit spread i've dollars collected 326.99 cents the position has been pushed out to 44 days so hopefully between now and expiration uh square will end up above the 250 short strike i have faith that it will like i said square is a really great stock to trade around it's got a very bullish bull case okay that's it for the video this is um the wrap up outro let me know if you have any questions about managing positions when to take losses if you need to when to roll if you need to rolling down out and writing widening strikes or rolling out for credit or debit i'm happy to help happy to answer questions where they arise i will probably end up trading on this account a little bit in between now in the next video so if you want to keep up with those trades and what i'm doing the link to the trade journal is in the description of all of the videos on this channel i'm probably going to start running the wheel on some low-cost stocks maybe go back to bank of america maybe go to something a little bit cheaper keeping in mind that the amount of buying power that i'm currently using for the square trade is consuming one thousand dollars in buying power now so i will there'll be some activity on on this account in between videos if you want to check it out just come check out these links thank you very much for being here as always i'm happy to help happy to answer questions where they come up so definitely leave a comment send me an email dm me on instagram i am available and happy to help alright thanks everyone talk to you soon bye

Channel: Tiffany Trades Options

Views: 3,714

Rating: 4.9463086 out of 5

Keywords: how to roll put credit spreads, how to roll in the money credit spreads, how to manage put credit spreads, taking a loss on credit spread, rolling credit spreads for credit, rolling credit spreads for debit, risk management, options trading strategies, when to cut your losses in options trading, credit spread options, credit spreads, how to trade options, trade management, learn to trade, options trading for beginners

Id: W41O_H5-Rjc

Length: 16min 40sec (1000 seconds)

Published: Wed Mar 17 2021