(NOT-ADVICE!!)If you can roll a cash secured put thats gone itm instead of taking a loss, why couldn't you just roll the spreads similar way?
It's what I've been doing lately..
I absolutely would roll to avoid the loss.
Worth noting - to stay delta neutral(ish) and be reasonably indifferent to direction, as well as make better use of margin, I'll be doing these on both sides (put credit spreads, and call credit spreads). They help each other out (one does outstanding if one is doing really badly for instance). I'm thinking about this as a semi-perma iron condor.
The benefit of this approach - the insurance put is protecting me from disaster. My (new - just learned this year) working definition of disaster is a short option that can't be rolled effectively. An effective roll is +1 or +2 weeks, net credit, AND strike improvement. That Feb/March move from 800s to 600s so quickly - that was a black swan for me, meaning specifically that I can't roll for a strike improvement any more (even if I add 4 weeks!).
With that working definition of a black swan the first observation is that they are a lot more common than I have previously believed.
Why was that a black swan? I have $76k reserved for each of those puts. I'm now 3 months into rolling those puts for small net credits. Small as in "rounds to 0". Even worse I don't have line of sight to when it'll end, doing what I've been doing. In fact - with my mental model and belief about where TSLA will trade the rest of the year, I could easily arrive at the end of the year and STILL be rolling those 760 puts for small net credits.
With the insurance puts in position any bad move against me that is going to make me worse off than an effective roll, will get stopped by the insurance put and I'll be done with it. That'll take something like that $200 move in 3 weeks kind of situation and back stop me effectively. Those are thankfully rare. It'll free up enough reserved cash that I can make up the income loss from the insurance by taking on more positions.
And yes - I'll be actively managing the position along the way.
The first management technique is to roll the winning leg closer to the share price while keeping the expiration the same. This is both an incremental profit generation technique as well as loss reduction technique, and will always be available when the share price is pushing one side ITM.
The second management technique, as you point out, is to roll the losing leg out a week and to a better strike (for a net credit). For margin purposes I might need to also roll the winning leg out a week to maintain the condor margin sizing.
And the last management technique - just take the loss. By taking the loss earlier it's not unreasonable to stop further losses at the 50% level (say $15 ITM instead of $25 ITM on a $25 spread). Stopping the losses before max loss is arrived at significantly reduces the amount of time it'll take to recoup the loss and get back to earning income.
Bigger idea. What is the purpose of insurance? (Whether home, life, auto, or options?) We buy insurance to mitigate disaster. I prefer a $1000 deductible on my car insurance over a $250 deductible. Why? I don't need the insurance company to cover $1k losses - I can handle those just fine. But if the car gets totaled and I'm left with a big car loan and no car -- that's a disaster.
Same idea with home insurance - I don't need the insurance company to cover me for each and every little thing. I want them when the house burns down.
The way I'm thinking about the insurance puts - I can handle the small losses ($10 or $15 ITM). It's not peanuts but that's also a level I've generated many times over the last year. Where I really want help is that black swan back in Feb, that I'm still dealing with today. If I'd had the insurance puts in place (and considering IV back then they may well have been $100 spreads), then that position would have taken the max loss (or maybe 1/2 if I'd have applied #3 fast enough) then I might have lost $10k minus the premium (I think it was $3k) and I'd have had that position available since then to be earning income. That is 2 or 3 months of opportunity cost so far.