This 8-Minute Video Will Teach You Exactly What to Do When Your Options Trade Goes Against You.

0:00 Jim Schultz here for Calculated Risk,

0:01 Jim Schultz here for Calculated Risk,

0:01 Jim Schultz here for Calculated Risk, and before we get going today, don't

0:02 and before we get going today, don't

0:02 and before we get going today, don't forget the best ways you can help us out

0:03 forget the best ways you can help us out

0:03 forget the best ways you can help us out are liking the video or subscribing to

0:05 are liking the video or subscribing to

0:05 are liking the video or subscribing to the channel. Either one of those really

0:07 the channel. Either one of those really

0:07 the channel. Either one of those really helps us out a lot. So, managing,

0:09 helps us out a lot. So, managing,

0:09 helps us out a lot. So, managing, rolling, adjusting are never things that

0:12 rolling, adjusting are never things that

0:12 rolling, adjusting are never things that signal everything is going well. They're

0:14 signal everything is going well. They're

0:14 signal everything is going well. They're never things that you do when the trade

0:16 never things that you do when the trade

0:16 never things that you do when the trade is working perfectly. Like, you don't

0:17 is working perfectly. Like, you don't

0:17 is working perfectly. Like, you don't manage a trade that's doing everything

0:19 manage a trade that's doing everything

0:19 manage a trade that's doing everything that you've asked it to do. You don't

0:21 that you've asked it to do. You don't

0:21 that you've asked it to do. You don't roll a position that is on its way

0:23 roll a position that is on its way

0:23 roll a position that is on its way naturally to hit whatever profit target

0:25 naturally to hit whatever profit target

0:25 naturally to hit whatever profit target you might have. You don't make an

0:26 you might have. You don't make an

0:26 you might have. You don't make an adjustment to a trade that's just been

0:28 adjustment to a trade that's just been

0:28 adjustment to a trade that's just been working out perfectly from the

0:30 working out perfectly from the

0:30 working out perfectly from the beginning. No, when you're managing and

0:32 beginning. No, when you're managing and

0:32 beginning. No, when you're managing and rolling and adjusting, all important

0:34 rolling and adjusting, all important

0:34 rolling and adjusting, all important things, let's be very clear, you are

0:36 things, let's be very clear, you are

0:36 things, let's be very clear, you are playing defense, and that's what I want

0:38 playing defense, and that's what I want

0:38 playing defense, and that's what I want to focus on here today. So, let's go.

0:40 to focus on here today. So, let's go.

0:40 to focus on here today. So, let's go. So, let's make sure we're all starting

0:42 So, let's make sure we're all starting

0:42 So, let's make sure we're all starting from the same place here. When a trade

0:44 from the same place here. When a trade

0:44 from the same place here. When a trade is working, what is the go-to strategy?

0:46 is working, what is the go-to strategy?

0:46 is working, what is the go-to strategy? What is the default setting? Shout out

0:48 What is the default setting? Shout out

0:48 What is the default setting? Shout out to my From Theory to Practice fam. The

0:50 to my From Theory to Practice fam. The

0:50 to my From Theory to Practice fam. The DNS, the do-nothing strategy. Like, let

0:54 DNS, the do-nothing strategy. Like, let

0:54 DNS, the do-nothing strategy. Like, let the strategy work. Let the theta come

0:56 the strategy work. Let the theta come

0:56 the strategy work. Let the theta come in. Let the probabilities play out. You

0:57 in. Let the probabilities play out. You

0:57 in. Let the probabilities play out. You don't necessarily need to go in and do

0:59 don't necessarily need to go in and do

0:59 don't necessarily need to go in and do anything to a strategy that is working.

1:02 anything to a strategy that is working.

