Options are not set-and-forget. Active management is the key to long-term survival.
So far, we have focused on building option positions, defining risk, and targeting payoffs.
But real options trading is dynamic.
Markets move, volatility shifts, and your outlook evolves.
Adjusting and rolling spreads are essential tools for managing trades as conditions change.
What Does It Mean to Adjust a Spread?
To adjust a spread means to change its structure in response to market movement or new information.
Common adjustments include:
- Rolling up or down: Move strikes higher or lower to match price action
- Widening or narrowing: Change the distance between strikes to alter risk and reward
- Adding or removing legs: Convert a vertical spread to a butterfly or condor, or vice versa
Adjustments can lock in gains, limit losses, or position for new scenarios.
What Is Rolling?
Rolling means closing an existing spread and opening a new one in a different expiry (and sometimes at different strikes).
Typical roll scenarios:
- Rolling forward: Move to a later expiry to buy more time for your thesis
- Rolling up or down: Change strikes to follow price trends
- Diagonal rolls: Change both expiry and strike to optimize risk and reward
Rolling can turn a potential loss into a breakeven or small win, or keep you in a trade that still has edge.
Why Adjust or Roll?
- Market moves beyond your expected range
- Volatility spikes or collapses
- You want to lock in profit or reduce risk
- Event timing changes, or new catalysts emerge
- Margin needs shift as account balances change
Good traders never treat options as set-and-forget.
They review positions regularly and adjust proactively.
On Derive
- Close one spread and open another with a few clicks
- Margin and risk update instantly as you adjust
- Track roll history using subaccounts and notes
- Monitor Greeks as you change structure to ensure risk stays within tolerance
Derive’s platform is designed for dynamic, responsive trading - not just passive holding.
Your Action Today
- Review any open spread in your portfolio
- Ask if price or volatility changes warrant an adjustment
- Practice rolling a vertical spread forward by one expiry, or shifting strikes up or down
- Track new margin, Greeks, and risk after the change
Tomorrow, we move to advanced multi-leg strategies, starting with the iron condor in fast-moving markets.
Coming tomorrow:
Day 30 – Iron Condors in Volatile Markets: Stretching the Range
Hasta manana
Cpt
CptRandlelwa
