We are at our first adjustment point on our SPX income trade. The goal here is to get our deltas much lower to prevent bigger losses.
Here is our current risk:
Currently at a small unrealized loss with a delta of 20. That means if the market continues lower, we could be in trouble.
We are going to do two things:
1. Roll the call side lower for a credit
2. Buy a calendar hedge
The call spread roll is going to be tricky as there is no liquidity out there– be patient on your fills.
Here is what our new risk looks like– it takes our delta from 20 to 7.
If the SPX loses 1600 we will adjust again.