Lesson Overview

Call Spread Adjustments

Making adjustments on a credit call spread starts with adding the additional put side to the trade should the stock continue to rally higher against your position. Our own trigger for making this adjustment is when the short call strike gets to a 0.30 delta.

Adding a put spread below the market, if you keep the same number of contracts and width of strikes you'll reduce your overall risk and increase your credit in the trade which widens your break-even points.

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  • Pretty cool seeing this in action w/ the IYR and YHOO trades yesterday. Seeing is learning :-)

  • I can tell you right now that I think it’s a bad idea because right away they are suggesting you increase your position size to “make up for the losses”. I never suggest that – if a trade is going bad, don’t add fuel to the fire.

    • AT

      Thanks!

  • Most of the trading I do is at the 70% level but yes there are some cases where we sell a .15 delta spread if the pricing is good. At the end of the day it’s just a preference on how often you’d like to win. I’m honestly not sure what else you could use for option pricing alerts other than to change brokers to TOS.

  • I think if you can roll for a credit then it makes sense to add the extra duration (or time).

  • No because by widening out your spread you are leaving yourself with bigger risk on the short option.

  • Generally no because we’ve found through backtesting that when you remove the whole iron condor at one time it’s better long term for your profitability.

  • Hey Ed – which page isn’t working or linking over correct? Please let me know if you can so we can get it corrected. This page details what you get in each level: https://optionalpha.com/pricing.

  • Try posting it to the forum since you can add images there.

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