Re: [TheOptionClub.com] Re: Best Adjustment Method

 

On Wed, 24 Mar 2010 21:50:47 -0500, "mcatolico"
<mcatolico@mindspring.com> wrote:

>Scenario 2: a day or two into the trade, the specific underlying suddenly
>gaps up strongly to 191 irrespective of the market as a whole. Here both the
>original implied assumptions (declining volatility, steady to driftless
>price movement) are pretty much proven wrong. Here, id have to reassess the
>entire trade and look to at least provisionally get cautious and assume I
>was wrong. I'd adjust by adding gamma to the threatened side and maybe add
>some long deltas by selling some putside premium. an example would be
>-190c/+3 195 to net into a 2X4 backspread on the call side and maybe I'd
>look to get a bit of a credit by selling the -190p/+185p vertical
>
Have you checked this one out with an options calculator or a real
ticker, Michael? Please post the details if so.

I think you are saying, add 185p -190p -190c + 3*195c to the original
condor, 175c - 180c - 190c +195c getting
175c -180c +185p -190p -2*190c +4*195c. The adjustment seems to
require a large debit because of the 3 long 195 calls and according to
a rough expiration graph I drew, the trade will lose big at 190, total
disaster at 195 and be unprofitable if the position ends up below 205
or so.

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