Thursday, March 10, 2011

(RMBS) Update on 18/25 short strangle

I wanted to update this trade in case anybody was following. Here is the link to the initial trade. I actually intended on updating last night 3/9 but got busy and pushed it off. So the screen shot of the chart below is yesterday's close on 3/9, which was the reason for the update because as you can see we closed right on support. However, today we broke support and I don't see a really well defined next support zone. With six trading days left I might be looking to close this leg out for a scratch trade and just let the 25 strike calls expire worthless and make the profit on the trade there. I sold the puts for .28 and the mark today is just below that. Each night I analyze my positions and ask myself if I would still put this trade on today, because if not, you should close the trade. Today's close is the first time I would say I wouldn't be interested in selling short the 18 strike puts. At the time of initiation I liked the idea. But because we've now broken a long-term support zone and the markets in general are in a much different environment then on 2/18 when I put the trade on, I'm thinking pulling this off the table for a break even on the puts but capturing 100% of the short calls is the best move. If anybody else is trading this let me know what you're thinking here.


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  1. That sounds rational.

  2. I followed through on this today and closed out for .02 less than I sold for. After commish it's a scratch trade. I tried to roll out and down to APR because IV is insane right now but wasn't filled. I will try again on Monday.