1:02 anything to a strategy that is working. It's already doing everything that

1:04 It's already doing everything that

1:04 It's already doing everything that you've asked it to do. Okay, but that's

1:05 you've asked it to do. Okay, but that's

1:05 you've asked it to do. Okay, but that's the easy stuff. The winners are the easy

1:07 the easy stuff. The winners are the easy

1:07 the easy stuff. The winners are the easy stuff. What happens when a trade is not

1:09 stuff. What happens when a trade is not

1:09 stuff. What happens when a trade is not working? This is when you're going to

1:11 working? This is when you're going to

1:11 working? This is when you're going to have some decisions to make. So, this is

1:13 have some decisions to make. So, this is

1:13 have some decisions to make. So, this is when managing early comes into play,

1:15 when managing early comes into play,

1:15 when managing early comes into play, whether it's a winner or especially a

1:17 whether it's a winner or especially a

1:17 whether it's a winner or especially a loser, which is what I want to focus on

1:19 loser, which is what I want to focus on

1:19 loser, which is what I want to focus on here today. This is when rolling and

1:20 here today. This is when rolling and

1:20 here today. This is when rolling and extending the duration of the trade

1:22 extending the duration of the trade

1:22 extending the duration of the trade comes into play. This is when adjusting

1:24 comes into play. This is when adjusting

1:24 comes into play. This is when adjusting and kind of controlling and minimizing

1:26 and kind of controlling and minimizing

1:26 and kind of controlling and minimizing or mitigating the directional bias on

1:28 or mitigating the directional bias on

1:28 or mitigating the directional bias on the strategy is a very important

1:29 the strategy is a very important

1:29 the strategy is a very important maneuver that you can make. Okay, so

1:31 maneuver that you can make. Okay, so

1:31 maneuver that you can make. Okay, so let's start with managing early. And

1:33 let's start with managing early. And

1:33 let's start with managing early. And again, winners are not really the issue.

1:35 again, winners are not really the issue.

1:35 again, winners are not really the issue. Like, we manage our winners early at 50%

1:37 Like, we manage our winners early at 50%

1:37 Like, we manage our winners early at 50% of max profit after a certain number of

1:38 of max profit after a certain number of

1:38 of max profit after a certain number of days, what have you. That's a whole

1:40 days, what have you. That's a whole

1:40 days, what have you. That's a whole separate discussion. Let's focus on the

1:42 separate discussion. Let's focus on the

1:42 separate discussion. Let's focus on the losers. Right, you have a losing trade

1:44 losers. Right, you have a losing trade

1:44 losers. Right, you have a losing trade on your hands, what do you do? Well,

1:46 on your hands, what do you do? Well,

1:46 on your hands, what do you do? Well, this is where you really have to map

1:48 this is where you really have to map

1:48 this is where you really have to map into whatever you wanted to do at the

1:50 into whatever you wanted to do at the

1:50 into whatever you wanted to do at the beginning of the trade. Like, what is

1:51 beginning of the trade. Like, what is

1:52 beginning of the trade. Like, what is your plan? Is it 2x of credit received?

1:54 your plan? Is it 2x of credit received?

1:54 your plan? Is it 2x of credit received? Is it 3x of credit received? Is it

1:55 Is it 3x of credit received? Is it

1:56 Is it 3x of credit received? Is it letting it go all the way to expiration

1:57 letting it go all the way to expiration

1:57 letting it go all the way to expiration for like a defined risk strategy or what

1:59 for like a defined risk strategy or what

1:59 for like a defined risk strategy or what have you? The tastytrade research team

2:00 have you? The tastytrade research team

2:00 have you? The tastytrade research team has looked at all of this a million

2:02 has looked at all of this a million

2:02 has looked at all of this a million different times. And this is when you

2:04 different times. And this is when you

2:04 different times. And this is when you need to hold fast to whatever that plan

2:06 need to hold fast to whatever that plan

2:06 need to hold fast to whatever that plan might be. So, that means if your plan on

2:08 might be. So, that means if your plan on

2:08 might be. So, that means if your plan on a short put on defined risk strategy was

2:10 a short put on defined risk strategy was

2:10 a short put on defined risk strategy was to manage it at 2x of credit received

2:12 to manage it at 2x of credit received

2:12 to manage it at 2x of credit received and you get there, then take it off.

