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June 21st, 2011 at 3:04 pm
Income Trader –
Thanks so much for this discussion! I’d like help/advice with the following trade – which will hopefully be helpful to the rest of the group.
When I placed the July trade – I moved my strikes down 10pts. As you may remember, the RUT dropped ~10pts that morning to 778.22 and when I reviewed the deltas it looked like moving the strikes down better fit your parameters. Here is what I have:
-5 RUT JUL11 690P 2.95 delta was .08
+5 RUT JUL11 680P 2.30
-5 RUT JUL11 845C 1.45 delta was .08
+5 RUT JUL11 855C .90
Net Premium: $1.20
I have the following questions:
1) With RUT at ~805 – and the short 845C with a delta of .15 — should I be buying insurance?
If so, what and how many do you recommend? (Please note – I only have qty 5)
2) Should I have bought insurance sooner?
3) Do you ever use TZA/TNA for insurance?
4) Would you recommend closing the Put spread for .20 or better? It is there now…
4) Was moving the stikes down from your recommendations an obvious error? By that I mean – in hindsight it seems like a mistake, but should I have seen something then that would have prevented me from moving down?
Thanks in advance for your help – this is a great Topic!!