RE: [SuperTraderKarenStudy] RE: Karen's trade adjustment rules


Feb 22, 2014

 


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#242 Feb 22, 2014

Hi all,

I got the following rules related trade adjustment after watching the recent interview. They may not be accurate though. Does anybody have comments about them?

ThanksCharles

Trade AdjustmentsWhen price drops and ITM probbecomes 30% (I heard it's an arbitrary number?) for puts with plenty of days left (> 30 days).����������������Adjust the position by taking it off and sellother far OTM puts about 20% ITM prob cautiously.

o����Some puts may be sold 10 points lower and otherssold 15 points lower.



.����������������It may be pushed out to another week for puts(Not another month).

o����Try to fix it in current week if possible.



.����������������It may lose one dollar.

o����Try to make up the loss either through morecontracts, or selling more calls.



.����������������Will keep existing calls and let them expireworthless..����������������Do not use existing calls as adjustments to thelosses on the puts.

o����It avoids risks due to sudden market directionreversals.



.����������������Don.t want to have any option ITM!

.. . ..



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#244 Feb 22, 2014

sums up perfectlyOn Feb 22, 2014 7:39 PM, "Smooth Options" smoothprofitoptions@...> wrote:

��Hi all,

I got the following rules related trade adjustment after watching the recent interview. They may not be accurate though. Does anybody have comments about them?



ThanksCharles

Trade AdjustmentsWhen price drops and ITM probbecomes 30% (I heard it's an arbitrary number?) for puts with plenty of days left (> 30 days).����������������Adjust the position by taking it off and sellother far OTM puts about 20% ITM prob cautiously.

o����Some puts may be sold 10 points lower and otherssold 15 points lower.



.����������������It may be pushed out to another week for puts(Not another month).

o����Try to fix it in current week if possible.



.����������������It may lose one dollar.

o����Try to make up the loss either through morecontracts, or selling more calls.



.����������������Will keep existing calls and let them expireworthless. .����������������Do not use existing calls as adjustments to thelosses on the puts.

o����It avoids risks due to sudden market directionreversals.



.����������������Don���t want to have any option ITM!



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#246 Feb 22, 2014

Hello Charles,

I believe it would be safer to say that if the probability of being ITM is below 30% nothing is done.�� At 30% it comes on the radar.�� What is done is based upon DTE and the general trend of the market.

One method of dealing with a position that is in trouble (somewhere over 30% ITM) is to buy back the position.�� Another method is to roll the position to a lower probability ITM.�� Both of these involve additional costs so other positions can be put on to finance those adjustments.��

My current method is that once a position gets to 30% ITM I watch it closely.�� When it gets to 40% ITM I act and do something.

Tom



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#251 Feb 22, 2014

Good comments. Make sense for me.ThanksCharles

To: supertraderkarenstudy@yahoogroups.comFrom: poast@...Date: Sat, 22 Feb 2014 18:06:43 -0800Subject: [SuperTraderKarenStudy] RE: Karen's trade adjustment rules

��Hello Charles,

I believe it would be safer to say that if the probability of being ITM is below 30% nothing is done.�� At 30% it comes on the radar.�� What is done is based upon DTE and the general trend of the market.

One method of dealing with a position that is in trouble (somewhere over 30% ITM) is to buy back the position.�� Another method is to roll the position to a lower probability ITM.�� Both of these involve additional costs so other positions can be put on to finance those adjustments.��

My current method is that once a position gets to 30% ITM I watch it closely.�� When it gets to 40% ITM I act and do something.

Tom



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