The art of position adjustment
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Transcript of The art of position adjustment
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The Art of Position Adjustment
Options Trading
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Let's look at some simple examples for options
Anyone who has dealt with the Stock Exchange for a while is familiar with the following stock market terms: pyramidal strategy, position enlargement, etc.
These are strategies that adjust the existing position, increase the possibility of profit and mostly reduce the initial risk. While these strategies are rather limited in the stock market, only your imagination can set the limit when it comes to option strategies.
Let's look at some simple examples for options
The best known and easiest options strategy is the Long Call, which is when we speculate on the increase of the underlying product with the possibility of "unlimited" profit. (Note to readers: "unlimited" is simply a beginners' illusion ;) )!
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Some examples for the adjustment
Such a basic strategy may pass through many metamorphoses over time, according to our expectations in relation to the underlying product.
During the conversions, the risk is continuously reduced in parallel with the increase of profit expectations. And don’t forget! We always talk about a strategy with limited risk!
Some examples for the adjustment of a simple Long Call in one step when our expectation changes:
having limited profit, but still rising,
moving sideways at a certain level - time is on our side,
moving sideways / consolidated rise - time is on our side,
or even a level write-out playing to short direction with one movement.
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The art of adjustment
Besides the above, there are a number of additional conversion options that I am not going to detail here.
The art of adjustment is not a trivial thing because it is important when, and to what, the strategy is converted. In addition, whether Call / Put or synthetic position needs to be used is also significant.
On the stock market, a position needs to be closed if we want to realize a profit, while in the options market, it is enough to make a proper adjustment and we do not necessarily need to quit the given position.
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