The Week Ahead
6 Nov 2007
The Week Ahead
The Fed’s rate cut came and go and the market went up and then down. The mess in Merrill and Citi, rocketing oil prices, a weakened dollar, and what not have been pushing the market down. Markets hate uncertainty and it is certainly showing its displeasure. We have seen how volatile the market can get lately. Just yesterday, we lost 100 Dow points at the open, and then went up to positive territory in mid-day and finally closed the day only slightly lower. Barring any bad news, we should expect to see a bounce in the coming days. We are waiting for this bounce to happen so that we can close up some of our open positions.
Position update:
RUT iron condor initiated on 8 Oct
Short Nov 900 call
Long Nov 910 call
Short Nov 780 put
Long Nov 770 put
For $2.20 credit per position.
On 23 Oct, when RUT was trading near 810, we initiated a roll to our put spread in accordance to our trading rules.
We bought back the put spread and sold another (short 750 put, long 740 put) for a net $1.00 debit.
We are now Short Nov 900 call, Long Nov 910 call, Short 750 put and long 740 put for a net $1.20 credit per position.
With the spike in Implied Volatility (IV), this condor is currently trading at $1.60, which indicates that this position is currently a loser of $0.40. Much of this is due to the heightened IV, which drove up the price of puts. Our short put of 750 is currently about 30 points away from the current price of RUT. It is now very unlikely that we will roll down our call spread to collect more premiums. With only about a week to go before Nov expiration, there is not much premiums we can collect anyway. We will watch close at the 770-780 level. Should the RUT falls below this range, we have to take action again. We will most probably close up the put spread should the need arises.
IWM iron condor initiated on 10 Oct
Short Nov 87 call
Long Nov 89 call
Short Nov 81 put
Long Nov 79 put
For $0.90 credit per position.
The put spread of this condor is currently ITM and the entire position is currently trading at $1.23, which means that we are facing a small loss of $0.33 per position. We will close the put spread when there is a bounce. If the bounce is substantiate, the value of the put spread will decrease dramatically because it has very little theta value left. We hope to get out even for this trade, or even a small profit.
SPY iron condor initiated on 17 Oct
Short Nov 157 call
Long Nov 159 call
Short Nov 148 put
Long Nov 146 put
For $0.98 credit per position.
This position is currently worth $0.55, which means that we are seeing a profit of $0.43 per position. As long as the SPY holds above 149, we should have a high chance of this trade being a winner. As of now, we don’t do anything to it and let the theta decay.
IWM iron condor initiated on 23 Oct
Short Nov 84 call
Long Nov 86 call
Short Nov 78 put
Long Nov 76 put
For $0.91 credit per position.
This position is currently trading at $0.76, which means that we are having a profit of $0.15 per position. Similar to the other IWM condor we have, we will try to close this trade as soon as possible when the bounce occur.
Out of the 4 iron condors that we have currently, 3 are 1:1 risk/reward condors (the last 3). With these condors we can wait out a little longer for a suitable chance to close up the trade, which is what we are doing now. We are waiting for the bounce to occur so that we can get out of some of these positions.
Subscribers will get the trade alert real-time when the time comes.
For now, take care in the market and good trading!
Gary