2:14 and you get there, then take it off.

2:14 and you get there, then take it off. Don't think twice about it. Eat the loss

2:15 Don't think twice about it. Eat the loss

2:15 Don't think twice about it. Eat the loss and move on. If your strategy on your

2:17 and move on. If your strategy on your

2:18 and move on. If your strategy on your strangle was to manage it at 3x of

2:19 strangle was to manage it at 3x of

2:19 strangle was to manage it at 3x of credit received, then don't think twice

2:21 credit received, then don't think twice

2:21 credit received, then don't think twice about it. Take it off, eat the loss, and

2:23 about it. Take it off, eat the loss, and

2:23 about it. Take it off, eat the loss, and move on. When it's time to play defense,

2:25 move on. When it's time to play defense,

2:25 move on. When it's time to play defense, it's time to play defense. The winners

2:27 it's time to play defense. The winners

2:27 it's time to play defense. The winners are going to take care of themselves,

2:29 are going to take care of themselves,

2:29 are going to take care of themselves, right? It's what we do with those losing

2:30 right? It's what we do with those losing

2:31 right? It's what we do with those losing trades that I believe is ultimately

2:32 trades that I believe is ultimately

2:32 trades that I believe is ultimately going to make all the difference. Okay,

2:34 going to make all the difference. Okay,

2:34 going to make all the difference. Okay, what about rolling a position? So, this

2:36 what about rolling a position? So, this

2:36 what about rolling a position? So, this is when you have a position on and you

2:38 is when you have a position on and you

2:38 is when you have a position on and you want to essentially pick it up from the

2:39 want to essentially pick it up from the

2:39 want to essentially pick it up from the current cycle and just move it out to a

2:41 current cycle and just move it out to a

2:41 current cycle and just move it out to a later cycle, typically the next monthly

2:43 later cycle, typically the next monthly

2:43 later cycle, typically the next monthly cycle. You're effectively

2:44 cycle. You're effectively

2:44 cycle. You're effectively re-establishing the exact same position

2:47 re-establishing the exact same position

2:47 re-establishing the exact same position in a later cycle. So, when does it make

2:49 in a later cycle. So, when does it make

2:49 in a later cycle. So, when does it make sense to do this? Well, the most natural

2:52 sense to do this? Well, the most natural

2:52 sense to do this? Well, the most natural time to do this is when the clock is

2:53 time to do this is when the clock is

2:53 time to do this is when the clock is running out. It's when the cycle is

2:55 running out. It's when the cycle is

2:55 running out. It's when the cycle is starting to run down and you're getting

2:56 starting to run down and you're getting

2:56 starting to run down and you're getting closer and closer to expiration. The

2:58 closer and closer to expiration. The

2:58 closer and closer to expiration. The tastytrade research team has looked at

3:00 tastytrade research team has looked at

3:00 tastytrade research team has looked at this a million times, too, and typically

3:02 this a million times, too, and typically

3:02 this a million times, too, and typically around or just inside that 21 days to go

3:05 around or just inside that 21 days to go

3:05 around or just inside that 21 days to go marker is a great marker or reference

3:07 marker is a great marker or reference

3:07 marker is a great marker or reference point for you to roll your trades out

3:09 point for you to roll your trades out

3:09 point for you to roll your trades out into the future. Whether they be

3:10 into the future. Whether they be

3:10 into the future. Whether they be undefined risk or defined risk, this is

3:13 undefined risk or defined risk, this is

3:13 undefined risk or defined risk, this is when you want to start thinking about,

3:14 when you want to start thinking about,

3:14 when you want to start thinking about, regardless of how it's doing, moving

3:16 regardless of how it's doing, moving

3:16 regardless of how it's doing, moving this guy out into the future. Now, of

3:17 this guy out into the future. Now, of

3:17 this guy out into the future. Now, of course, if it's a winning trade and you

3:19 course, if it's a winning trade and you

3:19 course, if it's a winning trade and you have an economically significant profit

3:21 have an economically significant profit

3:21 have an economically significant profit at this time, just take it off. Just

3:22 at this time, just take it off. Just

3:22 at this time, just take it off. Just take it off and be done with it. But if

3:23 take it off and be done with it. But if

3:23 take it off and be done with it. But if it's a scratch or any type of loser,

3:25 it's a scratch or any type of loser,

3:25 it's a scratch or any type of loser, this is where you would look to roll it

3:27 this is where you would look to roll it

3:27 this is where you would look to roll it out. Now, of course, defined risk and

3:28 out. Now, of course, defined risk and

3:28 out. Now, of course, defined risk and undefined risk are not going to behave

3:30 undefined risk are not going to behave

3:30 undefined risk are not going to behave the same way when it comes to being able

3:31 the same way when it comes to being able

3:31 the same way when it comes to being able to roll at 21 days to go because by the

3:34 to roll at 21 days to go because by the

3:34 to roll at 21 days to go because by the very nature of a defined risk strategy,

3:36 very nature of a defined risk strategy,

3:36 very nature of a defined risk strategy, oftentimes, if it's really significantly

3:38 oftentimes, if it's really significantly

3:38 oftentimes, if it's really significantly underwater, which is where you don't

3:40 underwater, which is where you don't

3:40 underwater, which is where you don't want it to be, like you sold a vertical

3:41 want it to be, like you sold a vertical

3:41 want it to be, like you sold a vertical spread and it's deep in the money,

3:43 spread and it's deep in the money,

3:43 spread and it's deep in the money, you're not going to be able to roll out

3:44 you're not going to be able to roll out

3:44 you're not going to be able to roll out for a credit. You're going to have to

3:45 for a credit. You're going to have to

3:45 for a credit. You're going to have to pay a debit to do that. So, that's when

3:47 pay a debit to do that. So, that's when

3:47 pay a debit to do that. So, that's when we would not roll out at 21 days to go.

3:49 we would not roll out at 21 days to go.

3:49 we would not roll out at 21 days to go. Just hold it all the the to expiration.

3:50 Just hold it all the the to expiration.

3:50 Just hold it all the the to expiration. Be prepared to take max loss if that's

3:52 Be prepared to take max loss if that's

3:52 Be prepared to take max loss if that's what it comes to. That's where position

3:54 what it comes to. That's where position

3:54 what it comes to. That's where position sizing on trade entry is so important.

3:56 sizing on trade entry is so important.

3:56 sizing on trade entry is so important. And so, if you have to pay a debit at 21

3:58 And so, if you have to pay a debit at 21

3:58 And so, if you have to pay a debit at 21 days to go with a defined risk strategy,

4:00 days to go with a defined risk strategy,

4:00 days to go with a defined risk strategy, don't do it. Just hold the trade all the

4:02 don't do it. Just hold the trade all the

4:02 don't do it. Just hold the trade all the way to the end if that's what it takes,

4:04 way to the end if that's what it takes,

4:04 way to the end if that's what it takes, for better or worse. But with an

4:05 for better or worse. But with an

4:05 for better or worse. But with an undefined risk strategy, you're always

4:08 undefined risk strategy, you're always

4:08 undefined risk strategy, you're always going to be able to roll out into the

4:09 going to be able to roll out into the

4:09 going to be able to roll out into the future for a credit. You're always going

4:10 future for a credit. You're always going

4:10 future for a credit. You're always going to be able to pick up additional

4:12 to be able to pick up additional

4:12 to be able to pick up additional extrinsic value when you move this guy

4:14 extrinsic value when you move this guy

4:14 extrinsic value when you move this guy out into the future. That's because

4:15 out into the future. That's because

4:15 out into the future. That's because you're taking on undefined unlimited

4:17 you're taking on undefined unlimited

4:17 you're taking on undefined unlimited naked risk for a longer period of time.

4:20 naked risk for a longer period of time.

