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1. In this article we'd like to explain adjustment beliefs which
can be practical in running an options account. This
individual strategy can be practical to each and every type
of option spread such as the Credit Spread, Iron
Butterflies, Iron Condors, Double Diagonals, as well as
others.

2. As this is being written in October of 2008 the VIX is as
high as it's been. Look at a 5 year chart and see where we
are. This level of volatility has made options quite
expensive. Before we make any adjustments to our
portfolios, we always think about the volatility. Where is it
now and where is it going? Should we be buying or selling
options at this moment?

3. A very common mistake that option traders make is
buying or selling options at the wrong time. If we buy
options when the volatility is at a high, we are entering a
trade with odds against us. Option traders that do this
don't realize why their options lose value so fast. Every
option trading adjustment should be made by thinking of
the option Greeks and volatility. We really need to
understand these fundamentals to succeed in the options
market.

4. A TYPICAL OPTION POSITION THAT MIGHT NEED AN
ADJUSTMENT

5. For example, we have on a Butterfly spread and the
market has been up-trending for a few days. In this case
we might need to make an adjustment on the Butterfly or
possibly on our whole portfolio. Options trading requires
some management or we can take on great amounts of
risk. So, if this is the situation, we'd be looking at
adjustment ideas with IV in mind. We'll study our price
chart and also the IV chart. Perhaps we'll find that the IV is
on support now, and it looks like it's going to rise again.

6. There are many option strategies and morphing
concepts, so how can we make a good decision on what to
do in this case? A critical step in the decision making is
graphing the current volatility inside the options market.
We usually use the VIX and RVX. Is the volatility bottomed
and increasing? Is it at a peak and coming back down? Is it
barely moving? What is happening in the options market
and where is the volatility in relationship to its history?
We additionally need to study the technical analysis of our
traded asset. Where is the price headed? We have to
comprehend Vega and the other option Greeks to
accomplish high probability changes to our positions. In
today's example, if the volatility prediction is up, it would
make sense to add some positive Vega to our portfolio.

7. There is really an unlimited number of ways to create a
positive Vega position, but the most common positive
Vega spreads are Debit Spreads, Short Butterflies, Broken
Wing Butterflies (OTM), Short Condors and Calendars. In
our mentoring course we discuss option strategies and
adjustments in detail.

8. To summarize, when your option trades come to an
adjustment point, always think about the IV of your asset.
If you can make decisions based on
volatility, direction, and time, then your option trading
skills will be much better. It's the little things like this that
make a difference at the end of the year.

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