MarketNeutralOptions.com

14 Nov 2007

SPY (Standard & Poors Dep Rec) Iron Condor initiated on 17 Oct 2007

Trade Summary

For a net price of $0.62-0.63 Debit or better. Thinkorswim auto-trade participants were filled at $0.60 debit.
Profit or Loss: +$36 per position.
Percentage Profit: +35.29% [36/102 X 100%]

Trade Analysis

We have been waiting to close this trade for a long time. For the past few trading sessions, this put spread was ITM. We could have closed it at $1.00-$1.15 just a few days ago. In fact, this same spread was trading at $1.20 for a moment just yesterday. We almost wanted to close it then to minimize the loss. Fortunately, we decided to hold on our seat belts for 1 more day because the market breadth was positive throughout the day (see chart below). The chart on the left shows the intra-day (15 min) up volume versus down volume in the NYSE. Up volume is the green candles and down volume is in purple. On the right is the intra-day (15 min) SPX chart. While the SPX showed some indecision during the first half of the day, the market breadth decisively bullish.

Lo and behold, the market eventually rallied! While there were signs that the market will turn positive for a change yesterday, we didn’t anticipate the rally to be so uplifting to say the least, pun intended. We almost gave up hope of having this put spread OTM by expiration. But what a difference 1 more day or waiting made!

With the rally, both our put options became OTM and were drastically cheaper. We decided to take this opportunity to close up this trade to lock in our profit. We entered this trade on 17 Oct (28 days ago) for $0.98 credit. We closed the put spread today for $0.62. We locked in a profit of $36 per position you put up. If you had put up 10 positions, you’ll be up by $360 despite the turmoil in the market recently. That is a 35.29% profit, hence,this trade will cost our subscribers $35.29 for November.

Although this trade is not officially closed because we are still holding on to the call spread of short Nov 157 call and long Nov 159 call. With the SPY currently at 148-9, it is quite unlikely that this call spread will be worth much in the next 2 days. But of course we all know what difference 1 day can make. So we’ll still keep an eye on this spread. Chances are we can let it expire worthless come expiration Friday.

We hope we can find more of such trade for December.

Good trading,
Gary

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

17 Oct 2007

SPY (Standard & Poors Dep Rec) Iron Condor initiated on 17 Oct 2007

Trade Summary

For a net price of $0.98 Credit or better.
Total margin required: $102 per position.

Trade Analysis

We have 29 days for this iron condor. This condor is currently pretty neutral, with a delta of about -4.5. Our breakeven points are 157.98 on the upside and 147.02 on the downside. That is about 11 SPY points, which is roughly about 110 SPX points. As long as the SPX trades within these 110 points for the next 29 days, this condor is a winner. This iron condor offers us a 1:1 risk/reward ratio. We are risking $102 to make $98 for each position we have. The probability of success currently stands at roughly about 47.54%.

We have no idea how bad the current downturn will be. But on the technical side we do have some rather defined support and resistance levels. Immediate support can be found at the 151 level and the 149 level will be the secondary support. Prior highs from July will act as immediate resisntance while the recent multi-year high of 157 will act as the next resistance. As we all know, these technical analysis merely serve as a guide for expectation of how the market might behave. We will have another FOMC meeting on 31 Oct, what will happen after the announcement is anybody’s guess. Because this is a 1:1 condor, we have a better risk/reward ratio and therefore we can afford to wait till the market settles down before we decide on our next move. We hope to lock in some profit before the FOMC meeting.

We shall set a mental stop-loss at $1.20-$1.30. When this condor trades for around these prices, we’ll relook at the market and decide on our next move. We’ll keep an eye on this trade and inform you when there is a need for adjustment.

Good trading,

Gary

Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com

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