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Mark There was no intended sarcasm; I wanted to check that I was on the same page before discussing the concepts you illustrated further. I thoroughly enjoy your blog postings and along with many others appreciate the time and effort you put into this. As ‘option trades’ can be perceived differently by each trader, maybe we can agree to disagree on whether the position should be dissected into its component parts or not. Cheers James
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Mark In your original post you said “I like to use several different adjustment types, and I've decided to combine three of them for consideration. These are not specifically recommended, but may give you an idea that you had not previously considered.” I understand that these are for illustration purposes only, and as you suggest I was only trying to consider / discuss what the result was from your combined adjustment and the risk graph you posted. It is not unusual in the options world for traders to end up with a position that is inconsistent with their objectives and I was just trying to understand what your objectives were for this trade. It is clear from the analysis and the risk graph that you end up with a backspread / slingshot type position to the upside, which as you say you do not recommend to individual investors. Please ignore this if you do not want to discuss further. Cheers James
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Mark If I have got it right, after your adjustment, you end up with the following position; -10c 670/+19c 680/-29c 690/+29c 700 In effect you have: -10c 670/+19c 680 backspread -29c 690/+29c 700 vertical I thought you didn't want to own the backspread .. or have I missed something in translation? Cheers James
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Mark You could simplify the adjustment [and consequently any further adjustments] by trading -3c 650/ +9c 700 backspread +29c 670/680/690/700 condor Would leave you with -29c 690/+38c 700 backspread and similar payoff to your suggested trade. Cheers James
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Mar 8, 2010