Options Adjustments

Options adjustments are techniques in which an option trader changes an existing option position to a new and different option strategy to manage the risk of the position.

Options adjustments can potentially turn losing trades into winning trades. This is accomplished by changing the options position to a high probability trade that has a high delta of success. Options adjustments can sometimes be over used. Negative gamma trades lock in small delta losses each time a trader makes an options adjustment. So, traders need to adjust positions sparingly but decisively.

Another type of options adjustment is rolling. Unlike adjusting losing trades, this is a technique to adjust winning trades to continue a winning position. This is referred to as a profit continuation adjustment.

Coming soon…

… More options education musings.