![\"spx-ic\"](\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/07\/spx-ic.png\")
<\/a><\/p>\nSo far so good.<\/p>\n
So at what price points would we need to adjust?<\/p>\n
Well, let’s start with the call side.<\/p>\n
Remember– we’re not looking at NET delta, we’re looking at the individual option delta.<\/p>\n
The short call option is the 2210 strike, so we can go look at the option board to see the current delta of all the strikes.<\/p>\n
So when can we figure out when the option will hit 20 delta?<\/p>\n Step 1: Find the option that has 20 delta already. In this example, it would be the 2175 call.<\/p>\n Step 2: Subtract the difference between your short strike and the current 20 delta strike.<\/p>\n In this case, your short strike is 2210, and the 20 delta is 2175.<\/p>\n That gives us a distance of 35 points.<\/p>\n Step 3: Adjust SPX price based off that distance.<\/p>\n So if current SPX price is 2100, and the distance is 35, then you should be expecting to adjust your position at the 2135 level.<\/p>\n The more sophisticated way to do it is to analyze the single option.<\/p>\n So the first step would be to simulate what buying the 2210 call would be like:<\/p>\n Now instead of looking at your P\/L, you want to look at the delta. In the dropdown menu, change the p\/l to delta.<\/p>\n That will leave you with a chart looking like this:<\/p>\n Now I’m not a big fan of this because it shows your delta at opex… it really doesn’t matter here, because you know that at options expiration all out of the money options have a delta of 0 and all in the money options have a delta of 100.<\/p>\n So I’ll change the “+1 Expiration” menu to “+3 day step” with a 7 day interval. This will make sense in just a second.<\/p>\n Now, to figure out where your delta hits 20, simply line up the graph…<\/p>\n<\/a><\/p>\nQuick and Dirty Method<\/h2>\n
<\/a><\/p>\nAnalytics Method<\/h2>\n
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