Spread

Adjustment
Module
OPTIONS 360
Set Up - 1
❑ Spread is a directional strategy, so first you have to find direction and momentum if you want to go
with spread
❑ In debit spread you are an option buyer and in credit spread you are an option seller.
❑ Try to find out breakout or reversal from support and resistance.
❑ Always try to buy debit spread with 1:2 RR minimum.
❑ Now check premiums, Your sell side should be minimum 50% of your buy price.
Set Up - 1
❑ Now try to keep Buy strike near first level (support and resistance) and sell strike should be near next
level.
❑ Always keep a SL level in mind according to chart level.
❑ Now try to do adjustments according to market movement.
❑ Stay in trade as long as market is in your favour.
Set Up - 2
❑ Ratio spread is a directional setup but risk on opposite side is negligible.
❑ Ratio Spread can give panic in strong trend.
❑ Always try to guage strength in trend.
❑ Never go above 1:2 ratio.
❑ Always avoid this for downside.
Set Up - 2
❑ If there is a weak trend then you should go with normal ratio of 1:2, in this case your sell
should be around a good level according to chart.
❑ If there is a strong trend then you should go with Ladder ratio of 1:1:2 or more on third strike,
in this case your first sell should be around your target and your second sell strike should be
near second level.
❑ And in case of rejection you can sell some extra CE around second sell.
Type of Adjustments
1. ITM strike shifting.
2. Extra Credit Ratio, Butterfly or Ladder.
3. Debit cut strangle.
4. Ratio sell shifting.
1. ‘ITM strike shifting’ (In case of Profit)
1. Do this adjustment if market is going in your direction.
2. Do first ITM strike shift if you get 60% intrinsic value.
3. Do second ITM shifting around 65-70%.
4. After these 2 adjustments your spread should become almost free.
5. Now you can avoid further ITM shifting or if you want to do then do at 80% minimum.
6. If you don’t want to book more ITM then you can go with ratio or butterfly.
2. ‘Extra Credit Ratio, Butterfly or
Laddar’ (In case of Profit)
1. Do this adjustment if market is going in your direction.
2. Before this always try to do ITM shifting adjustment.
3. Always try to do this to make your trade free.
4. Make spread into ratio spread if you feel that there is less momentum in direction.
2. ‘Extra Credit Ratio, Butterfly or
Laddar’ (In case of Profit)
5. For butterfly and ladder always try to keep same credit as of your total debit and distance of
strikes should be same as of your debit spread.
6. Just calculate your total debit and try to find a set of credit spread with same credit.
7. Book your Debit spread if you got overall above 80-90% of total profit and same in case of
credit spread.
8. For extra profit you can do scalping in buy position as well
3. ‘Debit cut Strangle’ (In case of Loss)
1. Wait for opposite side impotant level breach or your buy price comes to your total debit.
2. Never do any adjustments on Friday, either book loss or stay in trade.
3. Cut your buy position at debit price.
4. Now check opposite side option.
3. ‘Debit cut Strangle’ (In case of Loss)
5. Sell opposite side option which have 80% value of your sell leg’s current price.
6. Now adjust according to market movement.
7. Shift opposite side leg if any side option increase 50% of its original value.
8. Cut over all position if after all adjustments you facing orginal trades loss.
4. ‘Ratio sell shifting’ (In case of Loss)
1. Initiate this adjustment when your sell side premiums become 50% of original premiums.
2. Sell one more lot on sell side.
3. If market continuously going against you, shift sell strike inside.
4. If market get reversed then convert extra selling into ratio strangle.
‘Ratio Spread’
1. Always try to go with 1-1-2 ratio.
2. If market goes againt you then keep shifting outside selling to downside.
3. If market goes in your direction then always cut one lot from extra selling when spot reached
at your buy position.
4. Cut second extra lot when market reached at your sell position.
5. When market reached at your first sell always do ITM shifting in buy position and make your
spread free.
6. Now you can play it like spread also.
Thank You
Options 360