9 Minute Read

Tales of a Technician: Adjustment Trading and the Salvation Syndrome

October 19, 2016

By | 4 Comments


One of the most common ways novice traders cut their teeth learning options is purchasing call and put options. While buying a directional call or put can provide large profits when right, they can be downright painful when wrong. It’s rare to find traders who can rake in consistent profits when buying options is the only weapon in their arsenal. One would certainly have to be adept at forecasting a stock’s price direction; a feat much easier said than done. When attempting the occasional long option trade, I’ve found increased success when using various adjustment techniques. Adjustment thinking helps with adapting to changing market conditions. The two primary objectives of adjusting are locking in gains and reducing or shifting risk.

When entering the realm of adjustment thinking one must be careful to avoid what I call salvation syndrome. This insidious disease often racks up trading costs while compounding losses. It’s primarily characterized by traders who are constantly adjusting losing trades in an attempt to salvage some type of gain. They have a bad case of the fix-its and rather than just exiting when trades go awry and moving to greener pastures, they attempt continual adjustments which often compound their problems. Consider the following example:

Suppose you sell a Nov 55/50 bull put spread on a $60 stock you deem bullish and expect to rise over the coming month. After two weeks of lackluster price action, the stock falls to $55 threatening to breach the higher strike of your put spread. Not wanting to lock in a loss, you decide to roll the put spread down and out to a Dec 50/45 put spread in an effort to make money back if the stock stabilizes or rallies. After making this adjustment, the market gods decide you need a better appreciation of Murphy’s Law and proceed to take the stock lower. As the stock approaches $50, you once again decide to “salvage” the trade by rolling to a Jan 45/40 put spread. Sensing that you’re failing to learn the lesson, the all-powerful market gods once again knock the stock down. Rinse and repeat…

In this example, your adjustments merely served as salt in the wound, insult to injury, a compounding of your losses. Sometimes the best course of action is to simply exit. The tricky part is knowing when an adjustment is warranted and which adjustment to take. That, friends, comes over time as experience and further knowledge are acquired.

Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

The Tales of a Technician series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

Sign up now for a 15-DAY FREE TRIAL #

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involve a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax, and accounting advisers, to determine whether such trading or investment is appropriate for that user.

4 Replies to “Tales of a Technician: Adjustment Trading and the Salvation Syndrome”


    thank you. for someone who is still learning it is great to hear.

  2. DarenKumar says:

    Very Interesting. So its good to learning the difference between salvaging and hedging trades and investments. Thank you.

  3. Thomas Hammonds says:

    This is GREAT! That WAS my style of trading. But I have since been disciplined enough to map out a target and a stop for each trade and not move my stop. Cardinal Trading Rule Number One, NEVER MOVE YOUR STOP!! I now let the number of occurrences and statistics work the rest out. Thanks for the post!! TY?

  4. CHERYLFREAR says:

    Love the analysis example. Yes I have been known to make these type of adjustments. Thanks for the advice.

Comments are closed.

Chart Modal

Tackle Trading

Book a FREE Consultation

Sign up for a free consultation to build your Educational Plan.