Tag Archives | psychology of trading

Trading Success: The Key

We all hear the phrase “options trading isn’t for everyone,” and my guess is that almost everyone thinks of that as a disclaimer, so that traders who lose money do not sue their brokers. One reason that the words in quotes are repeated so often is that they are true.

It is possible for every person who trades options to make money. But that is not going to happen.
It is possible that you will win the lottery. That’s not going to happen either.
Anyone can get lucky and anyone can get unlucky. That goes for options traders as well as for everyone else.

When those words are repeated, you must believe them (please): Options are not for everyone.

There are various reasons why some people cannot succeed when trading options (or anything else). Those who panic easily or are never satisfied with profits and always want more are not likely to do well with options. The nature of the game requires good strategic decision-making, and when emotions play a big role in your everyday life, they are likely to have a large negative effect on your trading results.

That’s why I believe discipline is so important. Other factors are important as well. Some people just cannot grasp the fundamental basics of how options work. We have to understand that. Many times a learning disability prevents the student from learning the lessons. At other times an obstacle must be overcome. But not everyone can learn to do all things.

That brings me to psychology and how important it is on how well a person can trade. The following blog post from Chris at My Simple Quant is so well done that I don’t want to excerpt it.

This is an important story to understand. It is reality. It applies to you. As a new trader you may not be in position to make plans or develop trading systems, but just looking at the big picture is enough to increase your chances of success.

A Drawdown in Emotional Capital





The last few trading weeks have been very difficult, a lot more difficult than they had to be. I am suffering a drawdown. The % drop bothers me but it really isn’t that bad, nothing catastrophic. I am still up on the year, so my finances are not out of whack. But the emotional capital drawdown I’m suffering feels enormous, like 5 times larger than actual monetary drawdown. I feel this way because I did not follow my own trading rules. I don’t mind losing money when I follow the rules, that’s part of the game. But to trade successfully under these rules for 18 months then abandon them, what the hell was I thinking?

Honestly, the threat of nuclear fallout kind of messed me up. The issues in Japan felt different to me. This wasn’t a debt problem or a fat fingered flash crash. This was a 9.0 quake with 7.0 aftershocks; this was a tsunami completely wiping out an entire city; this was 6 nuclear reactors melting out of control. This really was the end of the world! Ahhhh!!!! -exhale, pause- Well, of course it wasn’t.

I think I became the media’s whipping boy. Twitter and Cable TV and the web all got in my head. Maybe it was the gravitational pull of SuperMoon turning me into a certifiable lunatic. My brain ‘went rogue.’ I think it warped some neurons or something. I just wasn’t thinking straight when I decided to liquidate everything the morning of March 15, 2011. I booked a pile of losing trades that would have been net profitable had I followed my rules. I also chose not [to] take many profitable buy signals that morning too. My system is designed to buy fear. I became a system trader to avoid this crap! It is extremely frustrating to know I did the exact opposite of my plan. I buckled under the pressure. I choked. Then of course I did a few revenge trades and lost more money. It was a throwback to my irrational trading days circa 2004 – 2007. It was a step back on my current trading journey. Heck, it’s taken me over a week to get beyond the denial and write about it. So this troubling time has really made me do some introspecting. I think some good lessons have come from it.

