Learn to Trade Options Adjustments
Want to learn to trade options like a pro? You need to learn how to adjust positions gone wrong. Once traders learn to trade options strategies from the analysis/trade entry perspective, the next step is trade management. To be sure, when/how a trader exits a trade ultimately determines whether or not the trade is a winner or a loser.
But exiting trades is not always as simple as selling your longs or buying your shorts. Sometimes traders need to alter an existing position to continue the trade and have it reflect changes in the market place.
A common example of an options trade adjustment is repairing an income trade, such as an iron condor, after the underlying has trended too much. If the underlying stock approaches one of the break evens in an iron condor, traders can roll the troubled credit spread up (for calls) or down (for puts) to offer some “wiggle room”. This is a common adjustment technique, and is just the beginning step in the world of adjustment mastery.
Once you have the basic options strategies and analysis techniques down, be sure to focus your options education efforts on adjustments. They may just make or break your next trade. v
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