M6 - Man, Mind, Money, Markets, Method & Madness


Well-Known Member
Iron Condor Adjustment: Can I "roll" it Forever?


(Though I trade options directionally, found an interesting article on adjusting options which traders often ask on 'rolling options'. Though I don't have much knowledge on that aspect of options, posting with links is article which answers the question for benefit of traders who are 'deep' :):):) into options)

Digging through some old forum posts, I came across the following question from one of our members:

"My bear call spread is ITM now (RUT 855/865). I adjusted it by rolling it to the next strike (closed 855/865, opened 875/890). But I was wondering if this could be approached differently. This seems too good to be true, so I'm wondering if I'm missing something.

I could have done nothing for now, and if on October 18 (when my spread expires) RUT is still above $865, I could just roll to the SAME strike prices for the NEXT MONTH, for even more credit. And keep doing it forever, until RUT is below my short leg and it can be closed for profit or expires worthless. This seems too good to be true, but here's my logic:

Is it too good to be true?

It is expected for the price to come down eventually. So I could roll the same strike price (855/865) forever, to a point (worse case scenario) that I would get $1,000+ credit (some more for time value) and pay $1,000 to cover it again (if it becomes well ITM). This RUT spread would eventually come down to less than $855 in this case, and in long term, since we're approaching new highs, eventually expire worthless for full profit. I mean, as long as EMA(50) and EMA(200) are below my short leg, there are good chances that the RUT price will come back to it (to close for profit), or simply expire worthless, to digest the recent climbing.

So in theory, there would be no loss adjusting the legs (use same strike price for following month), and eventually they could always be closed for less than the original credit received. This would apply specifically to indexes like RUT, which is low volatile and can never be assigned before expiration."

Thoughts on what I'm missing here? Seems to be almost no risk of loss provided we keep rolling it this way?

Before I even had a chance to reply, another member posted the following reply:

"rod, that would be great if we could simply keep rolling a spread that went against us. But I think when you roll a spread that is in the money and has gone against you, it will be a debit, not a credit. For example, the RUT September 850/855 bear call spread is going for a mid price of 3.15 credit. Since RUT closed at 856, the spread is in the money. The same spread for October is going for 2.95, which means that if you rolled it from September to October, you will incur a cost of at least 0.2, probably closer to 0.3. So there will be cost to roll it over to the next month. Now say you roll it, and the RUT comes back down and closes at 848 at October expiration, you should be able to keep that credit.

Now if you get into an OTM call credit spread, say September 860/865, the credit is $2.10. The same spread for October is going for $2.50. So it seems that if a spread is OTM, you get bigger credits the farther in time you go out. The reverse is true with spreads that are ITM; the credits are smaller. Someone like Kim could probably explain why this is so. But I don't think you can simply roll an ITM spread that has gone against you and still get a credit. Someone please correct me if I am wrong."

Unfortunately, it is (too good to be true)

My response:

First of all, I don't accept the concept of "rolling". What you do is closing one position (for a loss) and opening a new one. A loss is a loss, no matter how you call it. The question is: do you want to own the new position or you roll just to salvage the losing trade?

Now for your question. As tradervic mentioned, the ITM spread cannot be rolled for a credit. The reason is simple. If RUT is at 855, the 850/855 spread will be worth a full $5 at expiration. As you go further from expiration, if will be worth less and less. If you think about it, it makes sense: further you go out in time, more time value those spreads have. So October spread will be always worth less than September. So you roll for a debit, and what if the index continues higher? You will have to roll again for a debit, this time probably larger debit since you are deep ITM. Sure at some point it will reverse, but meanwhile you might already have a very significant loss.

And here is a response from Chris:

"And I want to emphasize what Kim has said -- the concept of "rolling" is idiotic. You simply CANNOT think in those terms. You have closed a losing trade and opened a second trade -- likely one you never would have opened on its own. You are almost always better off putting your capital to use on another trade.

Simply put, DON'T EVER ROLL UNLESS IT IS A TRADE YOU WOULD DO IF NOT ROLLING. Now this does happen sometimes, I have rolled calendars and spreads before because I liked the trade I was rolling into. But I independently evaluated it."