  • Accept that it is all in the past and there is nothing I can do about that it. Really, it’s over with. Just move on.
  • It is only money. I can earn more. I am alive. I do not have radiation poisoning. Stop stressing! Now laugh.
  • Step away from the computer more man. I got on Twitter/StockTwits in September 2010 and my addiction has been progressively getting worse. It peaked (or I hit rock bottom) with the Japan quake. I could not step away from the information for more than 5 minutes. It was bad. That definitely contributed to my deluded mindset. Twitter is a powerful trading tool but I was abusing it.
  • This touches on the previous point, but: Do not focus so much of after hours futures activity. Monday the 14th really started it all for me. When the Japanese market dropped 17% that night, Twitter seriously flipped out. I flipped out. It was pure PANIC! That was probably the craziest Twitter stream I have ever witnessed. If anyone was online that night, you know what I’m talking about. Even Dr. Phil Pearlman did a Stocktwits.tv episode about the panic. I am really glad he did that show; it really is worth a watch here.
  • Work out, get exercise. James Altucher talks about this. It makes sense. I’ve worked out my entire life, but since September 2010, I’ve maybe gone to the gym 5 times. That is not good. Working out releases endorphins and the whole process is a good way to burn out any toxicity in your body. I’ve gone everyday this week, the positive change is significant.
  • Beware of trading hubris. Stay humble. Always. I am not a professional yet. I am still prone to make mistakes. I am not perfect.
  • Trust yourself. Trust your system.

Trading is such a psychologically challenging profession. Professional athletes need their bodies to be in supreme shape; professional traders need their minds to be in supreme shape. When the body is injured, it needs to be rehabilitated. I pulled my mind muscle; I need to rehab. So I’ve been more cognizant of my mental health. It’s always been a primary concern for me, but I’ve strayed lately from that focus. It’s funny how some of the esoteric, vague $STUDY tweets actually make some sense when you’re in crisis. I know I’m not the only person who’s going through something like this. I will learn from it. I will be a better trader because of it. After all, it’s only money.

936
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Legging into an iron condor: A Good Idea?

Mark,

Can you please provide some in depth info on what would the preferable steps to leg into an IC – by spread – would be?

Example. if I open the put side today and next week index moves higher I sell the call side, that's great. But what if next week index moves lower? Roll-down the puts? Take losses and wait for another opportunity? Sell the calls at current prices?

My second question is: from your experience, would an IC constructed around 1 standard deviation OTM be really ~68% probability of keeping all the premium (given we do not make adjustments, in plain theory)? Thanks.

Dmitry

***

In depth discussions are not always possible.  That's the stuff of which lessons and book chapters are made.  However, I'll offer the major points in enough detail, that it should satisfy your needs.

As it turns out, you do not need a lot of information about legging into iron condor trades. 

 

Legging into iron condors

1) Here are the major points – everything else on this topic is far less meaningful.

I do not like the idea of legging into iron condor trades by selling puts first.  It simply doesn't work as well as it should – when considering the risk involved. I know that's not good news for the trader who usually has a bullish bias, but there are good reasons.

When the market rallies, IV tends to shrink.  When IV shrinks, the value of the call spread that you are planning to sell also shrinks.  By that I mean it increases in value by less than you anticipate.  Often much less because it is an OTM spread.  I'm assuming that the iron condor trader is not looking to sell options that are CTM (close to the money).

It takes a significant upward move for that OTM call spread to increase in value by enough to compensate the trader for taking the leg. If you do sell the put spread first, and the market cooperates, it's often better to buy back that put spread, take the profit, and forget about getting a little better price on the call spread.

It's different with calls. If you correctly (i.e., you are correctly short-term bearish) sell the call spread first, then you have the opposite effect.  If the market declines, the put spread widens faster than expected and you have an iron condor trade at a good price.

Thus, unless bearish, I suggest not legging into iron condor trades.

Managing the single leg

2) If you don't get an opportunity to sell the second leg of the iron condor, I suggest forgetting about it and managing risk for the one credit spread that you did sell. 

Let me point out something that seems 'obvious,' but may not be obvious to everyone.  More than that, a significant number of traders may have never considered this simple idea: Once you own the full iron condor position, my experience tells me that it is far more efficient to forget that it is an iron condor and manage risk as if it were two separate trades:  one call spread and one put spread.

Thus, I recommend trading the situation described above as a put spread.  The fact that you did not collect any option premium by selling the call spread no longer matters. 

