Open Position update: SPX Weekly Credit Spread for March 1.
I received an email from one of our readers informing me that the sudden drop in the market late Friday afternoon caused his stop limit order to trigger, closing his position for a debit of 1.60. This resulted in the pre-set maximum loss established for this strategy (100% of credit received). I had the same stop limit order in with my broker (Think or Swim), and my order did not trigger so the position remains open. The question was raised as to whether the bid/ask spread prices could vary depending which broker is used. It's very difficult to determine this unless one was watching the individual option prices at the exact time the order triggered on both platforms.
This same reader made the comment that "it's always tough taking losses but if we can have 3 gains and one loss in any given month for an average, I'll take itâ€¦." My feelings are exactly the same, which I have shared with you in previous articles where I have had to close a position for a loss.
OCO orders have their strengths and weaknesses; there is no guarantee that you would be taken out of a position for the expected price. In most cases, however, they can prevent what could be an even bigger loss if the market continued down Friday.
Below is the open weekly position as of the close yesterday:
SPX March 1 Weekly Credit Spread:
SPX closed Friday at the all-time high of 1859.45, 34 points from the short put strike of 1825. The position is currently -($10). Our target gain remains at $60.00. I have a "good to cancel" order in to close the position for .20, which would the target gain on this position before commissions.
The 6 month chart of SPX is shown below showing the strikes for the current position:
SPX 6 Month Chart:
An update will be posted early next week.
As always, stay keen on your risk management and trade carefully,