Recently I have had the pleasure of some strangles going well past my strike price in TLT and GLD. I prefer to not "realize" losses on my trades and instead roll into the future, but my typical strategy of going inverted would require me to have the width of my inversion greater than the premium collected so far, which could lock in a loss.

I have tried a new management strategy that I have not read/heard about before and want to know if it has a specific name so I can research more about it.

Say I have 10 strangles on TLT expiring Dec 29 and the call is at $90 (worth $4.75) and the put is at $80 (worth less than a nickel).

I roll 7 of the calls forward and collect $0.6 each ($4.20 total) and I roll 7 puts to the $91 strike collecting $1.53 each ($10.71 total). I then use the $14.91 collected premium to buy back 3 of the Dec 29 calls.

Now I am left with 7 contracts instead of 10, and the width of my inversion is just $1 (less than the original credit received).

It seems like I have reduced my risk quite a bit, and in 21 days if TLT has continued well past my strike I should be able to do the same thing, buying back more contracts until it either rebounds or possibly expanding the number of contracts sold back to 10 and un-inverting.

Has anyone ever done this before? Is there a name for it? Am I missing something?

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EDIT: As u/Snoo-71957 said:

>It's called reducing size or reducing unit risk

There is not a lot I could find on the topic but here are some TT videos:

https://www.tastylive.com/shows/market-measures/episodes/what-is-unit-risk-12-14-2021

https://www.tastylive.com/shows/market-measures/episodes/contract-size-tail-risk-10-26-2017

The problem is these videos don't really speak to reducing/increasing contract size in regards to a position that got away. But the more I think about it and push the pencil on some numbers, rolling and reducing unit size instead of just collecting extra credits has some really nice benefits. If you use my original example of rolling 10 contracts down to 7, if the underlying continues against me the risk is cut by 30%, but so is the risk of it boomeranging back past the puts I rolled up. If the underlying continues to move another 10% against me in the following 3 weeks, I should be able to do the same thing and reduce 7 contracts to 5. And then if things setting down a few weeks later I could expand back to 10 contracts and potentially be out of the money on both sides of the trade. The contract size could be expanded and collapsed like an accordion and seems like it would be a faster resolution to a break-even point compared to just rolling and collecting credits until a break-even is reached on the original 10 contracts. We'll see how it goes with TLT as it looks like number is continuing to go up..