Iron Condors and Stupidity

Discussion in 'Options' started by jwcapital, Mar 14, 2009.

  1. What are you trying to accomplish with adjustments?

    1) Prevent large losses? If that's the priority you can easily see whether you accomplished that goal?

    2) Correctly decide how the market is going to move next? That would be a terrible goal, IMHO - but if that's your goal - did you succeed? On balance, did you save or lose money with your ultimate decision?

    3) Reduce risk? Reduce it sufficiently? That's more difficult to determine, but if you never incurred a large loss and if your adjustments turned out not to have been necessary, did you still come out with a profit? In other words, all things being equal are you pleased to did something, or would you have rather closed your eyes and hoped for the best (I shudder at the thought).

    4) The 'right' thing is not the decision that would have earned or saved he most money. the 'right' decision allows to to remain within your comfort zone, reduces potential losses to acceptable levels, and allows you stay in the game - and that means not going broke.

    You have raised a difficult to answer question. If you 'feel' okay about what you did - regardless of the results, the you are probably okay. future record-keeping may prove helpful.

    If you have doubts - as I suspect you do from your question - I don't think there's a 'best' way to resolve those doubts. To me, staying in my comfort zone and giving myself the opportunity to profit while limiting losses, is the 'right' thing for me. I have no idea if that's good enough for you.

    #211     May 20, 2009
  2. sync


    I'm starting to think that ICs aren't right for me to trade since I can't seem to come up with an approach for adjusting that makes sense to me.
    #212     May 20, 2009
  3. There are plenty of other methods out there. I believe the strategy is not important. It's just a way of managing risk associated with each of the Greeks. But whichever you choose, an adjustment is going to be necessary from time to time.

    Unless you want to buy 20 cent options and pray. No adjustments needed.

    #213     May 20, 2009
  4. bebpasco


    LOL! Always interesting to see if the people recommending software really know its functionality.

    Still use your freeware DOS program. Meets my needs. Have a simple spreadsheet model that adjusts the expected P/L for the after-event IV differences in the legs. However, what really dominates the P/L now-a-days are the ridiculous b/a spreads that comes with the high IVs. Midpoint execution is wishful thinking.

    Having fun trading preferreds in this market? (grin)
    #214     May 21, 2009
  5. Whisky


    Right in alignment with my empirical observations too.

    #215     May 21, 2009