[If you had sold the call spread, and the market declines, the only important consideration is knowing when to buy back that call spread by paying a small price .  Waiting for it to expire worthless is far too risky.  Sure, it expires most of the time, but on those occasions when you get the big bounce (and that's what you (Dmitry) are in the market to find, isn't it?) there is no point in taking a good-sized loss on the call spread when it could have been covered by paying $0.20 – or another low price that suits you.

That's why I suggest managing the put spread as you would normally manage such a spread.  I understand that you are primarily a stock trader and have not traded a bunch of these, but there is no single best way to manage the risk.  My advice is DO NOT allow the fact that the call spread was not sold influence your decisions.

Yes, you can roll it down; yes you may be uncomfortable with the trade and exit at a loss.  Yes you may sell a call spread now – but that is my least favorite adjustment method and I strongly recommend that you not do that.  I base that on your bullish personality, and for you, losing money in a rising market would make you very unhappy.  Much more so than losing in a falling market.  These pshychological factors may not be a legitimate of scientific trading, however I truly believe that a successful trader does not place him/herself in a situation that can result is a very unhappy outcome.  My strong guess is that if you were to lose a given sum, you would be far unahppier losing on the upsdie than the downside.

Standard Deviation

No.  The chances of keeping the entire premium are nowhere near that 68%.

If you sell an option that is one standard deviation (SD) OTM, then yes, it will be out of the money approximately 68% of the time when expiration arrives.  But don't ignore the fact that it may be ITM far earlier than expiration (and then finish OTM), and you would probably elect to adjust or exit, rather than clsoe your eyes and wait for expiration.

More importantly, you are selling a call and a put.  The probability that the put finishes OTM is that 68%.  The probability that the calls finishes OTM is also 68%.  However, you have both positions and the probability of finishing ITM is 32% for either option.  these probabilities are additive. 

Conclusion:  The probability that either the put or call will finish ITM is ~64% and the chance that the iron condor will expire worthless is only 34%.  That is nothing near the 68% that you mentioned.

It gets worse.  If you decide to determine (see yesterday's blog post) the probability that the underlying stock or index will move to touch either the put or call strike price during the lifetime of the options, you will discover that the probability of touching is much higher than the probability of finishing ITM.  Assuming you would make an adjustment, the probability of keeping the entire sum is now far less than 34%

Iron condors are riskier than they may appear at first. That's why risk management is so important.

883


 

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Iron Condors: Emotions, Psychology, and Risk Management

Andy made a very important comment, including questions. 

"I've been in the trenches the past month. Unfortunately, the experience has been costly. Started trading iron condors late
last year and  was losing money every month while everyone else was having fun riding the market higher.

You can probably guess where this story goes… I loaded up on MAY bull put spreads
and sold cash-covered puts (with the subliminal goal of
earning all the money I had lost with one fell
swoop). As everyone knows, a few weeks later, the market 'correction'
occurs, and I reluctantly closed some spreads early, but miserably
waited until the bitter end for many of my other contracts (I was in
shell-shock by that time). Indeed, I lost a lot of
money."

Andy,

It's appropriate that you commented on a post discussing trader psychology.  I know that you made trades that you considered to be reasonable at the time – at least when you began with iron condors.  However, I'm certain you recognize the 'one fell swoop' play was a high risk gamble.  Sure it could have worked, but alas, it didn't. 

I know the last thing you want to hear is a string of 'should haves.'  But let's get that part out in the open before going further.

The life lessons to be learned are

  • It's very important to trade without emotions.  That said, I recognize that many people cannot do that.  I'm sure it's far too early in your trading career to know if you are in that group or whether this is a skill you can learn

If, for now, you cannot trade without making emotional decisions, the lesson is to avoid positions that are large enough to frighten you (when danger looms).  Trading when afraid leads to panic decisions.  Panic is not 100% bad – it will save you from going broke, but it usually leads to terrible results

  • Size kills.  It's important to properly size all trades as the first step in managing risk, and especially when emotions may come into play when making decisions
  • Getting even is never an appropriate trading goal.  Earning money is your goal, and maintaining risk at an appropriate level is the path to follow
  • Managing risk is a full time job.  I've been there.  I've held positions that I hated, just waiting for expiration to take them off my hands.  It's important to avoid losing a bunch of extra money, just hoping to recover.  Money not lost is every bit as valuable as money earned.  Conclusion: Don't hold onto hated positions.

***

"I haven't given up on trading… and, hopefully, will be able to
recoup a good portion of my losses over the next year (or two). In one
of your posts a while back, you mention how difficult it is to teach
risk management to a new trader, and that most people will go on to
learn their lessons from their own experiences.


Here are a few things that stuck with me:


1) If you get to the point where you have to adjust a condor, it's
hard to come out ahead. My condors were simple: close them whenever the
index came within 30 points of either leg. One major thing I learned
about this: the money you lose from the 'close' leg far outweighs the
money you gain from the 'far' leg. For a while, when the market was
moving singularly upwards, I simply tried selling fewer short legs (ie: 4
bull put spreads and 2 bear call spreads) and selling the short leg
further out of the money than the long legs. Eventually I just decided
to sell the long legs and scrap the short legs."

[Exiting when 30 points OTM is one choice.  But to tell the truth, '30 points' is not a term that tells me anything.  In RUT it's almost 5% OTM while in SPX it's only 3% OTM]

I don't agree with your premise. 
Obviously it's best if we never have to adjust an iron condor and get to
watch as it fades into the sunset.

Adjusting is not something to fear.  It's an opportunity to convert a risky trade into something better.  Not only do you reduce (not eliminate) the risk of further loss, but you improve the position.  If you cannot make the position good enough that you want to hold it – then it's best to take the loss and exit.  Then use your trading capital to own a position that you believe is good enough to hold.

The above paragraph is so important (in my opinion) that I want to shout it from the rooftops.  If you accept the premise that you are trading to earn money, then I ask: Don't you want to hold a portfolio of positions that you believe will be profitable?  Positions whose prospects (for whatever reason) you like?  Why devote your time and resources to defend a bad – or at least not good enough to hold – position?

The psychological need to defend a bad trade or to take extra risk to get back the lost money is based on emotion, not logic.  Mr. Spock would not approve.

Spock

I suggest that you make a change to your adjustment technique.  If you can comment with a SHORT description of which index you trade, when you tend to make the first adjustment (% OTM), and the strategy you use (i.e. reduce size, roll, buy extra options etc), perhaps I can help.  If it's a lengthy reply, send it by e-mail instead. For the options you sell, include either delta, or how far OTM they are.

In my experience, the adjustment gives the trade a good opportunity to do better that it would without the adjustment.  That's the reason I don't accept your premise.

Your next observation is disconcerting.  The losing side had a larger delta and a higher gamma.  Of course it moves more than the winning side.  But surely you already knew that.

Your plan of opening unbalanced iron condors is viable.  It demonstrates a market bias.  I'm surprised that even with those two modifications you still ran into trouble.

And even when you only sold the put spreads, if you kept to your standards and not increased size (selling naked puts is surely extra size) it would not have been so bad.  That was an emotional trade and I hope you have it out of your system.

Note:  It's fine to take a market stance and it's okay to increase size (modestly), but there must be a good trading reason to do it.  Seeking revenge is too emotional and not valid. 

No losing trade is a complete waste if you learn something useful.

***

2)  Sell your spreads for at least 1 dollar. Way out of the money for
25 cents seems nice, but then you have to hold onto your spread to near
expiration to make any profit. You'll probably find it much easier to
sell a spread for 1.25 and close it for a 1.00 if you're far from
expiration
.


I agree that selling spreads for small premium is not a good idea.  But each person has to set his/her own minimum.  There is nothing magical about $1.  You could just as easily have said $0.95 or $1.50.

I don't believe the risk/reward is justified if you plan to exit when a 10-point iron condor earns $0.25.

***



3)  For every trade you make, there is another person out there who
thinks otherwise (who do you think is buying/selling your spreads?). So,
what makes my judgment any better than his? By this reasoning, this
should be a 'zero sum game'. I've been pondering that the only reason
people generally make money from the stock market is that the influx of
new investors outweighs the outflux of retiring investors, thus the
market generally floats upwards (like a pyramid scheme). Thus, doesn't
it only make sense for the non-prognosticator to invest long, and never
short?

You do not always get filled by another person who thinks as you suggest.  Sometimes you get filled on each leg by trading with an individual investor.  Also, a market maker makes a two-sided market.  He/she does not have an opinion on the small trade made with your order.  Bid enough and the MM sells; offer low enough and the same MM buys.  The MM does not have an opinion on your iron condor, nor does that MM hold the trade as an iron condor.  It is hedged in a flash and then forgotten.

No.  It does not make sense to always invest long.  That's what the masses do.  They buy mutual funds, getting screwed by the management team who charge far too much for doing far too little. 

Markets do not always rise.  Invest as you see fit.  If that's 'always long,' then go for it.  But don't do it based on the rationale given here.  If your picture of the market holds true and if you believe in that pyramid scheme,
then what is going to happen when baby boomers withdraw their savings to
cover living expenses?

When you get over the shock of what happened, you will recognize that you can only earn money at the rate that is available to you.  That rate is dictated by the size of your bankroll and the risk you are willing to take.  I urge you to trade with risk you can afford – especially until you have proven than you can control emotions when trading.

I wish you good trading.

720


 

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Psychology of Trading Series: Stress

As mentioned previously I've become interested in trader psychology. This is an entirely new field for me, and professionals already blog in this area. I have no credentials to compete, nor do I intend to compete.  However, I believe that discussing some of their ideas can only improve our understanding of how we trade, and thus, improve our results.

***

Although no longer an active blog, Dr. Brett's TraderFeed is still my favorite place to find nuggets worth sharing:


What stresses traders out: "When
traders face high levels of emotional stress over time, the result can
be a form of burnout. Overwhelmed by obstacles and challenges, traders
shut down. They stop learning, and they stop taking the actions needed
to move their progress forward."


It's difficult to be trading under stress.  And it's not likely to be a profitable time.  Yet that's when we need to be at our most alert – to defend our assets and be certain that we are not over-trading, trading too much size, or ignoring risk. 

When suffering from burnout, it's easy to get bored and take a 'let's go for it and take my chances' attitude.  When in danger of not performing at your best, it is important to take a break from trading.  You don't have to go on vacation.  Perhaps an afternoon bike ride will be enough to restore your energy.

***

Signs of psychological burnout: "Very often, it's
not just the stresses of markets that overload traders; it's also the
stresses that traders can impose upon themselves. It's easy for
achievement-oriented traders to become their own worst enemies when
they're not making money: instead of focusing on constructive
improvements, they beat up on themselves and add self-imposed stress to
trading pressures."

Can you imagine the frustration of someone who is on a losing streak who feels the desperate need to earn a big profit from the next trade?  I hope you are never in that position.  When under stress, if you cannot back off and get away form trading for a short (or longer) time, then it's mandatory to your mental health and future earnings power to cut down on trade size. 

That's the simplest and most direct method for cutting risk and stress when trading.  And when you have less pressure, you are more likely to make good trading decisions.  That's far more important than risking your trading career in an effort to go for one big win.  

Don't undervalue the risk of ruin.  It's difficult for traders to find another stake when they blow out.  When under stress, it's far better to take a break than make a big effort (under even more stress) to recover losses.

***

Keep your eye on the ideal: "It is far better to trade less often
and trade exquisitely well than to trade frequently and haphazardly."

There's nothing to disagree with in that statement.

718


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Success Breeds Failure. An Unexpected Result?