Rolling is just a way to hide losses

Rolling from month to month is something many condor services do on a regular basis. Option selling strategies, especially those that roll from month to month to hide losses in their track record, often have hidden risk. This risk became obvious last year when some of them have experienced catastrophic losses of 50-90%.

The simple truth is that in most cases, rolling will increase your risk, not reduce it. Is it what you want? If the underlying continues in the same direction, after few rolls the trade will be a complete toast.


Well-Known Member

An interesting topic for traders doing pair trades and also option traders. Maths and stats can be deceiving as much as being suggestive.....



Well-Known Member
Fear in Trading, Investment & Financial Risk: Lessons from Boxing Great Cus D’Amato

“Boxing is a sport of self-control. You must understand Fear so you can manipulate it. Fear is like fire. You can make it work for you: it can warm you in the winter, cook your food when you’re hungry, give you light when you are in the dark, and produce energy. Let it go out of control and it can hurt you, even kill you….Fear is a friend of exceptional people."


Well-Known Member
Online Trading Academy : Trading Style Decision Matrix

Day Trader? Swing Trader? Investor?



Well-Known Member
Online Trading Academy :

Identifying entries in trending and sideways market :



Well-Known Member
How 'The Devil's Financial Dictionary' defines 13 Wall Street words - Elena Holodny (Edited excerpt)


Forecasting : The attempt to predict the unknowable by measuring the irrelevant; a task that, in one way or another, employs most people on Wall Street.

Regulator : A bureaucrat who attempts to stop rampaging elephants by bradishing feather-dusters at them.

Irrational : A word you use to describe any investor other than yourself.

Technical analysis : A method by predicting the future prices of a financial asset by looking at its past prices, which is about as reliable as attempting to forecast tomorrow's weather by studying yesterday's.

Stock market : A chaotic hive of millions of people who overpay for hope and underpay for value.

Clearly : Analysts and pundits using the word "clearly" are either (1) pretending, without any valid evidence, that they know what is going to happen, or (2) describing what has already happened.

Thrift : The obsolete practice of spending less money than you earn; once believed to be a virtue

Central bank : A group of economists who believe that their current forecasts will turn out to be accurate even though their past forecasts have been unreliable, that their present policies will succeed even though their past policies have failed, that they can prevent inflation from occurring next time even though they didn't prevent it last time, that they can foster lower unemployment in the future even though their practices worsened it in the past, and so forth.

Research : The art of making financial guesswork seem like a science

Economist : A professor who studies the real world from a perch in the ivory tower and concludes that the chaotic interactions of people, goods, and money conform to his or her theories.

Dax Devil

Well-Known Member
Great post, DSM. Very witty. Loved it. BTW, remember I talked about the trigger the western world was waiting for to wage all out war against fundamentalism? Guess ISIS provided that in Paris. Now, will they pull the trigger? A million dollar question.


Well-Known Member

It's difficult to fight an idea or an idealogy. The Western society has openness which becomes it weakness. The enemy within is a cancer to the society. How can these be identified and segregated? Parts of London and many Western cities resembles India, Pakistan, Somalia, Sudan and Nigeria - and not all have assimilated to the culture of the West. And of these, one or a few rouge elements can wreak havoc on the entire society or the idea of Western democracies as is today.

And brings into question of Western and democratic values. Of all the refugees coming from Syria, how many did the rich gulf states take? Not one.

And unleashing trident missiles, submarines, warthogs, F-16's is not going to help as it did not even in Afganistan or Iraq.

BTW, if you read some of the threads in the forum, it seems people have seen too many of 'Matrix' movies and cannot differentiate between fantasy and reality. ::lol::lol::lol:

BTW, remember I talked about the trigger the western world was waiting for to wage all out war against fundamentalism? Guess ISIS provided that in Paris. Now, will they pull the trigger? A million dollar question.

Dax Devil

Well-Known Member

BTW, if you read some of the threads in the forum, it seems people have seen too many of 'Matrix' movies and cannot differentiate between fantasy and reality. ::lol::lol::lol:
Ha ha. Witty again...
Seems Morpheus must have come in their dreams to say: You are the ONE. :p

(The real Morpheus is greek god of dreams)

Similar threads