RUT (Russell 2000 Index) Iron Condor initiated on 12 Jun 2007
Entered 1 position to mock account. Profit or Loss: +$225.
20 Jul 2007
RUT (Russell 2000 Index) Iron Condor initiated on 12 Jun 2007
Trade Summary
RUT at 836.66
-1 days to Jul expiration.
Do nothing. Let remaining options
Short RUT Jul 880 Call
Long RUT Jul 890 Call
Short RUT Jul 780 Put
Long RUT Jul 770 Put
expire worthless.
Profit or Loss: +$225 per position.
Percentage Profit: [225/775 X 100%] = 29.03%.
Trade Analysis
We had been trying to close up this trade for the past few days. However, we were not successful in getting it filled. We were willing to spend another $0.10 to close up the entire position to eliminate all possible risk. As it so happened, we have to hold on to our position through expiration.
RUT options expired yesterday (Thurs) but we’ll only know the settlement price on Friday. Meaning we’ll only know if the options we held overnight are OTM or ITM on Friday (today). We would like to close up all our open positions before Thursday to eliminate all possible risks. We just don’t feel good about keeping them overnight. RUT may decide to make a big move on Friday and the options we thought were OTM on Thursday suddenly become ITM on Friday! This is something we try to avoid.
This time around, we were unable to close this trade before Thursday. As I’m typing this analysis (15:49 EST), the settlement price for RUT is still not available. However, we believe whatever the final settlement price for RUT, it should be more than 780 (our short put) and less than 880 (our short call). It will be very unlikely that the settlement price for RUT will make our short options ITM since it is trading at around 836.24 currently. We should be able to confirm that this condor will expire worthless in a while. With about 5 mintues left, our position should be safe.
This advisory makes a $225 profit per position. Even if you entered only 1 position, you have made $225 using $775, a percentage return of 29.03%. The price for this advisory? $29.03. Good deal!
Good trade!
Gary
************Trade History***********
12 Jun 2007
RUT (Russell 2000 Index) Iron Condor initiated on 12 Jun 2007
Trade Summary
RUT at 825.09
36 days to Jul expiration.
Sell RUT Jul 880 Call
Buy RUT Jul 890 Call
Sell RUT Jul 780 Put
Buy RUT Jul 770 Put
For a net price of $2.25 Credit or better.
Total margin required: $775.
Trade Analysis
We are currently trying to close up our RUT iron condor for June but we still haven’t got any luck getting filled at $0.15 debit (our target price). While we are looking to close up our existing iron condor, we spotted one for July. In fact, we’ve been stalking this condor for a few days by now. We finally got filled today at a price we’re pleased with.
The recent spike in IV results in higher premium for this condor. This condor is currently very neutral with a delta of only 0.06, that is as close to zero as we can ever wish for. With 36 days to expiration, we expect the value of this condor will diminish rapidly as long as we don’t have any more surprises from the market.
Currently, it has a probability of 67.71% that it will be profitable by July expiration. This probability is almost 1 standard deviation away. Our breakeven points are 777.75 on the downside and 882.25 on the upside. That is more than 100 RUT points for a profitable range.
Since our short options are at 780 and 880, we shall set up our alarm at 810 and 850 respectively. We should be prepared to adjust or close up when RUT breaches below 810 or above 850.
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
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