Several recent Options 101 articles have explored capabilities you might consider when evaluating online brokerages. One that I appreciate with my current options trading platform is the ability to open one strike and close another by placing a single order. Let's look at what I mean.

Hypothetical Hedged RUT Butterfly Trade on Friday, June 20, Graph by OptionNet Explorer:

By 30 minutes before the close, a typical adjustment time of day for many option traders, the RUT's price had moved slightly beyond the upper expiration breakeven of this hypothetical position. Because this trade is hedged on the upside with call debit spreads, the climb had not produced any significant pain.

It appeared possible that the RUT could be climbing to challenge its March 4 intraday high of 1212.82, but perhaps our hypothetical trader preferred not to move butterflies higher until after the trader watched for a test of that previous high. Perhaps that test would fail, that trader might have recognized. Just by eyeballing that expiration graph, we can see that a potential move up to challenge that previous 1212.82 high wasn't going to do terrible harm to anything but the trader's anxiety levels.

However, delta was negative and some harm would be done, perhaps slightly offset by a decline in implied volatilities. What if our hypothetical trader wanted to do something to raise the deltas without trying to move those butterflies in the last few minutes of trading?

One possibility would be to roll up the call debit spreads, closing the ones that have made some profit and opening new--and cheaper--ones at higher strikes. On some online platforms, that action can be performed in a single order, condor-rolling the debit spreads higher. Those platforms offering this capability may actually be going through some extra machinations to execute the order, but you've been able to set up a single order in your interface with the platform.

I'll show you what I mean by condor-rolling credit spreads, using OptionNet Explorer's options chains. The strikes showing positions in blue are current positions in the hypothetical trade: the strikes showing positions in green are the ones showing the condor roll. Note that not all the strikes are shown for the put butterfly itself since we're focusing on the call debit spreads.

Condor-rolling Call Debit Spreads Higher, Table by OptionNet Explorer:

The order for a 7-contract condor includes the following actions: buy-to-close 7 1140 calls, buy-to-open 7 1150 calls, buy to close 7 1160 calls, and sell-to-open 7 1170 calls. Because the original 1140/1160 call debit spread is worth more than the new 1150/1170 call debit spread, the order will result in a credit, and the max loss/margin held is reduced. Delta is raised from -20.78 to a more neutral 0.18. The new expiration chart will look a little wonky, but theta, vega and gamma are not greatly impacted.

New Expiration Graph in Hypothetical Trade, Showing the Effect of Condor Rolling the Call Debit Spreads Higher, Graph by OptionNet Explorer:

Many traders could have slept easily after such an adjustment that Friday, without worrying about a rally that next Monday morning. They could watch how an upside test played out and then moved those butterflies if the upside test was successful and the RUT broke through. I did have a live trade, a bigger one, and I personally don't like to let prices push outside the expiration breakeven less than a month before the options expire. Therefore, I had made a different choice that Friday, moving a few but not all of my butterflies so I could safely watch the test play out. However, I do sometimes butterfly-roll or condor-roll my call debit spreads higher and wanted to demonstrate a case when the tactic might at least have been considered.

Not all traders can consider such condor rolls, however. Their brokerages may not allow them to place trades online that close and open various strikes in the same order. In the condor roll shown, two strikes were being closed while two were being opened. On some platforms, this trade would have had to be broken into its two component parts, into two separate orders. The selling of the original call debit spread and the buying of the new one would have had to have been done in two separate orders.

In one online brokerage I used, such butterfly-rolling or condor-rolling orders would have been kicked out on the online platform, but I could call the trading desk and get them to override it and place that trade. The trouble was, if the trade didn't fill and the limit for the order needed to be adjusted, I would have to call them back. Precious time was lost.

It's of course possible to move those call debit spreads with two separate orders, but that risks more slippage. Of course, the converse to that concern is that in fast-market conditions, it's probably going to be impossible to butterfly-roll or condor-roll those debit spreads higher or lower, and the trades would have to be broken apart if there was going to be any hope of getting them filled.

Perhaps your style of trading would never include such trades as demonstrated above. Perhaps you just never thought of such trades and might want to consider them now but don't know what would be allowed on your platform. Thinking about how you trade is always necessary when you're evaluating a new platform. You don't need to agonize over the unavailability of a capability that you'll never use anyway. You do need to evaluate the various pros and cons of a platform if you think you'd occasionally use a specific tactic that is not allowed on that platform, and you must devise a workaround. Is something else that the platform does allow far more important?

Linda Piazza