4:20 naked risk for a longer period of time. So, you need to be compensated for that

4:22 So, you need to be compensated for that

4:22 So, you need to be compensated for that by additional extrinsic value. That's

4:24 by additional extrinsic value. That's

4:24 by additional extrinsic value. That's not the case with defined risk because

4:26 not the case with defined risk because

4:26 not the case with defined risk because the very presence of those long legs

4:28 the very presence of those long legs

4:28 the very presence of those long legs really muddies the waters. But again, it

4:29 really muddies the waters. But again, it

4:29 really muddies the waters. But again, it defines your risk, so it's

4:30 defines your risk, so it's

4:30 defines your risk, so it's give-us-and-get-us, as it always is. But

4:33 give-us-and-get-us, as it always is. But

4:33 give-us-and-get-us, as it always is. But with undefined risk, when you move it

4:34 with undefined risk, when you move it

4:34 with undefined risk, when you move it out into the future, you pick up more

4:36 out into the future, you pick up more

4:36 out into the future, you pick up more extrinsic value. So, that's a much

4:37 extrinsic value. So, that's a much

4:37 extrinsic value. So, that's a much easier play to make at 21 days to go.

4:39 easier play to make at 21 days to go.

4:39 easier play to make at 21 days to go. It's pretty much a no-brainer. Okay,

4:42 It's pretty much a no-brainer. Okay,

4:42 It's pretty much a no-brainer. Okay, now, what about adjusting your strikes?

4:44 now, what about adjusting your strikes?

4:44 now, what about adjusting your strikes? Well, this is where you want to start to

4:46 Well, this is where you want to start to

4:46 Well, this is where you want to start to control the directional exposure when

4:48 control the directional exposure when

4:48 control the directional exposure when you get a little bit overloaded on one

4:50 you get a little bit overloaded on one

4:50 you get a little bit overloaded on one side or the other. And the most classic

4:51 side or the other. And the most classic

4:51 side or the other. And the most classic example here would be a short strangle.

4:53 example here would be a short strangle.

4:53 example here would be a short strangle. So, let's say you have a short strangle

4:54 So, let's say you have a short strangle

4:55 So, let's say you have a short strangle on and the market starts to running up

4:56 on and the market starts to running up

4:56 on and the market starts to running up towards your short call strike. You're

4:58 towards your short call strike. You're

4:58 towards your short call strike. You're becoming more and more bearish as the

5:00 becoming more and more bearish as the

5:00 becoming more and more bearish as the market grinds higher. Well, you may get

5:02 market grinds higher. Well, you may get

5:02 market grinds higher. Well, you may get to a point where you are too bearish and

5:03 to a point where you are too bearish and

5:03 to a point where you are too bearish and you want to control and mitigate that

5:05 you want to control and mitigate that

5:05 you want to control and mitigate that directional bias that you have to the

5:07 directional bias that you have to the

5:07 directional bias that you have to the downside. And so, this is where rolling

5:09 downside. And so, this is where rolling

5:09 downside. And so, this is where rolling up the untested side, rolling up that

5:11 up the untested side, rolling up that

5:11 up the untested side, rolling up that put side is going to make a lot of sense

5:12 put side is going to make a lot of sense

5:12 put side is going to make a lot of sense cuz it's going to allow you to bring in

5:14 cuz it's going to allow you to bring in

5:14 cuz it's going to allow you to bring in some credit to improve the break-even

5:16 some credit to improve the break-even

5:16 some credit to improve the break-even point on the tested side and help to

5:18 point on the tested side and help to

5:18 point on the tested side and help to reduce and mitigate that bearish

5:20 reduce and mitigate that bearish

5:20 reduce and mitigate that bearish exposure that you have. You're still

5:21 exposure that you have. You're still

5:21 exposure that you have. You're still going to be net bearish, which if you're

5:23 going to be net bearish, which if you're

5:23 going to be net bearish, which if you're naturally contrarian, that's what you

