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! 🚀
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
