MM36 - Tale of 2 Short Calls

Today I want to walk you through something I get asked about all the time. Why would I keep one short call position open but buy back another one to close? What did I see different in Trade A versus Trade B? This is one of those decision-making processes that becomes second nature once you understand what to look for.

I had 2 different short call positions open at the same time. Both were showing sell signals on my four-hour IADSS chart. Both could move against me at any point. But the decision I made on each one was completely different. One I closed out. The other I kept. The reason comes down to one thing: what does my Plan B look like?

If you have been following along with Market Minutes, you know I talk about this constantly. I always have a next plan. Before I even enter a trade, I need to know what my repair looks like if things go sideways. In MM32, I walked you through the diagonal spread exercise using Marvel as the example, and I laid out the rule: when the stock hits your breakeven (strike plus credit), you have a decision to make. Today I am going to show you what that decision looks like in real time, side by side, with two very different outcomes.

Let me start with Google. I pulled up my four-hour IADSS chart, and we had very clear sell signals. I sold a June 390 call and received a $12 credit.

My rule is simple. When we get to the breakeven, I make a decision. Do I want to roll up or forward to adjust my position?