The more I do this, the more I just wind up looking at prices (of options) as trigger points for adjustment. When I am in a winner I look for a point where I can turn the trade into a risk free winner (i.e. no downside with some residual profit potential). When the trade is a loser I just put on my “inside out hat” and look for points where someone holding the opposite side of my trade can turn that into a risk free position; if that point is triggered, I know I have to make some kind of defensive move.
Example: let’s say you enter a +45/-50/-55/
Conversely, say you are in that same +45/-50/-55/
From: OptionClub@yahoogro
Sent: Monday, November 02, 2009 8:28 PM
To: OptionClub@yahoogro
Subject: Re: [TheOptionClub.
Thanks Rob. For some reason, iron condor is "taught" most often - you win 10 times out of 12 and the 2 times you lose, it wipes all your profits. But in the name of "income" and "selling options" and "collecting premium" ... oh well.
And any adjustments you make, takes away the little "credit" you get from the initial entry.
Murthy
On Mon, Nov 2, 2009 at 6:15 PM, drrobhansen <robhansen5252@
Murthy, from what I remember, he didn't do the adjustment at the threatened wing at a particular short option delta. He looked at the credit from the initial position and somehow decided how much he was willing to sacrifice to extend the break evens with the butterfly adjustment. I have a great article from SFO magazine which also has a method of iron condor adjustments. This is well worth the read.
http://www.sfomag.
Dan Sheridan likes to look at the short option deltas with his high probability condors when determining the proper adjustment point. I believe he will initiate the position with a delta around 10 and adjust when the short option hits 20. It seems that the butterfly will cost less than if you wait until the delta reaches the high 20's and certainly the 30's. You can also increase the number of contracts on the threatened side in an attempt to maintain the initial credit, but the cost of the trade (margin) increases proportionally (along with the risk). There are probably as many iron condor adjustment techniques as there are iron condor traders!
RFH
--- In OptionClub@yahoogro
>
> In general, did he go over WHEN to do these adjustments?
>
> Murthy
>
> On Tue, Oct 27, 2009 at 4:20 PM, Ricky Jimenez <rickyjim@...> wrote:
>
> > The first type of adjustment he presented was the familiar widening of
> > a condor by adding a butterfly at the wing. Sorry, but I wasn't
> > paying close attention when he presented the second adjustment. Can
> > anybody supply what it was? I remember that it had positive delta but
> > would be a loss at the wing if held to expiration, so if the
> > underlying kept going higher you could close the entire position or
> > just the call side for a profit.
> >
> >
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The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading. All messages and postings, and any materials circulated are provided for discussion and educational purposes only. No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice. All investors are encouraged to consult a qualified professional before trading in any security. Stock and option trading involves risk and is not suitable for most people. There is no guarantee that any information provided is accurate and, may in fact, be wrong. It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student. As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.
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