5:24 naturally contrarian, that's what you

5:24 naturally contrarian, that's what you want to be. But you might want to take

5:26 want to be. But you might want to take

5:26 want to be. But you might want to take it down just a notch or two by rolling

5:28 it down just a notch or two by rolling

5:28 it down just a notch or two by rolling that put up. And of course, the opposite

5:30 that put up. And of course, the opposite

5:30 that put up. And of course, the opposite would also be true if you have a

5:31 would also be true if you have a

5:31 would also be true if you have a strangle on and the market starts going

5:33 strangle on and the market starts going

5:33 strangle on and the market starts going down, the stock starts going down

5:34 down, the stock starts going down

5:34 down, the stock starts going down towards your put strike. This is where

5:36 towards your put strike. This is where

5:36 towards your put strike. This is where you're becoming more and more bullish,

5:38 you're becoming more and more bullish,

5:38 you're becoming more and more bullish, so you may want to reduce that

5:39 so you may want to reduce that

5:39 so you may want to reduce that bullishness on the strategy. And one of

5:41 bullishness on the strategy. And one of

5:41 bullishness on the strategy. And one of the ways, one of the classic ways that

5:42 the ways, one of the classic ways that

5:42 the ways, one of the classic ways that we like to do that here at tasty is by

5:44 we like to do that here at tasty is by

5:44 we like to do that here at tasty is by rolling that call strike down. So, you

5:46 rolling that call strike down. So, you

5:46 rolling that call strike down. So, you roll the call strike down, you bring in

5:47 roll the call strike down, you bring in

5:47 roll the call strike down, you bring in premium, you improve the break-even

5:49 premium, you improve the break-even

5:49 premium, you improve the break-even point on the tested side, and you quell

5:51 point on the tested side, and you quell

5:51 point on the tested side, and you quell and mitigate that bullish exposure that

5:53 and mitigate that bullish exposure that

5:53 and mitigate that bullish exposure that you have that's building up because the

5:55 you have that's building up because the

5:55 you have that's building up because the market is moving closer to your short

5:57 market is moving closer to your short

5:57 market is moving closer to your short put. Okay, so three things to keep in

5:59 put. Okay, so three things to keep in

5:59 put. Okay, so three things to keep in mind when it comes to rolling down

6:00 mind when it comes to rolling down

6:00 mind when it comes to rolling down tested side. Number one, by doing this,

6:02 tested side. Number one, by doing this,

6:02 tested side. Number one, by doing this, you are now exposed to whipsaw risk. So,

6:04 you are now exposed to whipsaw risk. So,

6:04 you are now exposed to whipsaw risk. So, you have to understand, at least more so

6:06 you have to understand, at least more so

6:06 you have to understand, at least more so than you were before you made the

6:07 than you were before you made the

6:07 than you were before you made the adjustment. If the market rips back in

6:09 adjustment. If the market rips back in

6:09 adjustment. If the market rips back in the direction that you originally wanted

6:10 the direction that you originally wanted

6:10 the direction that you originally wanted to go before you made that adjustment by

6:12 to go before you made that adjustment by

6:12 to go before you made that adjustment by rolling down tested side, it's going to

6:14 rolling down tested side, it's going to

6:14 rolling down tested side, it's going to happen a time or two or maybe 12,

6:17 happen a time or two or maybe 12,

6:17 happen a time or two or maybe 12, depending on how often you trade, where

6:18 depending on how often you trade, where

6:18 depending on how often you trade, where what was your untested side is going to

6:20 what was your untested side is going to

6:20 what was your untested side is going to now become your tested side. It's not a

6:22 now become your tested side. It's not a

6:22 now become your tested side. It's not a super fun experience, but it is

6:23 super fun experience, but it is

6:24 super fun experience, but it is something that all traders go through at

6:25 something that all traders go through at

6:25 something that all traders go through at one time or another, and it's going to

6:27 one time or another, and it's going to

6:27 one time or another, and it's going to happen to you at, you know, sooner or

