IC adjustments

I'm just saying all you did was put on a 4-leg synthetic bull spread with ~ 2:1 reward to risk (fill in the appropriate numbers). It's not "inverted" in any practical sense -- you could have saved half the commission and put on a bull put spread for the same credit or a bull call spread for a complementary debit. In the end, either would exhibit the same P&L as your trade, although potentially my alternatives would only incur half the commissions, depending on how your broker's fee structure is set up.

Regarding this statement: "When TLT moved outside the break even down to 115.44 you can take a loss OR . . ." There is no "OR" about it. You took a loss on the initial trade. You subsequently put on a separate trade to try to regain some of that loss. They were independent events.

Two other thoughts: Trading against price action can be risky, and credit is not the same as profit.
 
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I don't have the PDF in front of me. The corner strikes of the equivalent spread are the strikes of the short call and long put in your 4-leg trade. The other two legs (long call and short put at the same strike) are synthetically equivalent to long stock. Adding a short OTM call and a long OTM put creates a synthetic collar, which is identical to a bull put spread with strikes at the strikes of the short OTM call and long OTM put. Wasn't it something like $117.50 and $111?
 
jimmyjazz said:
I'm just saying all you did was put on a 4-leg synthetic bull spread with ~ 2:1 reward to risk (fill in the appropriate numbers). It's not "inverted" in any practical sense -- you could have saved half the commission and put on a bull put spread for the same credit or a bull call spread for a complementary debit. In the end, either would exhibit the same P&L as your trade, although potentially my alternatives would only incur half the commissions, depending on how your broker's fee structure is set up.

Regarding this statement: "When TLT moved outside the break even down to 115.44 you can take a loss OR . . ." There is no "OR" about it. You took a loss on the initial trade. You subsequently put on a separate trade to try to regain some of that loss. They were independent events.

Two other thoughts: Trading against price action can be risky, and credit is not the same as profit.
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Regarding the OR statement. What I meant was take a loss OR roll the position. This thread is about adjustments and I consider rolling a type of adjustment. You can call a roll independent events as they are but I also consider them an adjustment. If we are referring to adjustments then that is what a roll is Or we can agree to disagree.

Regarding trading against price action being risky. Every trade carries risk if there is a probability of profit. (If you have found otherwise let me know because I have spent a lot of time searching for the otherwise and I have come close with some of my systems but haven't been able to eliminate all risk with only possible reward. Of course I'm referring to the retail trading space). Trading based on Cyclicality can be profitable as I have proven with my own money.

What is one of your trading styles? How do you trade? Where do you see an edge?
 
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jimmyjazz said:
I don't have the PDF in front of me. The corner strikes of the equivalent spread are the strikes of the short call and long put in your 4-leg trade. The other two legs (long call and short put at the same strike) are synthetically equivalent to long stock. Adding a short OTM call and a long OTM put creates a synthetic collar, which is identical to a bull put spread with strikes at the strikes of the short OTM call and long OTM put. Wasn't it something like $117.50 and $111?
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Here is the position on TLT
Date 6/26/15
Price 115.44
Long Call 119
Short Call 117.5
Short Put 119
Long Put 111

Please fill in the blanks of your proposed position
Date 6/26/15
Price 115.44
Long Call
Short Call
Short Put
Long Put
Stock
 
Long Put 111
Short Put 117.5

(You could also use calls for a net debit -- the bid/ask should be wider, but the tradeoff is that the long leg goes ITM before the short leg.)
 
That is an excellent alternative that does achieve the same position. Anyone adjusting iron flys or iron condors that wants to trade based on cyclicality could apply the technique laid out in the PDF or apply a synthetic equivalent to the adjustment explained in the PDF either way the trade philosophy and results will still hold.
 
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