Complete Guide to Adjusting Credit Spreads, Iron Condors & Calendar Spreads - Options Adjustments
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- Опубликовано: 4 май 2016
- In this video, I'll walk you through the complete strategy and techniques we use for adjusting credit spreads, iron condors, and calendar spreads including more than four different detailed examples of real trades we adjusted and turned around.
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Wow. I love you guys. Taking notes on every single video!! Literally thousands of hours of studying... On it. thank you so much!
Each and every video gives tremendous insight , into what we need to do right. Awesome!
Great video Kirk, keep up the good work.
You've got a great fan here in Mexico.
Regards
Very well explained adjustments! awesome!
Great video. I'll have to check out your website.
I see how you moved the put spread up as the underlying moved away from it, but once the put spread strikes got higher than the call spread didn't that expose you to more risk since at that point both put and call spreads could lose full strike widths at that same time if the underlying moved below the puts and above the calls? Maybe we shouldn't increase the risk and just move up to overlapping the calls at most?
Correct which is why we don't go inverted when we move up spreads.
Thanks.
Could you also turn the call side to a back ratio if the stock is moving up like the RUT iron condor example as well as rolling up the put side?
You could yes.
Nice video. How far from expiration do you do your last adjustment on an iron condor?
Usually anything inside 20 days to expiration is far game but of course it depends on the situation.
I understand turning the vertical spreads into iron condors, How do you decide on which put spread to sell? Do you use the STD to decide?
Yep we decide by looking at the individual strike price probabilities.
Great video and great lessons. I just have one concern, if you do nothing with your loosing side, don't you risk getting assigned? and how would you deal with that?
We would always manage that side before expiration to avoid assignment since most assignment happens the last week of expiration.
Why wouldn't you leave the initial un-challenged side in play to let theta decay work in your favor?
Great Video, what is your opinion on setting stop loss orders on spreads combined with rolling up the un-tested side?
Stop losses are crap - here's the backtesting data on it: optionalpha.com/stop-loss-option-strategies-21775.html
Why are you not rolling the losing side as well?
Rolling the losing side increases risk. You close the spread with a guaranteed loss, then move it up/down but what if the market continues to move against you? Do you close and roll again - locking in loss after loss after loss. Why not just leave it along and take whatever loss you have and manage the unchallenged side. Make sense?
There are several ways you could roll the losing side. One way, which you pointed out, is to buy back the losing spread and then resell further away. How large a loss you take depends on when you exit the losing spread and how far out in both time and price you resell the new credit spread. Yes, if the market continues in that same direction unabated, you could be locking in loss after loss. But if you are selling a put credit spread, the volalitility will also pick up when the market drops, allowing the next spread you sell to be sold farther away and/or for more money. The spreads can be sold very far away in the indices each time you roll. The tradeoff is that you increase probability of a small loss or smaller gain after rolling the losing side at the cost of not defining your risk.
The second method of rolling the losing side actually reduces risk. Instead of rolling the entire spread, roll only the short strike while keeping the long strike. Each roll either gets closer to the long strike reducing your risk or even past your long strike. You could even end up with a situation where you roll past your long strike so that each subsequent roll of the short strike makes you more and more money if the market continues in one direction.
Believe me I understand the rationale behind what you say here but in reality (since we've backtested more than 21million different trading strategies, adjustment techniques, etc.) is that rolling the losing side is not as effective as rolling the un-challenged side closer.