Adjustments

312國道 (烏伊公路一級公路段)

(奇摩原貼：2013/01/22)

不僅要注意方向性的調整, 更要同時做好資金控管 (部位規模管理)

--- by Sheldon Natenberg

Theoretical edge is only an indication of what we expect to earn if we are right about market conditions. Since there is no guarantee that we will be right, we must give at least as much consideration to the question of risk. If all options are overpriced and the trader decides to sell additional calls to reduce the delta, the sale of the overpriced calls will have the effect of increasing the theoretical edge. If all options remain overpriced and the trader is always intent on increasing his theoretical edge, he will continue to make whatever adjustments are necessary by continuously selling overpriced options. This method of adjusting may indeed result in the greatest profit to the trader. If the market now makes a violent move in either direction, the negative consequences will be greatly magnified. For this reason, a trader who is unfamiliar with all the subtleties of an option market should avoid making adjustments which increase the size of his position.

A trader cannot afford to sell overpriced options or buy underpriced options ad infinitum. At some point the size of the spread will simply become too large, and any additional theoretical edge will have to take a back seat to risk considerations. When that happens there are only two choices: decrease the size of the spread or adjust in the underlying market. A disciplined trader knows that sometimes, because of risk considerations, the best course is to reduce the size of the spread, even if it means giving up some theoretical edge.