So, one would think that my spread would now be making some money, right?
INCORRECT. I sold the March 125p for 0.55, its now ~1.00. My original put spread, the 130/131, stands at 0.65, meaning I'm actually losing more money than I should be.
The chart on the left shows the original debit put spread, bought @ 0.50. On a $1 wide spread, this means that I can either make a maximum of 0.50 or lose a maximum of 0.50.
The chart on the right shows the current spread, with the short 125p. The red line shows how it would play out upon expiration. As long as TLT stays above 125 on March 20, then that 125p would expire worthless, netting a 0.55 return. Additionally, if TLT remains below 130 on March 20, then the 130p would expire worthless too. The original spread would net 0.50 and the expired 125p would net 0.55, rendering a total possible 1.05 profit.
The orange lines suggest where the spread should be trading currently. Even though I wouldn't be making 1.05, I should still be in the green, above the gray zero line. But, it isn't. I'm down 0.30, which doesn't make any sense.
So, is there a price anomaly in TLT options? This is the last time I will probably ever trade them, because I'm in 12 contracts. -0.30 x 12 x 100 = -$360, so I'm down a good chunk of change!
This is beyond me... I don't know what to do. Sit and wait and let the loss get potentially massive, or exit the trade soon and write this one down as some mo bullshit?
Oh did she come back down! If I had just stuck to my guns, this trade would have been a BIG winner. Oh well, lesson learned.
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