Turning a Losing Trade into a Winning Trade: A Real-World Example with TSLA

$TSLA Vertical 241220 437.5P/442.5P$ $TSLA Vertical 241220 440.0C/445.0C$ 

Trading is as much about managing risk as it is about making the right calls. Recently, I faced a challenging situation with a TSLA options trade, but with careful monitoring and a strategic adjustment, I turned a potential loss into a profitable outcome.

📉 The Initial Trade: Vertical Put Spread

• On December 16, 2024, I sold a vertical put spread (437.5-442.5) when TSLA was trading at $448 and showing strong upward momentum.

• However, on December 18, the market turned sharply bearish, and TSLA dropped to $420.

• By December 19, it fell even further to $410, leaving my position deep in the money and facing maximum loss as expiration (December 20) approached.

At this point, I had two choices:

1. Close the position and accept the loss.

2. Sell a bear call spread to hedge and potentially recover some of the loss.

📊 The Adjustment: Selling a Bear Call Spread

Instead of panicking, I decided to closely monitor the price movement. On December 20, TSLA showed upward momentum at the market open.

• As the price approached $441, I executed a bear call spread (440-445) for a credit of $2.70.

• At the same time, I decided to let the original put spread run to expiration.

This adjustment allowed me to:

✅ Collect additional premium from the bear call spread.

✅ Hedge against further downside risk.

✅ Capitalize on the market’s intraday movement.

🏁 The Outcome: Success

By the end of expiration, TSLA closed around $423 — below both the put and call strikes.

• The put spread expired worthless, and I kept the original premium.

• The call spread also expired worthless, allowing me to keep the additional premium.

Final Result: A trade that was heading for maximum loss turned into a profitable outcome through strategic adjustments and disciplined monitoring.

📚 Key Takeaways:

1. Stay Calm Under Pressure: Emotional decisions often lead to bigger losses.

2. Monitor Price Movements: Intraday trends can present opportunities for recovery.

3. Use Complementary Strategies: Pairing a bear call spread with a put spread can balance risk and increase flexibility.

4. Know Your Choices: Sometimes, minimizing a loss is better; other times, taking an additional calculated risk pays off.

Trading isn’t about being right every time — it’s about managing your positions effectively. This experience was a powerful reminder of that.

What strategies do you use to recover from challenging trades? Share your thoughts! 🚀