The art of adjustment

O

optiontraders

Very long time ago I posted video about one interesting strategy and approach of trading options. Here is the link: http://www.youtube.com/watch?v=xit3Mxky2NM&feature=share&list=UUNZpzTMgDTcJNsz3-R2a7yQ&index=10

All this time I upgrade my skill of option adjustment

And today I want to show one of my last trade.

So, I opened a ratiospread with bull call spread:
View attachment 146017
Then time passed and position showed a some profit.
I made an adjustment.
I did it several times adding and deleting some another options locking profit.
And finally I got a simple vertical spread without any risk and with opportunity to gain more if market goes down rapidly.
View attachment 146018
 
optiontraders said:
Very long time ago I posted video about one interesting strategy and approach of trading options. Here is the link: http://www.youtube.com/watch?v=xit3Mxky2NM&feature=share&list=UUNZpzTMgDTcJNsz3-R2a7yQ&index=10

All this time I upgrade my skill of option adjustment

And today I want to show one of my last trade.

So, I opened a ratiospread with bull call spread:
View attachment 146017
Then time passed and position showed a some profit.
I made an adjustment.
I did it several times adding and deleting some another options locking profit.
And finally I got a simple vertical spread without any risk and with opportunity to gain more if market goes down rapidly.
View attachment 146018
More...
Kudos on turning the trade in to a riskless vertical but you might want to see how much of it was the market moving in your favor vs. artful adjusting. One note from your video, the day step tool in the TOS platform is meaningless if you don't adjust volatility (and even with that still is inaccurate). You will find that with a move down and vol goes up, your BWB/ ratio spread won't be near as profitable as you thought. Unless you plan on holding this thing until the very end, I would change it over to the day step feature vs. expiration. Those trades look great at the end but most people never get close to expiration.
 
optiontraders said:
Very long time ago I posted video about one interesting strategy and approach of trading options. Here is the link: http://www.youtube.com/watch?v=xit3Mxky2NM&feature=share&list=UUNZpzTMgDTcJNsz3-R2a7yQ&index=10

All this time I upgrade my skill of option adjustment

And today I want to show one of my last trade.

So, I opened a ratiospread with bull call spread:
View attachment 146017
Then time passed and position showed a some profit.
I made an adjustment.
I did it several times adding and deleting some another options locking profit.
And finally I got a simple vertical spread without any risk and with opportunity to gain more if market goes down rapidly.
View attachment 146018
More...

And the point is...?
 
daniel5198 said:
And the point is...?
More...

Narcissism :
The childish belief that other people are as interested in me as I am in myself.

Boris should go back to Russia and leave them Ukrainians alone.

(he should also learn to use articles like 'the' and 'a')
 
oldnemesis said:
Narcissism :
The childish belief that other people are as interested in me as I am in myself.

Boris should go back to Russia and leave them Ukrainians alone.

(he should also learn to use articles like 'the' and 'a')
More...

Well in his defense I remember the time I thought I had the keys to the market and I could trade a butterfly with special adjustments in any market condition. I was so giddy I was telling everyone who would listen that the edge is in the adjustments. Then the market did something it hadn't in previous months and I took a big hit. 8 months of winners before I got hammered.
 
Dolemite said:
Kudos on turning the trade in to a riskless vertical but you might want to see how much of it was the market moving in your favor vs. artful adjusting. One note from your video, the day step tool in the TOS platform is meaningless if you don't adjust volatility (and even with that still is inaccurate). You will find that with a move down and vol goes up, your BWB/ ratio spread won't be near as profitable as you thought. Unless you plan on holding this thing until the very end, I would change it over to the day step feature vs. expiration. Those trades look great at the end but most people never get close to expiration.
More...

Do you want a cookie?
 
Several years ago "Michael Catolico" wrote a good article on adjustments.
Google may yet remember the PDF.

Carl

Remember mistakes don't define you, they only mark your progress.
 
Carl..yes..and he made a point of saying adjustments can only improve on a trade working in your favor. IE a vertical that is making money can morph into a fly then condor. He did many of these trades over the years. Important point is if an initial trade goes AGAINST you there is no rescue adjustment. You can only attempt to roll out but at additional risk or sell/buy the other side to perhaps mitigate the loss. Best is to set either a time or $$ uncle point.
 
RichardRimes said:
Carl..yes..and he made a point of saying adjustments can only improve on a trade working in your favor. IE a vertical that is making money can morph into a fly then condor. He did many of these trades over the years. Important point is if an initial trade goes AGAINST you there is no rescue adjustment. You can only attempt to roll out but at additional risk or sell/buy the other side to perhaps mitigate the loss. Best is to set either a time or $$ uncle point.
More...

I agree, but that's not entirely true - he also had examples of turning a losing long call into a ratio so that it turns a marked loss into a BE trade at expiry (at the expense of upside risk)...and iirc other examples of salvaging losing positions.

The marked p/l is irrelevant, a long call showing a profit that gets adjusted into a 'riskless' call spread is risking marked profits. There is an advantage in not paying full commissions on a new position if you're using legs already on the books.

Adjustments in and of themselves don't provide edge though I do think they are very valuable and provide a good way of looking at a dynamic book. m2c.
 
Those are good points, but most option traders eventually realize a losing trade is best closed. As far as risking profits...yes that is a personal judgment call. You have a winning position do you take "some" profit and try to structure for perhaps a "home run" or do you take profit when you are at %50 %75 etc. All part of managing your trade.

Usually time is the final determination of whether or not I want to "play" with the trade. If I have lots of time I might want to increase the possibility of winning or create a "risk less" trade, obviously with less time you may just take your profit. Conversely if you get %50 in a day...do you cash it in and set up a new trade with the assumption the same opportunity may soon present itself. All management questions that each trader needs to work out for themselves.
 
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