Managing/Adjusting Positions

[dreamliner]

Greetings,

I'm new to options, have been trading Iron Condors, spread trades, etc. for a few months now, and have a question:

Some people recommend managing the trades by adjusting them individually, others recommend managing "portfolio delta" to keep it as neutral as possible.

I've been managing about 12 trades per month just by adjusting delta (selling Vertical Calls if needing negative delta, selling Vertical Puts if needing positive delta) and have done well that way. But is this a viable long term method?

Any input you have on managing/adjusting trades would be helpful, or pointing me to a valuable resource, etc.

Thank you in advance.

 

[spindr0]

Quote from dreamliner:

I've been managing about 12 trades per month just by adjusting delta (selling Vertical Calls if needing negative delta, selling Vertical Puts if needing positive delta) and have done well that way. But is this a viable long term method?

When you make money doing that, it's viable. When you don't, it's not.

 

[MTE]

There is no right or wrong way in trading, if it works for you (and apparently it does) then keep doing this.

 

[Premium]

I'm not saying whether the strategy is right or wrong, but you are increasing your maximum risk every time you adjust that way. If you have an iron condor and the underlying goes up, you become more delta negative and so you sell more vertical put spreads. I would rather use the oppotunity to hedge or remove the put side (at a cheaper price) or do nothing, and possibly manage the call side. But that's just my preference.

 

[dreamliner]

Quote from Premium:

I'm not saying whether the strategy is right or wrong, but you are increasing your maximum risk every time you adjust that way. If you have an iron condor and the underlying goes up, you become more delta negative and so you sell more vertical put spreads. I would rather use the oppotunity to hedge or remove the put side (at a cheaper price) or do nothing, and possibly manage the call side. But that's just my preference.

Thank you. When you say you would rather "use the opportunity to hedge" can you explain what you would do then?

In other words you are in an iron condor and the underlying goes up and approaches the short call. How would you hedge?

Thank you again for responding.

 

[NHS]

Quote from dreamliner:

Greetings,

I'm new to options, have been trading Iron Condors, spread trades, etc. for a few months now, and have a question:

Some people recommend managing the trades by adjusting them individually, others recommend managing "portfolio delta" to keep it as neutral as possible.

I've been managing about 12 trades per month just by adjusting delta (selling Vertical Calls if needing negative delta, selling Vertical Puts if needing positive delta) and have done well that way. But is this a viable long term method?

Any input you have on managing/adjusting trades would be helpful, or pointing me to a valuable resource, etc.

Thank you in advance.

I think adjusting greeks on portfolio level can be somewhat complicated and risky. Fx how do you adjust the delta exposure for an entire portfolio? Just by adjusting the position with the most negative delta problem? That could cause more risk in that position. I would have focus on each position and than the overall portfolio level is what it is, if it turns out that the overall greeks are bad than you have traded wrong positions.

 

[dreamliner]

Quote from NHS:

I think adjusting greeks on portfolio level can be somewhat complicated and risky. Fx how do you adjust the delta exposure for an entire portfolio? Just by adjusting the position with the most negative delta problem? That could cause more risk in that position. I would have focus on each position and than the overall portfolio level is what it is, if it turns out that the overall greeks are bad than you have traded wrong positions.

This makes sense, but I watched a webinar with Don Kauffman (search for him at Think or Swim webinars) and he showed how by merely adjusting "portfolio delta" (adding Vertical calls when needing negative delta, adding Vertical puts when needing positive delta) you can keep all positions on until expiration and come out quite a bit ahead.

For example, I put on about 6 Iron Condors and Calendars, but as you know the market has plummeted recently (about 6% drop so far), which has put me in large positive delta for my overall portfolio. All my positions would have been a loss had I closed them early. But instead I've just put on some Vertical calls, which have reduced my portfolio delta down a long ways, and it appears that I will now be able to wait until February expiration and close out at a profit.

Maybe if you watched Don's video presentation on "Adjustments" (search for his name at Think or Swim) it might help to clarify what he suggests. I'm not saying this is right, just explaining what he taught, and how it is doing so far.

 

[NHS]

Quote from dreamliner:


For example, I put on about 6 Iron Condors and Calendars, but as you know the market has plummeted recently (about 6% drop so far), which has put me in large positive delta for my overall portfolio. All my positions would have been a loss had I closed them early. But instead I've just put on some Vertical calls, which have reduced my portfolio delta down a long ways, and it appears that I will now be able to wait until February expiration and close out at a profit.

Thank you for the information about the presentation.

Well if you have al lot of cash on the side ready I guess you can always buy more and more to adjust.

 

[dreamliner]

Quote from NHS:

Thank you for the information about the presentation.

Well if you have al lot of cash on the side ready I guess you can always buy more and more to adjust.

Yes, I believe the recommendation is to use half for putting on positions and the other half for adjusting. This way we can carry our positions to expiration.

Again, not recommending this, just showing what he taught, and wondering if others are managing "overall position delta" rather than individual adjustments.

I do recommend watching his video webinar, it really is informative. I felt like I was drinking from a fire hose.

 

[NHS]

Quote from dreamliner:

Yes, I believe the recommendation is to use half for putting on positions and the other half for adjusting. This way we can carry our positions to expiration.

Again, not recommending this, just showing what he taught, and wondering if others are managing "overall position delta" rather than individual adjustments.

I do recommend watching his video webinar, it really is informative. I felt like I was drinking from a fire hose.

Remember that there is no free lunch out there