Risk path

Reducing risk without fully exiting

Reducing risk can mean cutting size, converting structure, tightening the exit rule, or removing a dangerous leg. It should make the position easier to manage, not more complicated.

Questions to ask

• What exact risk is being reduced?
• Does the adjustment improve reward-to-risk from today?
• Does it create new assignment, liquidity, or margin risk?
• Would simply closing be cleaner?

A risk reduction that adds complexity without solving the real exposure is often just a disguised roll.

Primary reading: FINRA options overview · FINRA assignment guide · OIC options basics · OIC exercising options · OCC options disclosure document · SEC Investor Bulletin on options