In this context, adjusting is to bring the winning leg of the position closer to the current strike price w/o changing the expiration date. This gives you some credit, reduces your position's delta, but this comes at the expense of lowering your POP. Re-centering also involves moving the losing leg farther from the current strike price, which may cost you some debit overall, but you it makes it easier for you to bring the position closer to neutral.
I don’t recommend selling naked options. You will win most of the time but one or two ugly moves will wipe out your returns. I also really don’t sell both sides very often. I did in GLD because GLD isn’t historically a huge mover. But in single stocks you will get tested a lot. Been doing this for damn near 10 years and I’m finally starting to figure it out. Play it close to the vest and your wallet will thank you. These guys have millions in their account and we don’t even know if they make good money. My best advice is to look into David Jaffee at Best Stock Strategy on RUclips. I love tastytrade for their research but I don’t trade like them. And I love Tom and Tony I think they’re good guys.
@@AString95 Tom and Tony's strategy is very conservative. Absolutely nothing wrong with following their suggestions. I agree with you about naked options. It's hit or miss.
Rather than showing the average carried absolute delta, perhaps can show how many % of the time the delta will move 0%-2%, 2%-4%, etc? That will give us a better picture what we can expect most of the time rather than the number being affected by some outlier move.
Just to get that right: let's say i entered a strangle at 16 delta on both sides and the next day (assuming i'd adjust daily) the strangle sits at 20 and 12 delta respectively, i roll the 12 delta strike to 20. Correct?
I'd like to know how they are rolling also. What I currently do is what you mentioned. Would be great if they showed us on the software what they are doing then we can see if it will be a credit or debit.
thats the confusing part.. rolling the 12delta to 20 brings in a credit... but eventually they will want to move a 30 delta back to 20 which is a debit or else the strangle gets tighter and tighter
Also I've had to roll the untested side so much that it's inverted. I've heard them mention to un-invert so would think how they recenter could be same approach to un-inverting. Currently when I'm inverted I just try to get out at B/E to make it a scratch to free up BP.
Why not trade stock to control delta? This seems like a much cheaper way to manage the position. Unless the strategy depends on holding a specific delta line.
Great Segment. Question - In Tastytrade position tab i have Net Delta as a header. It looks accurate for my strangle positions in things like DIA, GLD, and QQQ but not /ES, why is that?
maybe im missing something. selling a strangle and collecting $3.00 credit at 45 days.. recentering / adjusting is done by rolling one or both sides up or down.. BUT seems to be done for a debit (buy the guts,sell the wings is a debit).. so each adjustment is subtracting from that $3.00 initial credit ..just for the sake of being centered.. and at 21 days my original $3.00 credit is less than $1.00 ... what am i missing
a normal adjustment is to buy the original put/call sold (a wing) back and sell a new put/call closer to what the original midpoint was for a credit that is higher than the debit which you bought the wing back for, giving you a net credit for the adjustment.
@@ilikemango422 i get that part , the roll down/up the untested side, but then you end up with a tighter and tighter strangle . Tom often adjusts daily and many times if stock moves against he adjusts for debit. example with simple strikes: sell strangle call at 100, put at 50, stock at 75. stock moves to 85, roll up the Put for credit to 70. now have 70/100 strangle, stock goes to 95. He would "adjust" the call from 100 to 120 to "recenter" , but thats for a debit , thats the part im not tracking. that debit now eats into or exceeds the credits received thus far.. on a fast moving stock Tom adjusts daily/multiple times a day.. you cant just keep rolling up the untested side..
I mean yeah but there is other variables. If it tests upside there is likely a premium crush happening, or if it tests down you can collect more premium on rolling untested side.
I think what is missing is you don’t have to keep to 21 DTE or 0 Dre or even a day. Once you’ve had to defend a position and reversal will likely give you a scratch. Next one might be a winner
The debit is what it costs to put yourself back in a "better" position to keep capturing premium for the remainder of the trade. So it costs you some of the potential premium you could have gotten in order to get back a better probability of profit going forward. The original trade went against you for whatever reason, you adjust if you continue to have the same assumption and volatility agrees, so you buy back that injured position which may be tested or breached and put on a fresh one for a smaller credit than what you paid, but now you have similar probability of profit to that of the beginning. So Tom always mentions adjusting deltas. So in your example the stock moved to 85, so your 50 put is now likely worthless, so roll that up to a comfortable strike to collect additional premium adding to your max profit. But now the stock moves to 95, if the new put you sold already lost most of its value you could roll it up to 80 or whatever but the call is probably close to 50 delta and getting uncomfortable. Before letting it possibly get worse you buy that back and sell the 110 or 120, whichever strike/delta you want to position yourself in for the current environment, but this will be done for a debit, reducing your max profit, increasing your probabilities of profit. In the same expiration the call that got in trouble will be more expensive than the new one you are selling further up, but the new one you are selling currently has theoretically a higher chance of expiring out of the money than the original 100 call. I say currently because you never know, the stock price could go back down and the 100 call would have been profitable but you don't know that as you are picking up deltas, so putting yourself in a better position has a cost. Hope that makes sense. It's a trade off, a better chance of making money will generally have a cost attached to it.
Can you explain the difference between Re-centering and Adjusting?
In this context, adjusting is to bring the winning leg of the position closer to the current strike price w/o changing the expiration date. This gives you some credit, reduces your position's delta, but this comes at the expense of lowering your POP. Re-centering also involves moving the losing leg farther from the current strike price, which may cost you some debit overall, but you it makes it easier for you to bring the position closer to neutral.
Thank you, guys for your videos! I keep watching them for 7 months! And I learnt so much practical information!
