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xli: 02.25.20 – 05.15.20

ETF | Industrial Fund | Status: Closed

Adjustment #3

View original trade
03.11.20
XLI was getting a little too large in terms of
today. The entire market is getting obliterated yet again, so I need to do some damage control. Similarly to my EWZ position from earlier today, in order to defend this trade effectively I'd have to severely
an already inverted
which would lock in a loss and do little to boost my
levels. The more extrinsic value I can retain in these trades gone wrong, the less I need to rely on directional correctness to make money back, and the more I'll benefit from
eventual contraction.
This adjustment is a bit experimental and not something I've had to resort to in the past. However, due to these extreme market conditions, I'm using what I've learned about extrinsic value and risk management to put myself in the most advantageous position I can. Today, I
my
down from the 70
to the 69, and my 74
down to the 70 for a $2.40 debit. Doing so reduces my inversion by $3, increases my max profit by about $0.60, cuts by delta risk in half, and boosts my extrinsic value by about $1.60. The risk of doing so is a narrower spread, which means a tighter window for profitability, and greater probability of loss to the upside. This is what trading is all about! Learning to deal with problems and carving a path forward.

Risk Profile:

Figure 4

Strategy: Roll Down Put and Call

btc 1 apr 17 70 call
sto 1 apr 17 69 call
btc 1 apr 17 74 put
sto 1 apr 17 70 put
Fill Price: $2.40 debit

Position Analysis

U/L Price: $67.98
IV: 63.7%
IVR: 79.1
Liquidity: 4/4
Position: Short APR 17 69/70 Inverted Strangle
POP: 16%
Cost Basis: $3.70
Risk: Undefined
BPR: $1930
Max Profit: $2.70
Max Loss: unlimited
Target P/L: $1.28
Break Even(s): $66.30, $72.70
Extrinsic Value: $483.00
Net Delta: 28.38
Net Theta: 10.293

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