I think that eventually the market will go retest the Aug lows. At the current risk structure we have on, that is an unacceptable level of risk. So we’re going to adjust this trade again to reduce our downside risk.
The trade will be split up into two main components:
1. Sell more call spreads
2. Roll the put spreads lower.
Selling the call spreads helps to pay for 50% of the cost of the roll.
So step 1:
Sell to open Half Size SPX Oct 2090/2100 call spread @1.10 or higher
Step 2:
Buy to Close Full Size SPX Oct 1950/1940 Put Spread @3.30
Sell to Open Full Size SPX Oct 1910/1900 Put Spread @2.40
If/when the market sells off aggressively again, We will clsoe out the downside hedge and use those hedge profits (along with roll some call spreads lower) as a way to adjust the put spread side again.
If the market rips even higher, into the 2030-2050 area then I will scale out half of the put spreads with intent to re-sell them.
Here’s the trade risk after the adjustments:
