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Trading Without an Opinion: Is it Possible? Is it Foolish?


I'm bewildered by your reply. I've been reading your
blog for a while, so I think I understand your admonition to consider
one's comfort level when trading. Nevertheless, I find it hard to
believe that you don't have some sort of underlying assumption if not
about market direction, at least about it's relative range when you make
a trade.

I understand adjusting before the underlying gets to a level
that reaches your discomfort point. But short of exiting the position,
when you roll up/down or out, it would seem that you've made an implicit
bet on market direction. That is, you expect the underlying to reverse
before it touches the further out strike.

Maybe you don't look at it
that way. I could imagine that you only look at the risk/reward of the
new position without forecasting market direction. But it would seem to
me that the risk/reward of the new position depends on the probabilities
of the underlying's movement, which still implies some sort of bias.

Even if you don't consider the probabilities, the premium you collect
reflects the market's view of the probabilities, so you're implicitly
betting against the market since you're selling premium.

This isn't a criticism of your method. But as I think more and more
about your suggestions I find it hard to to conceptualize how you get
comfortable with your positions without having some view on market

Any insights would be most appreciated.



Hey Burt,

I see your point of view.  Sometimes people use different words to express the same view.  When I tell you that I have no market bias or no expectation for how the underlying stock is going to behave, I mean that from an intellectual point of view.  I have no belief (on which I am willing to wager) that the markets are moving higher or lower or are range-bound.

However, every time I open a position, my account balance is affected by the market action.  By trading iron condors, the bet I choose to make is that the stock price will remain within a range specified by the strike prices of my iron condor. 

I do not believe you are correct when stating that I am betting 'against' the market.  The market has established the odds (when holding the iron condor through expiration).  But those odds apply to both sides.  Why do you think I am against the market?  Why aren't I on the same side as the market?  Oddsmakers go out of their way to make the bet equally attractive from both sides so they can earn the vig (vigorish).

A significant portion of my overall strategy includes: If that price range does not hold, then I wager I can manipulate the trade to hold losses to an acceptable level.  That translates to this: I can make more when things go well than I lose when things go badly.  Every trader makes the same wager: they can earn more when profitable than they lose when unprofitable.

To me that is not a bias.  I am depending on my risk management abilities to keep me out of trouble – despite the fact that they are not 100% reliable.  I choose iron condors because I have no reason to choose bullish or bearish plays.

I adopt a strategy that owns positions that are near neutral in delta and gamma, but which have positive theta and negative vega.  If I am comfortable trading those positions, why should you be bewildered?  I'm always surprised when people believe they can profitably wager on market direction.

My explanation

I believe it's a good idea to open a limited-risk position whenever I 'like my chances.'  If I lack an edge in predictive ability, I must depend on my ability to avoid disasters. 

I must also compromise between safety (how long to wait before exiting a winning trade) and taking advantage when the markets trade within my range.  I decide how long to hold and how much profit to seek.  If I lose when markets are volatile, I must compensate when they are calm.  Risk management precludes holding through expiration (for me) and thus, there is a time to cover.

You are correct.  The premium collected determines the maximum reward.  Risk is more difficult to determine.  I will not allow the trade to move to the worst case scenario, but I also don't know – in advance – at what price I'll exit.  Thus, 'risk' is only estimated.  Options traders estimate future volatility all the time.  I estimate future risk.

If I like the estimated risk/reward for no well-defined reason, does that suggest the trade is 'wrong' or a bad idea?  Not to me. 

Those who use technical analysis, and never trade without a very strong opinion, would disagree.  In fact I had one novice who was incredulous that I traded without using technical analysis.  When I asked how much money he was making by having an opinion, I did not get a satisfactory answer.

I was trained in the 'always be neutral' school, and although I don't strictly adhere to it's teachings, I learned that 'neutral is good' and 'opinions are bad.' 

Question – without trying to get into a philosophical discussion: Is this any different from religion?  As children we are taught to believe that certain things are true.  Most hold those beliefs while others turn away from religion.

There's no 'proof' that the beliefs are true, but people live their lives by those 'truths.' To be a true believer, means that everyone who doesn't think as you do is wrong.  Is that reasonable?  It is how we live.

So I ask: Why is my approach so bewildering?  I don't believe I can accomplish anything with technical analysis.  I don't have a good method for predicting the markets, and believe the vast majority cannot consistently do so.  I choose to trade as a non-believer, i.e., neither the bulls nor bears have an edge. 

I see nothing wrong with remaining faithful to the neutrality idea which tells me that having a market bias is wrong.  I have enough proof that it's wrong for me.

1) I've frequently traded with directional bias in my career, with a dismal track record.

One example: I clearly remember Aug 1982 when I was certain the market had not bottomed.  I was short, stayed short, watched my money disappear (I had made a mint in 1981) and stubbornly refused to change my opinion. When I ran out of money, I conceded defeat.

I've had similar results when opinionated.  I have an opinion right now.  I do not understand why the DJIA is not 5,000 instead of 10,000.  But it is 10,000 and I cannot afford to wager that there will be a huge decline.

If I am a skillful risk manager and don't hold onto positions that are too risky, I do well.  When I get stubborn, I either get lucky and survive, or get clobbered.

I don't want to depend on luck to avoid getting clobbered.  Thus, I learned to control my emotions and opinions when trading.

Is that a good idea for anyone else?  I believe it is, but I'm not adamant.  Each trader goes his own way  I must trade this way.  I proved to myself that I cannot afford the luxury of placing market bets based on my opinion. 

My job is to help people understand options and how to use them.  To that end, I share my philosophy and strongly held views.  But I do not tell people that my way is the truth.  I encourage independent thought.

2) You said: "But it would seem to me that the risk/reward of the new position depends on the probabilities of the underlying's movement, which still implies some sort of bias"

Yes.  It depends on the probability of where the underlying is going.  But I don't know where it is goingThis is where we disagree.

I do not distort that probability with
my opinion.  You believe that if you have a
market opinion, then there is an increased probability that your opinion
will come true.  I know from past experience that my opinion is
not likley to come true. That's why I always ask about a trader's proven
track record when he/she want to bet on market direction.

I suppose I do trade with a bias (if you want to call it that) of sorts.  The volatility skew allows me to sell puts that are farther OTM than calls.  This suits me because I believe a collapse has a higher probability than a melt-up.  It's not a big deal and does not play a huge role in my choice of options to trade.


I no longer roll a position unless I want the new position in my portfolio.  The new trade must offer a sufficient reward for accepting risk of being 'wrong.' Wrong in this context does not mean that my expectation does not come to pass.  I have no expectation other than I believe I can make money with the trade.  'Wrong' means that the trade loses money.

I consider trading as a study in probabilities.  I estimate the probability of success (difficult to measure because I don't know exactly how long I will hold the trade) – estimate a reward for that success – and decide if I am willing to accept the risk associated with the trade.  That risk is also difficult to estimate, but if I set a max loss per trade, then I have a very reasonable estimate.

Most traders have strong opinions.  That's great when they have a track record to support that opinion.  I have a track record that screams: don't bet on me.


Lessons of a Lifetime: My 33 Years as an Option Trader (Kindle) and e-book versions available.


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Quandary: The Logic of Trading Iron Condors

This post originally appeared at The Options Zone


I'm an iron condor (sell call spread and put spread with
same expiration date
on same
underlying asset
) trader.  I understand the risk and reward potential for these positions and recognize that skillful risk management is crucial to my success when trading these negative gamma positions.

The best part of trading iron condors occurs when the markets are calm and no adjustments have to be be made.  In those rare situations, I eventually cover my shorts and bank the profits. 

In the current volatile market, there is little peace.  Depending on the strike prices chosen, iron condor traders are making frequent adjustments to their positions.  That thought took me down a strange path.  Looking ahead by a few days, it occurred to me:

  • It's very likely the underlying asset will move sufficiently so that the iron condor is no longer delta neutral (due to negative gamma)
  • If that happens, the position will have lost an unknown number of dollars

That leads to this quandary:  Why should I trade the iron condor today, when it is very likely to trade at a higher price soon?  Why not simply wait for that higher price to enter the trade?

If I were to follow that unusual line of thought, I would proceed as follows:

1) Choose a specific iron condor and estimate the premium I can collect now

2) Do not enter the order.

3) Wait until that trade is losing money: i.e., I can collect a higher premium 

How much higher?  How long to wait?  I don't have answers to those questions.

4) Open the trade and collect that higher premium.

Obviously this trade is no longer delta neutral, nor is it likely to be the trade i would select at the future date.  But it's the position I would normally open today.  By waiting I get to make the same trade at a better price.  Doesn't that have to be better than owning it at a worse price?

By the time I enter the trade, the position may require a minor adjustment. No problem.  Open the slightly adjusted position in place of the original. 

To adopt this idea, I cannot allow much time to pass or I may miss a profitable trade opportunity.

Thus, the quandary:  Why trade now?

5) By collecting that better price: 

I have more risk than I prefer when making a new trade, but to compensate, I collect additional premium.  The bottom line is: I would be facing this extra risk had I already owned the position, so why not own it several days later – with the same problem, but at a better price?

Another point to ponder:  Is this truly taking on more risk?  By not opening the position sooner, I had zero risk of loss (or profit) during the time that I had no position.  The easiest method for avoiding a disaster is to be out of the market.   Is the benefit of a few days on the sidelines enough to offset a bit of extra risk when the non-neutral position is opened late?   I believe it is.

6) And if that quandary is not sufficient, why not take an additional step?  Instead of waiting, open an unbalanced iron condor right now.

I would be forced to make the trade with a choice of extra upside or downside risk, rather than allowing the market to force that decision upon me. 

I can go even farther by opening half the trade with an upside bias and half with a downside bias.

The real question is:  does it make sense to open an iron condor position at the time I am ready to trade, or is it better to either:

  • Wait for a better price
  • Open two unbalanced IC now, in place of a single, neutral IC


Opening positions that are not neutral when lacking a market opinion feels wrong.  Yet, the probability is very high that I'm going to have that position anyway. And soon.

Why not take advantage of that by opening those two non-neutral iron condors at a better price now?  (I do that by choosing an iron condor that is already unbalanced.  Because it is no longer neutral suggests that it is losing money.)

Bottom line:  It appears that I can take advantage of the fact that whichever iron condor I choose is likely to be a (hopefully temporary) loser at some point in time.  By waiting for it to become a loser and delay initiating the position until that time, a better premium is collected.

Logic tells me this is not sound reasoning.  Yet, I cannot find the flaw(s) in my argument.   A quandary.



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VIX Graphs May 21, 2010

There is no doubt that volatility has returned to the markets, and the graph below doesn't tell the whole story.  Intraday volatility has shown some remarkable swings.

Excluding 1987 and 2008, this week VIX visited a level seldom seen (>45).  There is definitely a lot of fear and investors are grabbing options to protect themselves – or to speculate on a big market move.  It's amazing to me that people seem to use option strategies to protect their portfolios only when everyone wants to buy options.  They choose to own insurance when that insurance is costly.


An expiration story

Last Thursday afternoon, the day before settlement prices were calculated, Jason posed this question:

I'm short the May 620/630 RUT put spread. Currently trading at 651. Settlement is
tomorrow. Settlement always scares me since getting sideswiped in March.
Could it settle more than 25 points down from close?

I told him that yes, it could, and suggested that he exit the trade.  In fact, after he wrote, the market declined further and RUT closed for the day at 640.

I held my 620/30's open. (Never again). Got busy, came home to
closing of 640. Lesson learned. Sleepless night ensued.
RUT settlement (ticker: RLS) finally came out at 629.95. Bullet avoided.

Restless night coupled with having to wait until after the market closed for the day (Friday) to see the results.  Not worth it.  And Jason agrees – I hope that 'never again' quote becomes reality.



"Your chapter on Equivalent Positions was the clearest explanation that I have ever read.  I
learned a great deal – and it made sense!  Thank you for making the
effort to put out such a fine book." DS

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Using Risk/Reward Ratio to Plan Iron Condor Trades. Good Idea?

When trading iron condors, or credit spreads (half an iron condor), the risk/reward ratio is usually unattractive. For example, if you sell a 10-point spread and collect $200, the maximum loss is $800 – for a risk reward of 4:1. Most traders shy away from trades when the ratio is that high. Yet, when trading these iron condors, we recognize that good risk management means that we will never incur the maximum loss and that the true risk/reward (r/r) ratio is much lower. And that allows more traders to adopt the iron condor strategy.

For those traders, it may be necessary to establish a maximum loss for the spread. To be certain there is no confusion: it's traders whose comfort zone requires a maximum risk/reward ratio who would establish this maximum loss as an exit point. Those of us who use different risk management techniques would probably not establish a maximum loss as a mandatory exit point.  [Delta of short option or % that short strike is OTM are two reasonable alternatives]

It's not always easy to determine the true r/r for these trades. If your plan is always to carry positions through expiration (far too risky in my world) then the maximum gain is the total premium collected. If you exit early, it's not always clear how much you will pay to exit. However, if you are an r/r based trader, it's necessary to establish a theoretical profit goal – even when it's flexible.


You trade a 7-week iron condor and collect $200 (These are 10-point put and call spreads). You plan to pay $1.00 to cover. Thus your maximum gain is $100, and you are unwilling to accept a maximum loss of $800, so you must decide on an exit point.

If you want an r/r = 1, then you must exit when the iron condor increases in value to $300 ($200 + $100)

If you are willing to accept an r/r of 2, then you can afford to hold on longer and hope it does not reach a price of $400 ($200 + 100 + 100)


Question: Is this a viable strategy?

To me, there is no doubt that iron condors should not be allowed to reach the area of maximum loss, but I don't have a specific exit price. Often, adjustments provide a superior alternative to exiting. Nevertheless, not every trader prefers adjustments and some want to establish a maximum possible loss. The purpose of this post is to determine the practicality of setting mental stops for iron condor trades.



There are two risks when trading iron condors.

  • Big market move with negative gamma results in being far too long on a decline and far too short on a rally


  • Surge in implied volatility results in big loss because both the call spread and the put spread increase in value


The combination of a significant down move, coupled with an increase in implied volatility wreaks havoc with an iron condor position.

Let's look at one example from recent history.

On Friday May 7, RUT had a trading range of 24 points or 3.6% of it's opening price ($571). RVX, which tracks implied volatility (IV) of RUT options (just as VIX tracks SPX options) ranged from 36 to 46. That's a very large range and certainly atypical.

Here's a typical iron condor: RUT: Jun 550/560P; 740/750C

When IV is 36 (ignoring volatility skew), the position is worth $1.62

When IV is 46, the position is worth $3.50

Any trader who happened to initiate the position near the low IV of the day, and who was seeking to earn a $1 profit would have been quickly stopped out of the trade when the desired r/r = 1. That method would have required exiting the IC position at a price near $2.60 – $2.65.

Even the trader who requires that risk/reward be 2 would be almost at his/her mandatory exit point of $3.60 – $3.65

This is a very unusual IV range for one day, but with RUT moving from 671 to 647, there is no reason to be forced out of the trade just because IV increased dramatically. There are other reasons for getting out, but an increase in IV should not seal your fate.

Yet, if you establish a specific unrealized loss as a target exit point, you must realize that the target may be reached quickly – even without the big market move.

Market volatility may have frightened you. That's all the reason needed to sit on the sidelines. There is the chance of a huge collapse and there is a chance that this entire loss will be quickly recovered. I doubt either is going to happen, but if the possibility makes you afraid to own iron condor positions, then it's right to be out of the market. Of course, you may prefer to find a positive gamma position to trade – if you are willing to pay the cost of owning gamma these days (I'm referring to simple strategies, not very complex, or high margin, positive gamma methods).


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Nightmare on Put Street


I have 20 may 640/630 and 20 may 620/610 rut put spreads that were placed prior
to Thursdays doomsday. Felt fine at the time. Now showing big potential
loss and fear of gap or heavy drawdown prior to expiration.
I'm past the point of shutting down and walking away due to heavy debit.

Trying to find if there is a way for insurance now in this late stage.
To close to the money for kite; correct?
If so looking at either rolling down which still makes me nervous or
selling call spread to bring in some extra premium, or simply buying a lower
number of puts to at least help negate some of the potential.

Is it too late to protect? Is combination of rolling, selling call
spread, and purchasing puts a good "option". What would you recommend?
Any advice is appreciated.



Hi Tim,

Very sorry to hear of your problems. I'll tell you what I think and hope it helps.  First, it's never too late to protect. Keep in mind that anything that reduces risk is good.  So if you elect to try a combination of trades, that is ok,  As long as the resulting position is not too complicated to handle.

1) "I'm past the point of shutting down and walking away due to heavy debit."

I am not advising you to shut down.  But, you still have more to lose than gain – if the market tanks.  It's okay to decide to hold – I know how painful it is to exit here – but try to decide if you can afford to take the risk of holding.

2) It is late for the kite.  It loses effectiveness as expiration nears.  But you can do a more expensive kite.  Buy one 640 put and sell only 2 put spreads at a lower strike – perhaps 590/600 or 600/610 or even more 610/620s.  This costs cash, but wins in a huge downside move. Check the risk graph to see.

3) Many traders choose to collect extra premium by selling calls. I believe this is the worst possible choice.  If the market reverses, you can incur the same devastating loss on the upside. And for what?  You probably can't collect enough cash to do you much good on a market drop.

4) Rolling down means closing one spread and selling another May Put spread with lower strike prices.  But it also means NOT selling extra spreads.  It means paying a debit for some immediate comfort – but in these volatile conditions, that comfort can disappear immediately.  This does not feel right to me – especially if it makes you uncomfortable.

5) As a compromise you can cover 5 of each spread, or perhaps 10 of the 630/640 spreads.  Obviously, there is nothing magical about the quantity.  You may feel better doing 2 at a time on any rally.

6) You can roll this way:  Cover the 630/640 put spread and replace it with Jul iron condors.  I say Jul because that month allows you to be farther OTM than Jun and it gets you short extra vega.  If selling vega does not appeal to you right now, that's fine.  Do Junes instead. 

Yes, you sell calls, but this way it's a fresh position, is farther OTM, and depending on how you choose your strike prices, will not cost much cash.  By the way, that last part is a side comment.  I believe it's very wrong to choose your new position based on the total debit for the roll.  You must like that new IC – or else this is a very bad idea.  No sense opening a July position when it is already outside your comfort zone.

DO NOT trade extras just to bring in more

Obviously if you trade put spreads and not iron condors, then just roll the puts.  Don't force a trade you don't want in your portfolio.

7) Sure you can buy 600 or 610 puts, but those are no longer cheap.  Here's the main reason I dislike that idea:  Owning protection in the form of farther OTM options is fine.   They do a decent job.  But, if the plan is to hold them to a point near expiration, then it's no longer a good idea.  You can't sell them because they are still needed.  Thus, the most likely result is that they will expire worthless.  If you were planning to exit your put spread early, then these OTM options can work (because you get to sell them early).  But I think it's too late for that.

If you want insurance against a complete market collapse – that's another story.  Then owning any options will help.  But as to using them to protect this specific trade, (again – and not as black swan protection), there are better choices.

NOTE:  Buying Jun farther OTM puts works very nicely.  A down move explodes volatility and these can pay off big time.  Unfortunately the time to buy them was before the IV explosion.   But look to owning some extra Jun puts.  Choose your own strike.  600 is better than 580 etc, but even 560s may help.

8) It is not too late.  But anything you do is going to cost cash.  You can walk away and end the nightmare, or you can try to salvage the position.

The best trades are the ones that buy net puts.  That's black swan protection.  To minimize the cost, you can sell puts (this is buying put spreads) or put spreads (kite).

Have you considered buying the 640/600 (or 640/610) put spread?  Lots of cash, but good protection.

Tim, the bottom line is that anything may work.  It's just that we cannot know in advance.  If you exit, the agony ends.  If you work with this you may lose more, or have a very successful trade.  In either event, unless you close your eyes and come back in two weeks (I could never make that choice), some cash must be invested.  You have the rest of the day to work on this, consider alternatives, use risk graphs and devise a plan.

That plan should include a small gap opening (say 10 points) – both up or down.

Best of luck.  If you choose to follow up with what happens, I'd be interested.  But I also know that it's personal information that's best kept to yourself.

I wish you well.


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What’s so Wonderful About Trading with No Market Bias?

Most traders have a directional bias.  Some have a volatility bias.  Getting either of those right can result in significant profits. And that's especially true when the market undergoes a strong move in either direction or when volatility makes a big move higher or lower.

Regardless, I learned to trade from a market neutral standpoint and have been proud of myself for sticking with that neutral outlook.  However, a question from a reader made me exit my stupor and consider the question:  What's so wonderful about trading without a market bias?

Well – I told myself – I don't care which way the market moves.  I'm in good shape either way (depending on my position and the size of the move).  Who could argue that this isn't the best place to be?  The answer to that question is every trader who makes money by leaning long or short.

But, I'm reconsidering, and looking at different aspects of my neutral bias.  Why is it better?  Why is it safer?  Why is 'neutral' any less of a market bias than long or short?  The sad truth – or at least I'm wavering about it being the truth – is that it isn't any better.  I've been brainwashed my entire career.  Is that possible?

Traders with a market bias hold positions that suit that bias.  I like to
describe my bias as non-existent, but the truth is, adopting an iron
condor strategy is best for traders who believe that the market is not
about to make a big move.  Having no bias, I'm 'hoping' for a
range-bound market, rather than predicting one. That forces me to consider the questions:  Believing that
hope is not a
, how can I trade iron condors?  How can I choose a strategy that depends on having a range-bound market?  If I am not confident that the market will be trendless, aren't I adopting a strategy of hope?

That is one scary thought.

I must rely on skillful risk management to survive.  Without the possible big win that those with a market bias can score, I trade strategies with limited profit potential.  That's fine because they come with limited loss.  But I am very much dependent on holding losses to modest amounts and managing my positions well.


As a market maker (1977 through 2000), it paid to remain neutral.  That allowed me to participate in all order flow (buy bids and sell offers) without being afraid.  When I was caught short and stubbornly refused to buy stock, I was in trouble when more call buyers entered the pit. [This was a problem because every market maker who sold those calls was going to bid for stock, pushing the price higher.  Thus, not being caught long or short had a monetary advantage.  Obviously I had the right direction part of the time, but being neutral left the market maker ready to take advantage of any order that enters (what was then called) the trading pit.]

When I worked for a trading firm, they insisted on traders being as neutral as possible at all times.  Not just delta, but all the other Greeks as well.  That made sense because our goal was to trade for an edge.  Using proprietary models, the idea was to buy Greek neutral spreads with a theoretical edge.

I'm trained to be neutral.  It was drummed into my head since 1977.  But now, 10 years after leaving the trading floor, I'm wondering if there's any advantage to being neutral.  Why can't I choose an iron condor with a bias?  Or adopt a bullish strategy in the first place?  Why should I allow a slow, steady unidirectional bull market be so difficult to trade?  Why don't I open my iron condor by selling extra put spreads or farther OTM calls or do something with a bullish bias (add some call kite spreads)?  I don't have a good answer to any of those questions.

I always believed neutral was the least risky choice.  And it is when you believe the market has an equal chance to move higher or lower on any given day, or over any given short period of time.  But why should I, or anyone else, believe that?

The news is horrible, and the future looks bleak to me – with high unemployment and all signs pointing to a commercial real estate bubble.  Businesses are not growing, real crises loom large (Greece) – but who cares?  Not 'the market,'  It just marches ever onward.

This is a bull market (which may end before this is published) and why shouldn't I trade just a little long?  What's wrong with that idea?  I don't know, but I am unable to do it.

Can anybody answer?  I've traded with no bias for so long, that it just feels right.  As indicated above, If asked, I'd claim to be a bear.  But  I cannot afford to wager on that bias, especially when being long has been the winning move for a year.  Why is it so difficult for me to trade long?  I have no answer.  For now, I rely on the (flawed?) safety of market neutral.


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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.  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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