Given a calendar options contract (sold 1 month out, bought 2 months out same strike price) and someone says to look to adjust/close out the position at the break even points.
Do they mean break even points based on my current profit/loss (points labeled 2 in the image below) or do they mean the expiration break even points (points labeled 1 in the image below)?
There seems to be some confusion about my image and the overall question I am asking.
The image is purely an example to show the two different types of break points someone could talk about. It could have been any options trade with expiration curve and current P/L curve (i.e. iron condor, short naked calls/puts, etc.)
The question I am asking is when someone says to adjust something when price is approaching the break even points, Do they mean the further out in time ones (i.e. break even on the expiration curve) or the closer in time ones (i.e. the break evens on the current P/L curve).
The reason I am asking is simple. When you first place a trade, many times the current P/L is negative and takes a time to become positive. If the underlying moves in a way that negatively affects the contract, you may never be above the current P/L break even points. This makes me think that "take action/adjust at the break evens" mean the break even points at the expiration, but I have never seen any indication one way or the other and thought I would ask here.