Definition
Adjustment (Options)
An adjustment is modifying an existing option position — rolling, adding, or hedging legs — to manage risk as the market moves.
When a trade goes against a position, traders adjust rather than simply exit: rolling a tested strike further out, adding a hedging leg, converting a strangle into an iron condor, or shifting the untested side closer to collect more premium. The goal is to defend the position and improve the odds.
Adjustments are central to Indian option-selling on Nifty and Bank Nifty, where sellers actively manage short straddles and strangles through weekly expiry. Good adjustment discipline — knowing in advance when and how to roll or hedge — often matters more than the original entry.
Related terms
- Short StrangleA short strangle sells an out-of-the-money call and an out-of-the-money put to earn premium in a quiet market.
- Iron CondorAn iron condor sells an out-of-the-money call spread and put spread to earn premium in a range-bound market with defined risk.
- Delta-Neutral StrategyA delta-neutral strategy balances long and short deltas so the position has little directional exposure, profiting from time or volatility instead.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.