Adjustments

Report
SMB TRAINING
OPTIONS TRAINING PROGRAM
Presents:

Brought to you by
SMB Training
A World Leader in Options Education
Created and taught by
John Locke
Locke in Your Success, LLC.
“Know what you want, make it happen!”

Please note: Hypothetical computer simulated performance
results are believed to be accurately presented. However, they
are not guaranteed as to accuracy or completeness and are
subject to change without any notice. Hypothetical or
simulated performance results have certain inherent
limitations. Unlike an actual performance record, simulated
results do not represent actual trading. Since, also, the trades
have not actually been executed; the results may have been
under or over compensated for the impact, if any, of certain
market factors such as liquidity, slippage and commisions.
Simulated trading programs in general are also subject to the
fact that they are designed with the benefit of hindsight. No
representation is being made that any portfolio will, or is
likely to achieve profits or losses similar to those shown. All
investments and trades carry risks.

The purpose of this Power Point is to be a quick
reference summary for the M3. It is NOT a rule sheet.
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Entry: 60-30 DTE
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Entry Positioning: 15 – 35 points below current price
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Planned Capital: 5000 -8750 per IWM call depending
on butterfly call ratio
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Profit target: 10% planned capital. Lower target if
number of butterflies is reduced.
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Preferred Delta Range: + 50 to (-) 100
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Buy ITM call verticals/sell OTM put verticals as an upside
adjustment to:
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Increase (+) Delta
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Increase (-) Vega and project (-) Vega further forward on the
T+0 line
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Increase (+) Theta and project (+) Theta further forward on
the T+0 line
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Be cautious of adding negative Vega to your position in very
low volatility environments especially when approaching
major long term resistance levels
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Buy deep ITM calls or stock as an upside
adjustment to:
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Increase (+) Delta
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Increase (+) Gamma Trend
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Roll butterflies up as an upside adjustment to:
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Increase (-) Vega
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Increase (+) Theta
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Increase (-) Delta
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To improve the profit potential in the expiration graph
at a higher price level
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Consider rolling up if market spends a few days more
than 10 points past the upper long strike of the
butterfly
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Reduce butterfly/call ratio as an upside
adjustment to:

Increase (+) Delta
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Increase (+) Gamma Trend
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Reduce margin

You will likely need to reduce your profit target
when you reduce the number of butterflies in
the position
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Buy OTM call verticals/Sell ITM put verticals for an
upside adjustment to:

Reduce or eliminate upside risk
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Increase (+) Delta
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This adjustment is typically used a protective move for
persistent up moves closer to expiration
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This adjustment, in addition to the above, will increase
downside risk, reduce Theta and reduce the likelihood
of gaining additional profits in the trade
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Reposition calls as an upside or downside
adjustment to:

Reduce margin
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Reduce downside risk
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Make small alterations to Delta, Gamma,
Vega and Theta
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Buy OTM calls as an upside adjustment to:

Increase (+) Delta

Increase (+) Gamma Trend
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This adjustment is to be used ONLY as a TEMPORARY
measure when there is a COMPELLING reason to expect
a large move
Once that move has occurred or the compelling reason
is gone, the call should be removed and the position
should be corrected as needed with one of the
previously listed techniques
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Roll butterflies back as a downside adjustment to:

Reduce downside risk

Reduce (-) Gamma

Reduce (+) Delta
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In some cases, this move may actually increase (+) Delta but the
reduction of Gamma and improvement in downside Gamma
trend typically protects very well against large down moves
This adjustment may also be used as an upside adjustment to
increase (+) Gamma trend to the upside
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Make butterflies into a condor as a
downside adjustment to:
Increase (-) Delta and give yourself more
downside room when closer to expiration in
flat market conditions
Be aware that this will decrease your upside
(+) Gamma trend, thereby increasing your
upside risk

Buy OTM puts as a downside adjustment to:

Hedge downside IV risk

Increase (-) Delta
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Increase (+) Gamma to the downside

Increase (+) Gamma trend to the downside
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Used mainly closer to expiration
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
Increase BF/call ratio as a downside adjustment
to:
Increase (-) Delta particularly when the position
is over hedged to the upside and rolling back
the butterflies does not accomplish the result
you want
In general, we do not recommend removing
upside hedging in the M3 but in this specific
situation the hedging can be reduced as an
alternative to adding butterflies
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Profit target or maximum acceptable loss is
hit/exceeded
ANY TIME you are in danger of significantly
exceeding your acceptable loss numbers with
a 30 point overnight market gap AND the
situation can not be corrected
Any time it is not likely that you will gain any
more profit from the position
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John Locke
www.lockeinyoursuccess.com
[email protected]
Facebook: Locke in Your Success
Twitter: locke4success
603-738-1795

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