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Hello,
about 2 or 3 weeks ago I put on a ratio back spread on RKH. At that
time RKH was at around 158.50
So I sold 2 January 165 puts and bought 3 January 160 puts for a
credit of 2.10
A few days ago, with RKH at around 156, this position still had a
loss, if I had bought it back. Don't understand why, seeing that the
underlying had gone in the right direction more than 2 bucks.
Yesterday I got exercised on my short puts, so I then exited the
whole position, but the question remains.
Many thanks, gis
P.S. There is a chance that when I checked my position that I
actually made a mistake and I already had a profit, but am not sure.
P.P.S Sorry for not being able to provide more accurate numbers. I
need to improve my trading diary.
P.P.S The difference in IV when entering the spread was about 36 for
the long puts and 35 for the short puts, so don't think that was the
reason.
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Hi gis, (click on pic to enlarge)
Here is your original risk profile, I estimated the entry date a few weeks back when u first put on the position. This is very much a long vega position with a large or quick move being the index sentiment.See my video "how to read a risk graph" if the pictures are gibberish to you.
Here is your risk profile today (assuming no assignment). Note the stock has not moved and decay is eating away at the white line.
Graphs created using Thinkorswim.
Frankly with the vol and price characteristics I would be inclined to do neutral calendars on this since it does not look like a mover to me.
1 comment:
Put on 2-3 weeks ago, at 158.5, this RKH trade had a good entry. I guess it didn't go well because this trader didn't have a good plan to take a small profit or a small loss if the trade turned against him. It should've been taken off last Monday, when RKH shot up to 156.5.
This was a difficult trade to manage because its setup was on a retracement in a bull trend. It's more difficult to trade retracements than thrusts.
Backspreads are difficult trades, and best suited when you expect a strong thrust, in a low implied volatility environment. They perform worst when the underlying goes your way just a little. The long strike is the worst point to be at.
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