What is an Adjustment?

Definition – Changing an existing option trade position

Purpose of an Adjustment?

• Maximize the profit on winning trade and Minimize the loss on loosing trade. 

• Fixing a Trade utilizing Greeks (alter gamma, theta or vega) when a trade does the opposite of what you wanted it to do.

• Stay in a Trade a little longer so the underlying price will back off a bit. When SPX goes up 50 points in 2-3 days, probabilities are that it might pull back off a little bit.

• Remember, you are just trying to stay in a trade long enough after an adjustment to get some profit out of your trade or reduce your loss in a trade.

Do I have to Adjust?

• No, you can just take off a trade when it hits profit target or max loss.

Keys to Adjustments 

– Delta is the biggest risk 

– All options trades either profit or lose as the underlying stock price moves up or down

– Most directional or Delta-Neutral can be adjusted using proper Risk Management Plan