V. 20:11 (44-45): Q&A by Don Bright

V. 20:11 (44-45): Q&A by Don Bright
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Q&A by Don Bright

MONEY MANAGEMENT OF OPTION SPREADS

What are some money management tips for credit and debit spreads? Specifically, when should I get out when a spread goes against me? Bob Maclaurin

When you have a pure option spread in place, each option has a theoretical delta (percent equivalent to shares of stock; 100 delta = 100 shares of stock). So when a spread starts to go against you, you can do a few things. First, of course, you can get rid of it. Second, you can adjust your net delta position to near zero (plus or minus the amount of risk you want to take on the long or short side for market movements and individual price movements) by adding to or reducing the number of contracts involved.... CONTINUDED




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