The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question – “How to fix a losing short put option trade?” This first, is assuming that you’ve done everything right up into the point of actually entering the short put option trade. Things like properly adjusting your position size, not incurring too much margin relative to your account, so that you don’t over-allocate it. This means selling a put option probably fairly far out of the money, not necessarily a 10 Delta, but maybe a 15 or a 20 Delta, so not right at the money, but fairly far out of the money. And assuming all of these things are in place and the stock starts to go against you, there’s potentially a couple of things you can do to fix or adjust/hedge your put option trade. The first thing you could potentially do to hedge the position is simply to buy a put option at a lower strike price than the put option that you sold. This will in effect, create a credit spread trade an