6:28 happen to you at, you know, sooner or

6:28 happen to you at, you know, sooner or later. Number two, when do you roll the

6:31 later. Number two, when do you roll the

6:31 later. Number two, when do you roll the untested side? Well, there's a couple

6:32 untested side? Well, there's a couple

6:32 untested side? Well, there's a couple different schools of thought when it

6:33 different schools of thought when it

6:33 different schools of thought when it comes to this. I think the most standard

6:34 comes to this. I think the most standard

6:34 comes to this. I think the most standard one that we've looked at for many, many

6:36 one that we've looked at for many, many

6:36 one that we've looked at for many, many years now is waiting until one strike

6:38 years now is waiting until one strike

6:38 years now is waiting until one strike gets hit. That becomes your tested side,

6:40 gets hit. That becomes your tested side,

6:40 gets hit. That becomes your tested side, and then you roll the opposite side, the

6:42 and then you roll the opposite side, the

6:42 and then you roll the opposite side, the untested side. So, for example, if the

6:44 untested side. So, for example, if the

6:44 untested side. So, for example, if the market is going down, and the put strike

6:45 market is going down, and the put strike

6:46 market is going down, and the put strike gets hit, when it gets hit, not before

6:47 gets hit, when it gets hit, not before

6:47 gets hit, when it gets hit, not before it gets hit, when it gets hit, that's

6:49 it gets hit, when it gets hit, that's

6:49 it gets hit, when it gets hit, that's when I roll my call strike down.

6:51 when I roll my call strike down.

6:51 when I roll my call strike down. Conversely, if the market's going up, I

6:52 Conversely, if the market's going up, I

6:52 Conversely, if the market's going up, I wait for the call strike to get hit, and

6:54 wait for the call strike to get hit, and

6:54 wait for the call strike to get hit, and then I roll my put strike up. So, this

6:55 then I roll my put strike up. So, this

6:55 then I roll my put strike up. So, this would be the standard way of thinking

6:57 would be the standard way of thinking

6:57 would be the standard way of thinking about when to roll the untested side. If

6:59 about when to roll the untested side. If

6:59 about when to roll the untested side. If you wanted to lean into the DNS a bit

7:01 you wanted to lean into the DNS a bit

7:01 you wanted to lean into the DNS a bit more, you could maybe wait for the

7:03 more, you could maybe wait for the

7:03 more, you could maybe wait for the break-even point to get hit before you

7:04 break-even point to get hit before you

7:04 break-even point to get hit before you make the adjustment. That's going to

7:05 make the adjustment. That's going to

7:05 make the adjustment. That's going to obviously mitigate the whipsaw risk and

7:07 obviously mitigate the whipsaw risk and

7:07 obviously mitigate the whipsaw risk and allow you to be more patient, but if the

7:09 allow you to be more patient, but if the

7:09 allow you to be more patient, but if the market keeps running away from you,

7:11 market keeps running away from you,

7:11 market keeps running away from you, you're not going to be able to roll for

7:12 you're not going to be able to roll for

7:12 you're not going to be able to roll for as favorable a price.

7:14 as favorable a price.

7:14 as favorable a price. And then lastly, when you roll the

7:15 And then lastly, when you roll the

7:15 And then lastly, when you roll the untested side, we're typically looking

7:17 untested side, we're typically looking

7:17 untested side, we're typically looking to produce the directional bias by about

7:19 to produce the directional bias by about

7:19 to produce the directional bias by about 30 to 50% of the total directional bias

7:21 30 to 50% of the total directional bias

7:21 30 to 50% of the total directional bias in the position. So, you maintain the

7:23 in the position. So, you maintain the

7:23 in the position. So, you maintain the same directional side of the market in

7:26 same directional side of the market in

7:26 same directional side of the market in terms of you were bearish, now you're

