This is not related to the post but I’m hoping some reading this might have some input.
I’ll try to keep this simple. I put on a spread one day and then put on another spread the next day… accidently washing out one leg. At first I thought I had made a big mistake. However, my Thinkorswim analysis graph and my open profits show that I made a $500 “profitable goof”. The problem is that I don’t understand what I did, so that I can do it again.
1st trade April 20th.
Sell 1 AEQ Jun 330 Put @ 42.85
Buy 1 AEQ Jun 320 Put @ 37.25
Credit of $5.60
2nd trade April 21st. (AEQ is up and I just wanted to add to my position. I didn’t realize I was closing out the 320 put)
Sell 1 AEQ Jun 320 Put @ 32.75
Buy 1 AEQ Jun 315 Put @ 30.50
Credit of $2.25
Total credit of $7.85
This new trade increased the spread from 10 pts to 15 pts.
—————————————————————————————————————–
My analysis chart on the first trade showed the following right after the trade.
Max Profit $5.60
Max Loss $4.40
However, after I made the second trade my “Open Profits” jumped up about $500 (I don’t understand why because I actually “lost” $4.45 by selling the 320 put at a loss, bought at $37.25 and sold it for $32.75).
Also, my analysis chart is much improved and shows the following.
Max Profit $1235
Max Loss $ 235
Why did my new position come out so much better than the old one? I didn’t intend to wash out the 320 put, that was accidental.
You have probably figured out that the TOS platform will show you an obscure profit amount in this particular case. Essentially, what you have done is execute a trade, then subsequently a second trade which has generated a loss, or more accurately, locked in a loss, at execution. However, according to the remaining positions, the platform shows a profit.
The easiest way to think of it is like this: The software doesn’t keep a history of your trades on the Monitor page. The Monitor page only knows and shows current open positions and considers only what you originally traded them for and what they are worth at this moment in time. Any legs that have been bought and sold in an effort to realize a current position are not considered.
It works this way with BWB trades. When a BWB trade is locked in (the embedded vertical trade is executed and the butterfly becomes symmetrical) the trade will show a profit. A false profit. The Monitor page is only considering the current position, not how the position was ultimately achieved.
This is not related to the post but I’m hoping some reading this might have some input.
I’ll try to keep this simple. I put on a spread one day and then put on another spread the next day… accidently washing out one leg. At first I thought I had made a big mistake. However, my Thinkorswim analysis graph and my open profits show that I made a $500 “profitable goof”. The problem is that I don’t understand what I did, so that I can do it again.
1st trade April 20th.
Sell 1 AEQ Jun 330 Put @ 42.85
Buy 1 AEQ Jun 320 Put @ 37.25
Credit of $5.60
2nd trade April 21st. (AEQ is up and I just wanted to add to my position. I didn’t realize I was closing out the 320 put)
Sell 1 AEQ Jun 320 Put @ 32.75
Buy 1 AEQ Jun 315 Put @ 30.50
Credit of $2.25
Total credit of $7.85
This new trade increased the spread from 10 pts to 15 pts.
—————————————————————————————————————–
My analysis chart on the first trade showed the following right after the trade.
Max Profit $5.60
Max Loss $4.40
However, after I made the second trade my “Open Profits” jumped up about $500 (I don’t understand why because I actually “lost” $4.45 by selling the 320 put at a loss, bought at $37.25 and sold it for $32.75).
Also, my analysis chart is much improved and shows the following.
Max Profit $1235
Max Loss $ 235
Why did my new position come out so much better than the old one? I didn’t intend to wash out the 320 put, that was accidental.
Thanks,
Steve McA
Hi Steve,
You have probably figured out that the TOS platform will show you an obscure profit amount in this particular case. Essentially, what you have done is execute a trade, then subsequently a second trade which has generated a loss, or more accurately, locked in a loss, at execution. However, according to the remaining positions, the platform shows a profit.
The easiest way to think of it is like this: The software doesn’t keep a history of your trades on the Monitor page. The Monitor page only knows and shows current open positions and considers only what you originally traded them for and what they are worth at this moment in time. Any legs that have been bought and sold in an effort to realize a current position are not considered.
It works this way with BWB trades. When a BWB trade is locked in (the embedded vertical trade is executed and the butterfly becomes symmetrical) the trade will show a profit. A false profit. The Monitor page is only considering the current position, not how the position was ultimately achieved.
Owen