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Full Time Profits, September 3rd 2019 – Risk Management on DIS, TLT, AMZN, TXN

September 3, 2019 By Steven Place

Markets are still stuck in this range, and it’s nearly been a month so it is reasonable to expect a break of this range soon.

All of Full Time Profits alerts are in September opex, which is under a month away. Given the fact that a break will happen soon, I’m very concerned about trades where the short strike of the option spread is dangerously close to the underlying price of the stock.

So that means… right now… I’m focused more on Risk.

In terms of open trades, it depends on which ones you took, but here are (I think) all open trade setups in Full Time Profits.

  • DIS Sep 135/130 Put Spread – 3 Tiers
  • ADBE Sep 265/260 Put Spread – 2 Tiers
  • SPX Sep 2815/2810 Put Spread – 2 Tiers
  • TXN Sep 120/115 Put Spread – 1 Tier
  • AMZN Sep 1745/1740 Put Spread – 3 Tiers
  • PYPL Sep 100/95 Put Spread – 1 Tier
  • MU Sep 36/34 Put Spread – 1 Tier
  • GS Sep 185/180 Put Spread – 1 Tier
  • TLT Sep 175/147 Call Spread – 3 Tiers

Many other setups have already rolled off the books because the market bounced and enough time decay had come along to hit our closing triggers.

With that said… this is a pretty good amount of risk. If these names had October spreads I wouldn’t worry too much about it because they would be plenty out of the money.

But Sep Opex is less than 3 weeks away, so the question is…  is the juice worth the squeeze? Do I want to hold some of these for another two weeks and hope for a pop, or should I cut bait?

Because if we see any kind of decent selling, then I’ll be in big trouble. This smells like this time last year where some trades went from uncomfortable to unmanageable.

I’d rather manage my risk when I can, not when I have to.

Here are the trades that I think are safe for now, given the distance from the underlying price: ADBE, SPX, PYPL, MU, GS

All the others I have concerns with… so it’s either roll them out to October or kill them for a loss.

Adjustment #1: AMZN

Current Setup:

Sep 1745/1740 Put Spread @1.00 Average

Current Price: 1.27

Risk Management Plan:

AMZN is 50 points away from our short stirke, but that’s not a lot when you consider the volatility. 1745 was tested 4 times last week and if it tests it again it will probably break.

My plan is to kill the trade and take a small loss.

Buy to Close AMZN Sep 1745/1740 Put Spread @1.27

Adjustment #2: DIS

Current Setup:

Sep 135/130 Put Spread @1.08 Average

Current Price: 1.42

Risk Management Plan

Similar kind of setup as AMZN. We’re dangerously close to going “in the money” on the spread and then it becomes very expensive to adjust the trade.

If I wanted to roll, I would look at rolling down and out to the October 130/125 Put Spread for 1.00. Problem with that is it introduces another full month of risk into the trade. I’d rather kill it here and scale back in to put spreads if DIS manages to take out 130 and test the rising 200 day moving average.

Buy to Close DIS Sep 135/130 Put Spread @1.42

Adjustment #3: TXN

Current Setup:

Sep 120/115 Put Spread @0.90 (Tier 1 And 2 Already Closed)

Current Price: 1.37

Risk Management Plan

We’ve already got wiggle room in the trade as there’s only Tier 1 left on the trade. I plan on rolling the first tier and then adding back to the trade on any dips.

Buy to Close TXN Sep 120/115 Put Spread @1.37

Sell to Open TXN Oct 110/105 Put Spread @0.60, Close at 0.05

Re-Enter Tier 2 At 0.90, Exit at 0.40

Re-Enter Tier 3 At 1.30, Exit at 0.70

Adjustment #4: TLT

Current Setup:

Sep 145/147 Call Spread @0.50 Average

Current Price: 1.29

Risk Management Plan

This is the trade giving me the most trouble. The stock market has been tame compared to the vol that has persisted in the bond market.

I’m going to kill the trade and immediately start scaling into an October short. I won’t treat this as a roll… rather they will be two separate trades.

Buy to Close TLT Sep 145/147 Call Spread @1.29

Sell to Open TLT Oct 153/155 Call Spread

Tier 1: Enter at 0.40, Exit at 0.10

Tier 2: Enter at 0.60, Exit at 0.20

Tier 3: Enter at 0.80, Exit at 0.30

 

 

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