7:27 terms of you were bearish, now you're

7:27 terms of you were bearish, now you're still bearish, just less so. You were

7:29 still bearish, just less so. You were

7:29 still bearish, just less so. You were bullish, you were still bullish, just

7:31 bullish, you were still bullish, just

7:31 bullish, you were still bullish, just less so. You would reduce your

7:33 less so. You would reduce your

7:33 less so. You would reduce your directional bias by maybe only 30% if

7:35 directional bias by maybe only 30% if

7:35 directional bias by maybe only 30% if you want to remain, you know, more

7:36 you want to remain, you know, more

7:36 you want to remain, you know, more bearish or more bullish, depending on

7:38 bearish or more bullish, depending on

7:38 bearish or more bullish, depending on which side of the market, you know, the

7:39 which side of the market, you know, the

7:39 which side of the market, you know, the movement of the stock put you on. If you

7:41 movement of the stock put you on. If you

7:41 movement of the stock put you on. If you want to control your directional bias

7:43 want to control your directional bias

7:43 want to control your directional bias even more and more neutralize that

7:45 even more and more neutralize that

7:45 even more and more neutralize that delta, be more aggressive with that

7:46 delta, be more aggressive with that

7:46 delta, be more aggressive with that delta neutralization and lean more on

7:48 delta neutralization and lean more on

7:48 delta neutralization and lean more on the extrinsic value, then you would look

7:50 the extrinsic value, then you would look

7:50 the extrinsic value, then you would look to reduce your bias by maybe 50%. Okay,

7:52 to reduce your bias by maybe 50%. Okay,

7:52 to reduce your bias by maybe 50%. Okay, so let's bring it all together.

7:54 so let's bring it all together.

7:54 so let's bring it all together. Rolling, managing, adjusting. These are

7:56 Rolling, managing, adjusting. These are

7:56 Rolling, managing, adjusting. These are defensive maneuvers. These are defensive

7:58 defensive maneuvers. These are defensive

7:58 defensive maneuvers. These are defensive tactics. You don't do these things to

8:00 tactics. You don't do these things to

8:00 tactics. You don't do these things to trades that are working. You do these

8:02 trades that are working. You do these

8:02 trades that are working. You do these things when you hit your loss target and

8:04 things when you hit your loss target and

8:04 things when you hit your loss target and it's time to cut the rip cord. You hit

8:06 it's time to cut the rip cord. You hit

8:06 it's time to cut the rip cord. You hit your loss target and it's time to just

8:07 your loss target and it's time to just

8:07 your loss target and it's time to just cut the cord on the position. You do

8:09 cut the cord on the position. You do

8:09 cut the cord on the position. You do these things when you get to 21 days to

8:10 these things when you get to 21 days to

8:10 these things when you get to 21 days to go and you want to keep the dream alive

8:12 go and you want to keep the dream alive

8:12 go and you want to keep the dream alive and you want to kick it out to the next

8:14 and you want to kick it out to the next

8:14 and you want to kick it out to the next monthly cycle. Or you do these things

8:15 monthly cycle. Or you do these things

8:15 monthly cycle. Or you do these things when one side is indeed tested and you

8:17 when one side is indeed tested and you

8:17 when one side is indeed tested and you want to control that directional bias by

8:19 want to control that directional bias by

8:19 want to control that directional bias by moving that untested side. All things

8:22 moving that untested side. All things

8:22 moving that untested side. All things that are intended and designed to allow

8:24 that are intended and designed to allow

8:24 that are intended and designed to allow you to lean more into duration over

8:27 you to lean more into duration over

8:27 you to lean more into duration over direction. Because remember, we all love

8:29 direction. Because remember, we all love

8:29 direction. Because remember, we all love trading. That's why we're here. But we

8:31 trading. That's why we're here. But we

8:31 trading. That's why we're here. But we don't want to do this for a day or a

8:32 don't want to do this for a day or a

8:32 don't want to do this for a day or a week or a month or a quarter. We want to

8:34 week or a month or a quarter. We want to

8:34 week or a month or a quarter. We want to do this for many, many years to come.

8:36 do this for many, many years to come.

8:36 do this for many, many years to come. And I'll see you guys next time.