It is thirty minutes before the market opens, and your calendar, butterfly or iron condor is going to be in trouble. You've adjusted previously, but you're out of time to make further adjustments. Now it's just time to take your lumps and get out if the underlying moves too far. You don't want to lose more than 25 percent on your calendar or the amount of the cash flow on your iron condor or some other parameter for your trades. You calculate what the spread price would be that would represent that loss. You decide to put in a stop limit order based on the spread price that will represent the maximum loss you intend to take.

Stop right there and rethink that order.

Imagine another scenario. It is thirty minutes before the market opens, and futures have moved big. Your calendar, butterfly or iron condor is probably going to be right where you want it to be to collect maximum profit. You know what that desired profit is, and you decide to lock in that profit on at least half the positions. You put in a complex limit order based on the spread price you want to get.

Good going.

Imagine a third scenario. Markets have just opened, and you see that the iron condor or calendar or butterfly trade you'd hoped to open is just out of reach at the price you wanted. You know the optimum credit you'd like to get on that iron condor or iron butterfly and the optimum debit you'd like to pay on the calendar or regular butterfly. You throw out a just-in-case limit order to open the trade.

Good going.

In each of these three scenarios, the trader contemplates placing a limit order based on the spread's price. In two cases, the idea might be a good one. In one, it's probably a bad idea. Let's start with the third scenario described, as it will likely explain all the others.

Experienced traders call the first hour of the market amateur hour. That's the period when an early move is sometimes quickly reversed, sometimes trapping bullish or bearish traders who entered an early trade. Even when the first direction proves to be the final direction of the day, prices tend to chop around a bit. Market makers are managing their inventories, sometimes widening spreads to manage their risks. Retail traders are buying or selling.

Inexperienced retail day traders who enter near the open sometimes find that they've just bought expensive options. Even if the underlying moves in the direction they predicted, the trade may be working under a handicap from the get-go. Early morning volatility and demand-supply imbalances may have artificially plumped up options prices. Experienced iron condor sellers, on the other hand, may find that the early volatility gets them a fill on a just-in-case order they threw out to lock in profit or enter a new trade, with little hope it would get filled. Especially with the RUT, I've thrown out a limit order to open (sell) an iron condor for a credit that I never thought I'd obtain, only to find that a momentary pricing inconsistency resulted in a fill. Similar occurrences may happen with calendars or other combination trades.

What's good for me is also good for the trader who wants to lock in full or partial credit on a combination trade, placing a limit order that will capture that wanted profit. Prices that are jumping around may result in a fill that makes that trader happy.

That same volatility and unpredictable fills can produce an unhappy result for the trader who wants to act responsibility, setting an order to close out losing positions when a spread reaches a level that signifies that trader's get-out point. A momentary spike in spread prices can trigger a fill when the spread's prices never lingered at that level and only momentarily touched it, a blip in pricing that no one else even saw. Or, if a strong trend against the position begins, prices may surge through that limit and the order never fill.

What's a responsible trader to do if the early morning action might result in a spread price that will represent the trader's maximum acceptable loss? If possible, that trader should watch the early action and manually place a trade, negotiating between the bid and ask if the markets aren't surging and the vehicle has enough liquidity to allow that negotiation. If a strong trend begins and the trader sees no signs that a reversal could occur (weak advance/decline volume on an early climb, dropping TRIN and volatility indices as prices dip, or other divergences from price action), and an attempt to negotiate would result in chasing the spread price higher, that trader may find it necessary to place a market order for the spread. That market order should be attempted only under runaway conditions when the trader must get out and only in vehicles that are liquid and have tight bid/ask spreads. They should be avoided if at all possible in underlyings with wide bid/ask spreads, such as the SPX and OEX. For example, a tight, liquid market such as the SPY's might be appropriate for such a market order to close a spread for a loss in a runaway market.

Not all brokers offer enough contingencies under which trades are placed to allow traders much flexibility for those times when they can't personally monitor the markets. Traders might find that their only choice for closing a going-wrong combination trade they can't personally monitor is a contingent order based on the underlying's price, with the triggered order then placed as a market order. Other brokerages might allow a trade trigger based on something such as the delta of one of the options in a combination trade, with the triggered trade then placed at a certain number of cents above or below the midpoint of the bid/ask spread. What type of trigger you need depends on you and your trade practices and ability to watch the markets.

Whatever your needs and whatever your brokerage's platform allows, be aware of the pluses and minuses of placing triggers for spread orders based on the spread's price, especially during amateur hour.