On Friday (10/20), while the market was dropping, I rolled the call leg down from 4500 to 4450. This gave me an addition +7.2 in credits to add to the +68.25 credits already collected.
Net Credit Received = +68.25 + 7.2 = +75.45
Even with rising volatility, the position is still above water and can be closed for -72 handles.
Looking at the greeks for the short strangle:
There was a moment on Friday when the strangle was perfectly delta neutral (0.0), but as the market dropped further into the short put, the position became more and more delta positive. Rolling down the call leg added some negative delta ending the position with an overall delta exposure of (+0.167). Positive delta is a bullish stance, the market going up from here is the favorable move for this position.
Looking at vega. With volatility being bid up this past week, short vega is overriding positive theta. With a vega of -8.847, every +1% move in Implied Volatility (IV) will cost the position -8.847 handles.
Current IVR: 49.6
Current IV: 21.7%
Initial IVR: 33
Initial IV: 19%
Since inception, volatility has increased by +2.7 points (21.7 - 19).
If the market rebounds upward this week, there will be little to do in this position as volatility will usually decrease in an upward market.
If the market continues to drop further, I’ll continue to roll down the call side. I am also considering closing out the legs at breakeven and resetting the deltas. Effectively restarting the position back at delta neutral at a higher level of initial IV.
With options, there are options. 80% of profitable option trading comes from having a high probability entry. The other 80% of success comes from strategic management of the position.