Options trading requires adaptability, and nowhere is this more true than with iron condor strategies. When market conditions shift and your iron condor comes under pressure, having a clear adjustment plan can mean the difference between preserving capital and suffering significant losses.

Understanding Iron Condors

An iron condor is an options trading strategy designed to generate income in range-bound markets. Traders sell out-of-the-money call and put spreads, collecting premium while hoping the underlying stock stays within a specific price range. Typically, traders select short strikes around the 15 delta mark, creating a balanced position with defined risk.

When Is an Iron Condor "Tested"?

A condor gets tested when the underlying price approaches or breaches one of your sold strike prices. This could manifest as:

• A stock rally threatening your call side
• A significant drop challenging your put side

Four Critical Adjustment Strategies

1. Rolling the Tested Side

When one side of your iron condor is under pressure, you can roll the tested spread to a higher (for calls) or lower (for puts) strike price. 

Key considerations:

• Provides more room and margin for error
• Reduces overall position delta
• Typically costs money, reducing your initial premium

2. Rolling the Untested Side

Instead of adjusting the pressured side, you can roll the untested side inward. 

Advantages include:

• Potential to generate additional premium
• Can offset adjustment costs
• Risks bringing your other short strike closer to current price

3. Delta Hedging

Considered the preferred method as expiration approaches, delta hedging involves:

• Buying or short selling shares to neutralize your position's delta
• Flattening your risk curve
• Limiting upside/downside exposure
• Can be done partially or fully depending on risk tolerance

4. Rolling Out in Time

When nearing expiration (around 14 days), you might choose to:

• Close the current iron condor
• Reestablish the position in a future expiration month
• Aim to do so for a net credit to offset costs

Pro Tips for Iron Condor Management

1.  
2. Set Strategic Price Alerts
   • Create alerts before reaching short strikes
   • Give yourself time to make calculated adjustments
3.  
4. Develop a Predefined Adjustment Plan
   • Establish clear rules for when and how to adjust
   • Decide in advance which scenarios warrant defensive or aggressive adjustments
5.  
6. Maintain Discipline
   • Stick to your predefined process
   • Avoid constantly changing adjustment strategies
   • Know when to exit a trade that isn't working

Conclusion

Trading options isn't about achieving perfection, but about intelligent risk management. The goal is not to never lose, but to preserve capital and maintain the ability to trade another day. By understanding these adjustment strategies, you'll be better prepared to navigate the dynamic world of options trading.

Every adjustment involves trade-offs. Your job is to choose the path that best manages risk while preserving potential profit.

Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.