In this post, I want to walk you through an XLV position I opened a little while ago. I’ll show you each step I took — from the initial entry to the adjustments and finally to closing out the trade. I’ll also drop in some screenshots along the way so you can see exactly what happened at each stage.
1. Opening the Position (Around December 16)
I used NinjaSpread to spot an opportunity on XLV. On the chart, it looked like there was a potential bounce off a double bottom zone, so I decided to open a Jade Lizard for 1.03 premium.
Unfortunately, by the end of the day, XLV moved down quite a bit, so the position went red immediately. Not a great start, but since there were 32 days to expiration (January 17), I still had plenty of time and flexibility to manage the trade.
Key Takeaway at Entry:
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If the market quickly moves against you but there’s enough time until expiration, don’t panic. There might be solid ways to adjust without automatically taking a loss.
2. First Adjustment (December 19)
XLV continued to fall. To improve the position, I sold a put ratio spread (134/131) underneath for a small 0.03 credit.
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This helped shift my break-even point further down.
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The original lower support was around 134, but now I could push my comfort level to around 131.
On the chart, 131 looked like an older support level, so I was hoping XLV wouldn’t go much below that (or if it did, maybe it’d bounce). This is a standard way to handle a losing position: extend your breakeven if the market has moved against you.
3. Taking Out the Upper Side (January 8)
On January 8, XLV and many of its sector components had a pretty nasty drop. I didn’t want to risk more downside, so I decided to close out the “upper” part of the position.
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I had originally sold that piece for 1.03.
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I bought it back for 0.44, which effectively removed the short premium risk on the upside.
Yes, it limited some potential future profit if XLV bounced back quickly, but I valued the peace of mind. Meanwhile, my lower put spread was still intact and quite far away, leaving room to profit if XLV continued dropping.
4. Expiration (January 17)
The last adjustment was on January 8. If you look at the chart, after that big drop, XLV dipped once more and then started moving higher. Hindsight’s 20/20: if I hadn’t closed that upper leg, I could’ve made about $174 in profit (because XLV ended up near the “best zone” for that spread).
But I couldn’t predict exactly how nasty the sell-off would be or if it would continue. In real-time, I chose safety over a larger profit. Ultimately, the position expired on January 17 with about $124 in profit. By expiration day, only the 134/131 puts were still active, and they expired worthless, so there was nothing left to do.
Final Thoughts
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Stay Flexible: If the market moves against you, consider adjustments (like selling a put ratio spread) instead of panicking or outright closing the trade.
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Know When to Take Risk Off: Sometimes it’s better to shut down a leg for peace of mind, even if it costs you some additional future profits.
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Protecting Your Nerves Also Matters: In trading, profit isn’t just about the PnL number. Sometimes it’s about avoiding sleepless nights and not stressing about large drawdowns.
In the end, I walked away with $124 in profit — not huge, but still preferable to sweating through a deep drawdown. Sure, in retrospect, I could have squeezed out more if I’d left the upper leg open, but I’m good with the decision given the uncertainty at the time.
If you’ve got any questions about this trade or option strategies in general, feel free to ask. Thanks for reading, and I hope you found it helpful!
Take care and happy trading!
