Iron Condor Adjustments: Rolling Up the Short Put Spreads

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When selling iron condors, you'll sometimes need to make an adjustment to your position when the stock price shifts substantially.

In this video, we'll talk about the iron condor adjustment of rolling up the short put spread, which is a defensive trade adjustment that iron condors traders typically make after a notable increase in the stock price. Additionally, we'll go through a live example in real trading software.

When you sell an iron condor, your position's delta (directional) exposure will generally start near zero (depending on how you structured the trade). However, as the stock price increases, your position delta will grow into negative territory, and your position will typically have a loss.

The iron condor adjustment of rolling up the short put spreads accomplishes two things:

1. Collect more option premium, which reduces the maximum loss potential on the trade and increases the maximum profit potential (at the expense of a narrower range of profitability).

2. Neutralizes your position's delta exposure, as rolling up the short put spreads adds more positive deltas to your position. When you make the roll, your position's delta will be negative, which means adding some positive deltas brings your overall directional exposure closer to zero.

Unfortunately, rolling up the put spreads decreases the range of maximum profitability, which means there's a lower probability of achieving the maximum profit potential.

Additionally, by neutralizing the position's delta, a reversal in the stock price won't be as favorable, and can even lead to losses after rolling up the put spreads. tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Project Finance(Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade.