r/options
Close, adjust or leave alone
Author seeks advice on managing a bearish AMD options trade as the stock rallies and IV remains high.
- The underlying stock is currently rallying and showing strong upward momentum.
- The broader market has recovered from a recent swoon, providing strong support.
- Implied Volatility Rank (IVR) is very high, presenting a theoretical opportunity for volatility crush.
- The author initially established a bearish diagonal spread anticipating post-earnings weakness or volatility contraction.
More of a theoretical conversation but using this AMD trade as an example. I set up a bearish diagonal on AMD with the long after the earnings, short on 7/17. Theory was the long should retain it's IV, and the short has potential to crush since IVR is very high right now.
Adjusted it into a calendar when underlying went up. Then with the recent market swoon it came back to break even but that short IV wasn't budging so the P/L was almost flat. Now it's ripping again...
https://preview.redd.it/wa4s4ojgkv6h1.png?width=1547&format=png&auto=webp&s=89a2a26eb8708f6decd65381e3e96aaca7685836
What would you do? Adjust it, leave it alone since vol is high with 35 days left, or close it?
My adjustment ideas...
- roll the short put again...but the spread was huge but theotetically my delta would be neutralized...
https://preview.redd.it/4oi03zfikv6h1.png?width=1547&format=png&auto=webp&s=b4c9863064dbb5e185471a8a30cc5d4028c13884
- add an upside broken wing butterfly, but the max loss goes up...
https://preview.redd.it/wschrsvmkv6h1.png?width=1487&format=png&auto=webp&s=2caaff72ba5bc2ee6ead511e6f429a6e56a9ffe3