I’m going to close the SPX October income trade at a small loss. The options have under 24 days left to expiration, and if the market sees any pop, we end up with a very large loss. The ability to roll or adjust is not good as the cost to roll is too high (due to being closer to opex), and there are no capital efficient adjustments to reduce the upside risk we have.
Here is the risk profile currently:
Looking back on this trade, it may have been a case of choosing the wrong adjustment. Rolling the call spread down to lower strikes is what is really hurting this trade, so I’m removing that adjustment strategy from my playbook.
If we didn’t adjust, here’s what the trade would look like right now:
To close the trade out, start with the bear call spreads, specifically buying back the 1790/1800. Then sell to close the extra bull call spread for a small profit. From there you’ve got a calendar and bull put spread left, so close those when you can, but the main risk is in those bear call spreads.