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Presuppose that

  1. on May 1 2020, you bought 1 BA 90P 6/19/2020.

  2. BA rocketed back to $205 as at 6/7/2020, and you no longer expect BA will drop back to \$90. Now you solely desire to minimize your loss, even if you must limit your gains.

What are the drawbacks of turning your naked Long Put into a Put Credit Spread, e.g. by selling 1 BA 120P 6/19/2020?

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By selling that additional Put, you're not only collecting the credit, but you're also introducing more risk. In essence, that's the reason the other party pays you for handing them the Put option.

I this case, I doubt that you will collect a high premium, if at all, for the 120P expiring in less than two weeks, with the current price at $205.

But if the price falls back below 120, you will be out of luck and end up with a loss. You're still long on the 90P, so your loss is limited to USD 30 per share, or $3,000 per contract.

So, back to your original question "Can't losses from Long Puts always be reduced"... Well, let's say you can always reduce them slightly by selling that additional Put option, BUT that sale might end in a larger loss for you at expiration - or even earlier in case you get assigned on your short put.

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The drawback of turning your long 90p into a Put Credit Spread by selling the 120p is that you add 30 points of risk (less the premium received).

Let's face it, if BA rocketed up, chalk this one up to a bad loss and move on.

Let's try a more realistic scenario. Suppose XYZ is 90 and you bought the 90p for 4. A few days later XYZ is 95, your put is worth 2 and the 95 call is selling for 4.

Do a repair strategy via a 1x2 ratio spread. Sell two $90 puts for 2 each and buy the 95 put for 4 (a no cost adjustment). Now you own the 95/90 bearish put vertical and you have a better chance of breaking even.

If you wait too long and XYZ rises much more, the opportunity for ths repair will be gone.

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