There's nothing I hate more than watching a winner turn into a loser! Oh the pain! Well that's exactly what I've been doing today.
I'm talking about my SPY 188/189 May credit call spread I opened up on April 4th, right as the market was turning over. Man, it was a sweet play - timed it damn near perfect! I mean, the SPY set an intraday high that day - I couldn't have set it up any better. I played 5 contracts pocketing $255 of premium.
Well, at the recent low I could have closed it for a profit around $140 after all commissions, which is 55% of the original $255 premium. Why didn't I? Well here's the deal, lately I've been trying to be a bit more patient and close trades once I've captured anywhere from 60 to 75 percent of the original premium. If you look at my winners this year you'll see a TON of trades I closed capturing less than HALF of the original premiums. It seems anytime I cut a "winner" short - it goes on to expire worthless. Then when I try to let one ride to get a little more profit, it turns against me and I lose! It's so dang annoying!! This is MY battle all the FREAKING time!
Anyway, so this SPY trade got SO close to the 60% threshold and after almost closing it several times - I decided to let it ride! Now the dang thing is $20 in the red on me as the SPY crossed my short strike (188) today. Now I'm in that place of HOW far do I let it run against me before I do something? It expires in May so I got some time. Plus, I really expect some more volatility come May. So my gut says hold, but it's a tough call. Either way, I hate being in this position, because I don't tend to make the best decisions. This is exactly WHY I close so many trades prematurely - because it takes ME out of the equation!
For now though, I'm holding!