Dear All,

We received several calls and emails on what to do yesterday.

A few offered suggestions to close both legs even though the underlying was still in the range, only nearer to call strike price. They do not want to roll to March 09 or June 09. One realised a loss of $1000 (10% of the capital) and another guys swallowed a $6600 loss (15% of the capital.

Once they close both legs, the market rallied. They said it was okay for them to stomach $1000 to $6600. Our argument is, if you can stomach the 'minor' loss, why can't you hold on because the underlying was still in the range.

The main reason to use non-directional short guts is to put the underlying in the range. As long as it is in the range, the temporarily delta loss will be totally repaired. The market does not have to go back to the original level to make a profit, it just has to go flat for several days to weeks.

The other reason most account seeing the 'artificial' loss of 10-30% was high volatility. The high volatility inflated time value, and made your account 'shrunk' visually. It is not a really because at expiration, all time value goes to zero.

Yes, Hanz, my account went down 25% from August's high due to delta loss and high volatility. Yes, the account is only a small 8% off from its recent high after one night of recovery.

One night can recoup 10-15%. Yes, I think you will get back to August high in next 2-4 weeks, with volatility keeps dropping and market going flat.

We are very sad and disappointed when traders lost to own's emotion. You guys lost to the psychological war by those Wall Street sharks. Imagine you are straight investment and you do not have short call to protect you, your portfolio is probably down by 60-80% now.

One trader told me his own unit trust has gone down 70%. Now you know how much protection the ITM short call has given.

For those who started early this year or years ago, you should be earning good time value from last year to early this year. The 10-25% delta loss is from recent highs, not from your entry watermark / original investment.

In trading, cut loss is forever loss. Yes, sometimes you have to cut loss if the underlying is Lehman or AIG or some of those financial counters, but if you dealing with ETF, just roll down and protect. the rich time value you sold yesterday will make you a happy man today.

Now, for those who close both legs to cut loss, the challenge is for you to get back that loss from the market. Clueless? Easy? Difficult?

No matter what you guys do, we are disappointed by those who refuse to roll down and protect. Probably we should not because this round of financial turmoil is too torturing mentally. But we are here to suggest protection and you guys never take the free advice.


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Wow, what a whitewash, not by markets, by Sun.....

Yes, I almost wanted to close all the positions, not both legs but the short call. This is because I know the market will reverse.

I am glad I did not close both legs earlier on. Now my account is about 12% down from August high, compared to 26% down on Thursday afternoon.

Ok, do't be mad, we are listening now. We will behave......

Everyone, please roll to protect! If you do not roll, don't write options.

Hi Etradehome, JK and all options traders,

I know how frustrated and disappointed Sun is. I also called him and asking the same questions whether I should wait until the market stabilises then I reconstruct the short guts. I was told if we construct short guts at lower volatility and as soon as the volatility spikes, we panic again and exit the position. Every time we will be busy taking loss and getting nothing from time decay. That was not the way the system works.

Luckily I did not (although I got an ear full of scolding, sorry, not scolding, advice from my trainer).

Today, when I open my account, the market recovered and my account was back to exactly the recent high in August. Wow, I did not know the repair can be done in ONE day, for those roller-coaster two nightmarish weeks of plunge.

Thanks, I really glad I stick to the rules of options writing, roll down to protect, not close to exit in panic.

Thanks, thanks, thanks!