One of my interests is 'psychology of trading.'  It's a fascinating topic and understanding the basics (if there is such a thing) can truly help a trader perform better.  The difficulty with that is recognizing that any of these principles applies to you.  It's so easy to dismiss studies as being unrealistic.  If not unrealistic, then at least the average trader has many reasons why the study does not apply to him/her.

We all want to make more money when trading, but many times traders inadvertently sabotage themselves by making decisions that they sense are not in their best interests.  It's not deliberate.  There's no attempt to prove to anyone that you can do it better than others. 

It's often the result of being uninformed about the myriads of data that explains why some trading decisions are less likely to be successful than others.

One simple example is the size of one's trading account.  Many rookies put together a very small stake ($2,000 or less) and begin to trade.  The chances for success are just dismal.  As yesterday's post of the risk of ruin indicates, the less money you have to trade, the greater the chances of losing your entire trading account.  It's a statistical truth.  But, it's also ignored.

***

Recently I read a very interesting research study (actually a blog post that discussed that study).  It concerned why traders alter their behavior – depending on whether the most recent trade was a winner or loser.  It would never occur to me to alter trade size, and thus risk, on anything as flimsy as that.  However, when the sample being studied includes a large number of traders and a large number of trades, patterns emerge.

The blog was by the CXO Advisory Group. Much of what follows comes from their post,  The original paper is no longer available online. .

The 6-month study (2006) covered more than 1.3 million Indian investors and 111 million transactions worth $85 billion. The details are available in the CXO post and the paper, but the interesting points to me are: 

  • Investors lost $2.3 billion
  • Investors with positive past trades – trade more often
  • Trading
    volume is 7.7% higher for traders with recent gains than for those with losses
  • The probability of increased trading volume is 1.7%
    higher for an individual with recent gains
  • The sign (+ or -) of recent outcomes explains 89%  of the variation in
    subsequent trading frequency
  • On average, profitability of current trades is almost 60% lower for
    traders with recent gains rather than losses.
  • The more successful individual investors appear
    to be those less influenced by the signs of recent trades.

Bottom line: The sign (much more than size) of recent trades influences future trading behavior
of individual investors. This influence hurts overall
profitability.

This is the typical situation that I find so interesting.  Something minor, such as a winning trade, influences some traders to make the next trade larger.  The real question is why the ensuing trade loses so much more often.

It may be the result of being anxious to trade again, resulting in a poor choice of trades.  It may be that overconfidence ruins risk management.  There's no way to discover the answer.  The takeaway from this discussion is that mindsets can be altered by seemingly minor events.  It's important to pay careful attention to your trading plan (if you have one) and make every effort to avoid allowing emotions to affect your decisions.

658


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Perpetual Dilemma: Rebalancing an Iron Condor Position

Hey Mark,

Thanks for starting and maintaining this blog. The blog and your
books are valuable resources.

I have a question about the position described in this post. I had a
similar situation with 10 April SPX 1150/1160 call spreads; the put spread
portion of the IC already having been closed.

My question is: if I'm going to continue holding the call spread
(adjusted by buying back 3 short calls) should I start a new put spread?
This probably wouldn't be called a roll, but would this be a good idea?

It seems that
adjusting when a position goes well would be a good idea and considering
the fact that I will hold the call spread a bit longer (hopefully close
early April), adding another put spread position would allow me to
collect a bit more premium.

I know this specific situation leaves very little time to open a new
position and I'm unlikely to open a new put spread but please consider
this question in a more general sense. Adjusting a good position vs
moving on to a new position in a later month.

Thanks,
Jeff

***

Thanks.  This is a perpetual problem with no answer that applies to everyone.  But I do have an idea of how to treat this situation.

Once you cover the put spread, your choices are:

a) Sell a new put spread.  It's closer to the money than the original and provides additional premium.  It also adds downside risk when you had none.

b) Do nothing.  Consider this situation to be a 'normal' a legging out of the initial iron condor position.

c) If you believe in market neutral trading, and if you don't have a market bias (on which you are willing to wager) that the market is about to decline, then selling another put spread to get to closer to market neutral is a sound policy. 

