Joe,
I'm going to spew out some thoughts that are rattling around in my head and maybe you can give me your impressions on them.
When we talk about cutting losses as options sellers, I don't think it's the same as cutting losses when you own stock. If you own a stock that has gone down, there is always a question as to whether that stock will ever rebound, or will it stay down forever.
Therefore, when you sell the stock and take your loss, you are putting an end to it, rather than waiting possibly for years for the stock to rebound.
Shorting options is an entirely different matter.
Whether you are shorting calls or puts, you can "always" recover by rolling out. If you have the collateral and you can stand the stress, you can always roll to a strike price that eventually will cause your option to expire worthless.
It may take a while, but, you know you can erase your loss and take your original profit, or even more if you roll for a credit.
Therefore, as sellers, the decision becomes, do we "ever" want to take a loss, or do we want to trust our knowledge and let our system take care of itself.
My paper losses are horrendous right now, but, I know that all I have to do is roll and I can make those losses go away. It is just a matter of doing it at the right time.
I guess the thing that bothers me is to look at my account value every morning and see the continued bleeding.
Oh well, I've talked enough for one post. I'll look forward to your response.
Ron |
