MarketNeutralOptions.com

21 Sep 2007

IWM (iShares Trust Russell 2000) Iron Condor initiated on 7 Sep 2007

Trade Summary

Do nothing, let position expires worthless. We’ll see if we can let this trade expire worthless at the end of the day. We’ll inform you again if there is any more to do for this trade.

Profit or Loss: +$43 per position.
Percentage Profit: +27.39% [43/157 X 100%]

Trade Analysis

We’ll let this position expire worthless today. It is unlikely that IWM will trade above 82 at the end of today. Subscribers who don’t feel safe with letting this position expire worthless in such volatile environment, you can try to buy back the short 82 call to play safe. We’ll keep watch until the market closes to make sure that the position is safe.

This condor was ITM for a day after the rally following the interest rates cut. IWM then started to show some weakness and we hold on to it. We made $43 with every position we enter. That is a 27.39% return for this advisory. You will be charged $27.39 for this advisory for your September bill. We will send out your September bill by next week. This is our last position for September. We had three trades for September, of which two made profits and one made a loss. We’ll list the details in your September bill.

Gary

********Trade History**********

7 Sep 2007

IWM (iShares Trust Russell 2000) Iron Condor initiated on 7 Sep 2007

Trade Summary

For a net price of $0.43 Credit or better.
Total margin required: $157 per position.

Trade Analysis

This is a rather late entry for September. With only 13 days to expiration, we see this trade as a low-risk, high probability trade. We are risking $157 for $43 for each position we have. If we can let this trade expire worthless by expiration, we would have a roughly 27.39% returns on investment [43/157 X 100%]. Not bad for a 13 day trade.

The biggest reason why we are able to find such a trade is because of the sudden surge in the implied volatility (IV) today. If you have been sleeping through the day, you wouldn’t have noticed that the Dow is down by more than 200 points as I type, SPX is down by more than 20 points. In short, the market is a sea of red ink today and thus, the jump in IV. The high IV allows us to sell more premiums.

Looking at the chart below, you can see that this trade has approximately about 73% probability of success. Although the chart shows that the best price for this condor is $0.46 credit, we could only get it filled at $0.43 credit. The darkened blue part of the chart is 1 standard deviation range. You can see that our breakeven points are wider than the 68% mark. Our breakeven points are at 82.43 on the upside and 71.57 on the downside.

Looking the the IWM daily chart below, we can see that this condor has a rather wide range to move around. In fact, we can’t even see our downside breakeven point of 71.57 in this 6-month, daily chart. The highlighted resistance and support should hold the ground for the next 13 days or so. However, we do have to brace ourselves for a coming FOMC meeting on the Fed rate. It is highly anticipated that there is going to be a cut in the interest rate. Whether there will be a cut or not, we don’t know. But we do know that the market usually shows erratic behavior after the announcement. The market is likely to rally if there is going to be a cut. Which ever way the market decides to move, we have to be prepared.

We are currently stalking a few other potential trades for Oct. We will inform you once we get filled at out target price.

Have a wonderful weekend!

Gary

Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com

Please note: All MarketNeutralOptions Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for ‘DAY’ orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications.
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Past Trades