Selling those puts allows you to be somewhat less aggressive when adjusting the call spread, but is that a good idea?  It's the call spread that threatens.  Buying three calls is an expensive proposition.  Are you thinking about potential losses on a decline, or are you counting on the market to rise?

***

Having no predictive powers for the market, it makes sense to be invested in positions that are not far removed from neutrality. 

At least, that's the common mindset.  This is a topic
for another time.  Tomorrow.

Your market outlook, your comfort zone, your desire/need to keep delta somewhere near neutral at all times, all play a significant role in the decision under discussion.

Then there's the psychological consideration, which I consider to be so important, that for me, this is the deciding factor when I am faced with your problem:

Consider two scenarios:

a) You don't sell the new put spread.  It turns out that the market never retreats and not selling results in  a missed opportunity.  You did not earn that extra premium when you 'knew' you should have sold the spread.  That bothers you.

b) You do sell a new put spread, the market declines and you exit that put spread at a loss.  The fact that the call spread became profitable and you were able to exit at a good price is no consolation.  You lost money on that put spread, and find it bothersome.

Which of those outcomes, if either, results in a more unhappy feeling for you?  Does either of these outcomes anger you?  Does one 'poor' result feel worse than the other?  Or are you truly emotionless and shrug your shoulders, knowing you made a good decision at the time the decision was needed?

Do not minimize this factor.  Psychology plays a big role in trading.  Some traders find a loss resulting from a specific trade type to be far more emotionally upsetting than other losses.  The reason for feeling this way is not the issue, but generally results from a condition knows as 'I should have known better syndrome.'  If you know that you may get so upset that your ability to trade efficiently is hindered, then you must take that possibility into consideration when making the trade.  Is the reward worth seeking when there is a possible 'worse than normal' outcome?

I've learned to sacrifice that potential profit (and avoid the risk) when a poor result is too upsetting.  I believe I keep my emotions in check very well, but getting whipsawed, is the situation that I avoid. Thus, I seldom sell new put spreads in the scenario described.  I'd rather pay more attention to the riskier call position and pay cash to protect it (assuming that the adjustment is a better idea than closing), rather than collecting a 'bit of premium' by selling put spreads. That's me.  I am not suggesting that you trade that way.

***

Comments not addressed in the reply above:

a) I'd call it rolling the trade.  A delayed roll.  Terminology is not important here.

b) Opening a new iron condor trade in a
new month is a separate decision.  If you usually carry only one
iron condor then don't do it.  Wait until this position is
closed.  If you often own more than one position, then open the new
trade when you deem it appropriate.

c) Your current position will be well
protected, if you make the specified adjustment.  It is going to be very costly.  You would own three 1160 calls and remain short seven 1150/1160 call
spreads.  This is a true 10 x 7 back spread.  Time decay is now the
enemy.  You have good protection that disappears as time passes. Consider more than the risk graph as it appears today.  Be aware of how time affects that graph.

Your risk management skills, are going to be tested in a new way.

d) One big negative is represented by the idea that you are adding a 'bit' more premium.  Is that sufficient for the risk?  This is a question, not a condemnation.

Do you consider that the trade is going well because you closed the put spread?  Do you consider that the trade is going well because you are able to adjust the call spread and still hold it?  It seems to me that this trade is  not going well.

Keep in mind that if you choose this adjustment method (buy three Apr 1150 calls), the downside is going to be an unhappy occurrence or you.

If you usually sell spreads with (for example) at a $2 – $4 premium, don't sell a put spread to collect an extra $0.50.  Sell a 'cheap' spread only if that's your normal course of action.

Do not make the mistake of believing that this put premium is 'in the bag.'  Markets do move up and down, sometimes violently (yes, not recently).  It's okay to sell a new put spread.  It's not mandatory, and if you follow the main advice, you will avoid the situation that may cause heartache.

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