So if adjustments narrow your profit window and lower your max profit (since you stick to 21days), why not be more conservative with them?
As a newer options trader, it'd be helpful to define Re-centering vs Adjusting. Some context to measuring the deltas as well.
I don’t recommend selling naked options. You will win most of the time but one or two ugly moves will wipe out your returns. I also really don’t sell both sides very often. I did in GLD because GLD isn’t historically a huge mover. But in single stocks you will get tested a lot. Been doing this for damn near 10 years and I’m finally starting to figure it out. Play it close to the vest and your wallet will thank you. These guys have millions in their account and we don’t even know if they make good money. My best advice is to look into David Jaffee at Best Stock Strategy on RUclips. I love tastytrade for their research but I don’t trade like them. And I love Tom and Tony I think they’re good guys.
Correcto Mundo
@@AString95 Jaffee sucks!
@@AString95 Tom and Tony's strategy is very conservative. Absolutely nothing wrong with following their suggestions. I agree with you about naked options. It's hit or miss.
Any body answer the guys question please. New options trader here also… what’s the difference between re-centering and adjusting???
Rather than showing the average carried absolute delta, perhaps can show how many % of the time the delta will move 0%-2%, 2%-4%, etc? That will give us a better picture what we can expect most of the time rather than the number being affected by some outlier move.
Just to get that right: let's say i entered a strangle at 16 delta on both sides and the next day (assuming i'd adjust daily) the strangle sits at 20 and 12 delta respectively, i roll the 12 delta strike to 20. Correct?
I'd like to know how they are rolling also. What I currently do is what you mentioned. Would be great if they showed us on the software what they are doing then we can see if it will be a credit or debit.
thats the confusing part.. rolling the 12delta to 20 brings in a credit... but eventually they will want to move a 30 delta back to 20 which is a debit or else the strangle gets tighter and tighter
Also I've had to roll the untested side so much that it's inverted. I've heard them mention to un-invert so would think how they recenter could be same approach to un-inverting. Currently when I'm inverted I just try to get out at B/E to make it a scratch to free up BP.
would like to see a response from tastylive
@@lexusmark1 maybe they inverse it.
This is was a great market measures!
Why not trade stock to control delta? This seems like a much cheaper way to manage the position. Unless the strategy depends on holding a specific delta line.
Yeah or there is to much delta to hedge and one side, usually the premium side, looses delta weight and becomes unbalanced
You would then have to short stock and pay margin interest!
But it costs a lot of commsions and fees? Do this and calculate the $$$ impact
Great Segment. Question - In Tastytrade position tab i have Net Delta as a header. It looks accurate for my strangle positions in things like DIA, GLD, and QQQ but not /ES, why is that?
Whats the difference between adjusting and centering?
Edit: someone beat me to it
Are there traders that simply take all positions off at 21 DTE?
Yes, or roll out if things look good.
maybe im missing something. selling a strangle and collecting $3.00 credit at 45 days.. recentering / adjusting is done by rolling one or both sides up or down.. BUT seems to be done for a debit (buy the guts,sell the wings is a debit).. so each adjustment is subtracting from that $3.00 initial credit ..just for the sake of being centered.. and at 21 days my original $3.00 credit is less than $1.00 ... what am i missing
a normal adjustment is to buy the original put/call sold (a wing) back and sell a new put/call closer to what the original midpoint was for a credit that is higher than the debit which you bought the wing back for, giving you a net credit for the adjustment.
@@ilikemango422 i get that part , the roll down/up the untested side, but then you end up with a tighter and tighter strangle . Tom often adjusts daily and many times if stock moves against he adjusts for debit. example with simple strikes: sell strangle call at 100, put at 50, stock at 75. stock moves to 85, roll up the Put for credit to 70. now have 70/100 strangle, stock goes to 95. He would "adjust" the call from 100 to 120 to "recenter" , but thats for a debit , thats the part im not tracking. that debit now eats into or exceeds the credits received thus far.. on a fast moving stock Tom adjusts daily/multiple times a day.. you cant just keep rolling up the untested side..
I mean yeah but there is other variables. If it tests upside there is likely a premium crush happening, or if it tests down you can collect more premium on rolling untested side.
I think what is missing is you don’t have to keep to 21 DTE or 0 Dre or even a day. Once you’ve had to defend a position and reversal will likely give you a scratch. Next one might be a winner
The debit is what it costs to put yourself back in a "better" position to keep capturing premium for the remainder of the trade. So it costs you some of the potential premium you could have gotten in order to get back a better probability of profit going forward. The original trade went against you for whatever reason, you adjust if you continue to have the same assumption and volatility agrees, so you buy back that injured position which may be tested or breached and put on a fresh one for a smaller credit than what you paid, but now you have similar probability of profit to that of the beginning.
So Tom always mentions adjusting deltas. So in your example the stock moved to 85, so your 50 put is now likely worthless, so roll that up to a comfortable strike to collect additional premium adding to your max profit. But now the stock moves to 95, if the new put you sold already lost most of its value you could roll it up to 80 or whatever but the call is probably close to 50 delta and getting uncomfortable. Before letting it possibly get worse you buy that back and sell the 110 or 120, whichever strike/delta you want to position yourself in for the current environment, but this will be done for a debit, reducing your max profit, increasing your probabilities of profit. In the same expiration the call that got in trouble will be more expensive than the new one you are selling further up, but the new one you are selling currently has theoretically a higher chance of expiring out of the money than the original 100 call. I say currently because you never know, the stock price could go back down and the 100 call would have been profitable but you don't know that as you are picking up deltas, so putting yourself in a better position has a cost. Hope that makes sense. It's a trade off, a better chance of making money will generally have a cost attached to it.
Batista is not the brightest guy ...