Stocks & Commodities V. 25:1 (58-64): Directional To Delta Neutral by Chris Tyler

Stocks & Commodities V. 25:1 (58-64): Directional To Delta Neutral by Chris Tyler

Staying alert to new opportunities and changing market conditions means you have to adjust your positions. Here’s how.

A Wall Street adage says winners take care of themselves. The reality, however, is that “winners” are traders who manage all of their trades in a disciplined manner. Seasoned traders remain successful by staying alert to fresh opportunities and changing market conditions, whether that means keeping losses small or adjusting a winning trade into a smarter position. By adhering to this discipline we reduce our stress and move toward more consistent results over the long run.

The idea of adapting to changing market conditions by making adjustments to positions is a familiar process for seasoned option traders. For new traders, however, the concept can seem daunting because there are few written guidelines or rules established for when and how to make adjustments. The truth is there is no right or wrong way to adjust a position. Instead, it is often dependent on the situation, but putting that process to work on a consistent basis increases the chances of success over the long run.