There are a couple of books by Paul Forchione. One is called Trading Options Visually. Google him to find his web site. His books contain extensive information about adjustments on many types of trades, and some very good ideas. The books are kind of pricey, but they are well worth it. On the web, I was able to find a used copy of one of the books.
As an example, I sometimes use short straddles. (I do not think that a 2nd or 3rd month straddle is any more scary than a near-month fly.) One of Forchione's methods for adjusting short straddles is to buy or sell a synthetic when the delta gets out of whack. You can decide upon a delta for your entire position at which you will adjust, say 100. Also decide how often you want to adjust--once a day is pretty good; checking too often causes you to whipsaw yourself. By starting with five short straddles on an ETF, for instance, you will probably reach a position delta of about 100 when the price changes by about 2-3%. It is necessary to keep some powder dry to use as margin for the synthetic. If you don't want to use naked options, you would set up a fly instead of a straddle, then buy or sell a call or put as an adjustment, while shorting another one out of the money in order to partially pay for it. As you can see, this is similar to Dan Sheridan's methods. Forchione recommends second or third month straddles. The near month ones just act too crazy; they are dangerous. Needless to say, the more adjustments you have to make, the less you can make on the position. It's a balancing act between making sure you adjust early and avoiding getting hurt in whipsaws. You'll have to experiment to determine how soon you want to adjust. In any case, you will be adjusting well before your breakeven. (The breakeven is irrelevant anyway, if you are not going to hold until expiration.) To avoid whipsaws, you can buy in any short options that are trading at a very low price. I have been able to make 3-9% on second and third month straddles this way, including some that have strayed well beyond their original breakeven. These are considerably more flexible than Sheridan-style flies. As long as you don't have to make a lot of adjustments early and you don't get whipsawed too much, it is usually possible to make something on these positions. Forchione also discusses at length the importance of timing your entry and exit based on volatility. You should not try to squeeze every last dime out of these. If I can make 3-4% in a few days because the volatility has crashed, I will exit, then re-enter when IV spikes up again.
I have also read damn near everything, and have found that the only complete discussions of adjustments can be obtained from Forchione's books and Dan Sheridan's videos. There are also a lot of adjustment suggestions buried in McMillan's big book, but they are not always organized as such; you have to slog through a lot of other stuff to find them (which isn't a bad idea, because you learn a lot of other good stuff while you are slogging.)
I find most of the books people have mentioned here to be long on explaining what a position is, and short on describing how you might adjust it. I don't think that some of us need any more definitions.
--- In OptionClub@yahoogro
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> Bill,
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> I have had similar experiences and there while there are a plethora of books out there that will tell you how to put on a position and look great as a "chalk talk" in planning the trade to borrow from your sports analogy, when it comes time to adjust, or when the market is threatening the position they leave you guessing.
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> One book that doesn't do this is called "The Option Traders Handbook" by George Jabour and Phillip Budwick...I had a copy of the 1st ed that I loaned out to someone and they moved and I have not tried to recover it. I missed having it as a reference so I recently purchased the 2nd Ed which is now out. It's one of the few books out there that not only discusses how to implement strategies but also how to potentially adjust and morph the spread positions.Â
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> So books by Salba that you mentioned, and others all can explain the How and why of choosing a strategy and how to put it on.....at the point in your trading plan that you need to adjust or morph the position Jabour'
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> As far as specific books on Volatility Trading I think that Augen's book is good but its not what I would call an easy read.
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> Cheers
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> --- On Tue, 3/2/10, Bill Fletcher <wnfletcher@
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> From: Bill Fletcher <wnfletcher@
> Subject: [TheOptionClub.
> To: OptionClub@yahoogro
> Date: Tuesday, March 2, 2010, 5:00 PM
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> I have Saliba’s book on spreads, which is pretty good. The book discussed here doesn’t get good reviews. It is one of the few trading books I don’t have!! Most of these books tell you what to do when you are in the huddle, but not when the pass rush is on, and you are looking for a receiver.  (Not a bad analogy for an Englishman!)  We don’t need more fancy spreads â€" they just move the lines around a bit on the risk graph. What we need is a sense of “I am in a calendar, and my deltas have gone from 5 to minus 62, and I am sliding into the abyss. What do I do?â€Â That kind of stuff. I may sound like I know what I am talking about, but I am lousy at it. There is a book called “Trading Option Greeksâ€, which I left in the supermarket cart because it was my “standing in line†book and I forgot it. I am currently back on Augen’s Volatility Edge, which I didn’t really understand the first time through. Do any of you
> guys out there have an opinion on these?
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> Bill
>
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