Re: [TheOptionClub.com] Comments on the Reverse IC Test and Vertical Adjustments

 

On Mon, 8 Mar 2010 20:55:42 -0600, "mcatolico"
<mcatolico@mindspring.com> wrote:

>mc- there are many other variants that can be used when a trade is
>profitable. These were just some of the more obvious/common. The idea in my
>spreadsheet is to look for ways to a) make the trade risk diminish or
>disappear completely and b) keep a winner in the game so that further
>profits may accrue.

I hope you will get a chance, Michael, to post a more extensive list.
I have been trying, with the reverse ICs, to chose one offensive and
one defensive for each adjustment. Below I have written the
transforms of your spreadsheet in equation form. I hope some people
will find it handy for reference. The first 6 are defensive (original
spread has lost value) for a credit, next 2 are defensive for a debit
and the last 4 are offensive (original spread has gained value) for a
credit.

Start Position: 50c - 55c

-55c = 50c - 2*55c (ratio)
-60c = 50c -55c -60c (ladder)
-55c + 65c = 50c - 2*55c +65c (broken wing butterfly)
+45c - 2*50c = 45c -50c - 55c (ladder)
+55c - 2*60c = 50c -2*60c (ratio)
+40c -2*45c +55c = 40c -2*45c +50c (butterfly)

+45c - 50c = 45c -55c (vertical)
+45c - 2*50c +55c = 45c - 50c (vertical roll down)

-50c +2*55c = 55c (call)
-55c + 60c = 50c - 2*55c +60c (butterfly, often free)
-60c + 65c = 50c - 55c -60c +65c (condor)
-50c + 2*55c - 60c = 55c - 60c (vertical roll up)

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