Ricky
Hi, I have taken your prices / scenario and illustrated a variety of possible alternative adjustments that might be suitable depending on the traders view of market direction / volatility / risk tolerance / position size / trading method.
The file is located in the Files Section / Best Adjustment / Condor Adjustments 01.
I have used calls to illustrate the adjustments [although in practice it may be more effecient to trade the equivalent put spread].
Most of the adjustments 1 to 7 are pretty conventional Call spreads/flies/
Adjustments 8 and 9 are a little unconventional and inspired by Charles Cottle's mentoring programme.
Adjustment 8 is buying the 190/200/205 Skip Strike Fly.
Adjustment 9 is selling the 175/180/190 BWB.
Hope this is of some interest.
Cheers
James
--- In OptionClub@yahoogro
>
> You are right, Michael, that 190 was the best outcome but I wouldn't
> call it a winner. To settle the argument (without pistols, boxing
> gloves, etc.) as to whether this adjustment is possible, I went to the
> OCC Options Calculator and put in the numbers you gave. Volatility
> 35%, 28 days until expiration, underlying at 185 and got for the
> initial position, the prices:
> 175c 13.09,
> 180c 9.86,
> 190c 5.03,
> 195c 3.41.
>
> Then I changed the underlying to be at 191 with 26 days until
> expiration:
> 185p 4.40
> 190p 6.60
> 190c 7.625
> 195c 5.38 (not so cheap after all). Attached is the expiration graph
> with the original condor in blue and the adjusted position in black.
>
> On Fri, 26 Mar 2010 18:45:49 -0500, "mcatolico"
> <mcatolico@.
>
> >
> >
> >-----Original Message-----
> >
> >Ricky asked:
> >
> ><...> 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.
> >
> >MC - it's theoretical and the prices may be a small debit or credit
> >depending on time/volatility. The point is that I'm suggesting an adjustment
> >based on circumstances. Price is important always but so are the resulting
> >risk & opportunity profiles. That's why there is no cookie-cutter approach
> >to trading.
> >
> >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.
> >
> >MC - no way would the adjustment be a large debit. it's basically an iron
> >butterfly (credit spread) plus a couple otm long calls (minor debit) that
> >may or may net into a total debit depending on the obvious factors. As far
> >as what the position looks like it's clear that at 190 you have a winner
> >(not a loser) since everything is worthless besides the long 175/180 call
> >vertical. worst case is definitely 195 but so what? The original condor is
> >also a "total disaster" at 195 and the point is that if things move toward
> >195 the embedded backspread will make money and can be scalped thus getting
> >to an overall net position to a much healthier cost point. The thing is
> >that ALL trades - and thus ALL trade adjustments - are decisions made under
> >uncertainty. You make a bet, when the bet goes sour you adapt and change it
> >all the time trying to fight for profitability. It's not magic but it's not
> >all luck either. If you develop an understanding about what a pending trade
> >profile looks like (i.e. understand what it will do under a variety of
> >subsequent price and volatility conditions) and you are acutely aware of
> >what your current risk profile consists of (i.e. your current position
> >relative to how it may have changed due to the changing market) and you
> >synthesize the two (possible adjustment relative to current position), then
> >you will eventually develop the skill and feel needed to succeed.
> >
>
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