RUT (Russell 2000 Index) Iron Condor initiated on 12 Nov 2007
12 Dec 2007
RUT (Russell 2000 Index) Iron Condor initiated on 12 Nov 2007
Trade Summary
RUT at 786.03 (+19.61)
8 days to Dec expiration.
Buy RUT Dec 860 Call
Sell RUT Dec 870 Call
Buy RUT Dec 700 Put
Sell RUT Dec 690 Put
For a net price of $0.20 Debit or better.
Profit or Loss: $205 per position.
Percentage Profit: 26.45% [$205/$775 X 100%]
Trade Analysis
With only 8 days to expiration, this iron condor has exhausted almost all of its time premium. In fact we’ve been wanting to close up this trade since yesterday but, as usual, we had problems getting it filled. The last time I checked, this iron condor was trading at $0.15. So hopefully some of you can get a better fill than me! By closing this position today, we are eliminating all possible risk associated with this position and at the same time, we are freeing up our margin so that we can start hunting for the next condor.
We made $205 for every position we put up. Against a maximum risk of $775, we made 26.45% per position! Therefore this advisory will be worth $26.45. If you have put up 10 positions for this trade, $26.45 may even be less than what you paid for commissions! This is what I mean when I said we grow rich with you.
Good trading,
Gary
***********************Trade History***************************
12 Nov 2007
RUT (Russell 2000 Index) Iron Condor initiated on 12 Nov 2007
Trade Summary
RUT at 781.35 (+8.97)
37 days to Dec expiration.
Sell RUT Dec 860 Call
Buy RUT Dec 870 Call
Sell RUT Dec 700 Put
Buy RUT Dec 690 Put
For a net price of $2.25 Credit or better.
Total margin required: $775.
Trade Analysis
This is another of our monthly RUT iron condor. The last one hasn’t been very smooth sailing so hopefully this iron condor will be a winner without a problem.
Looking at the P&L chart below, we can see that this position has about more than 70% probability of success. The odds are good, we are risking $775 to make $225 for each position we put up. Our breakeven points are 862.25 on the upside and 697.75 on the downside. This iron condor has a profitable range of more than 160 RUT points! This iron condor is very neutral at the moment, with a delta of only -1.35.
From the RUT daily chart, we can see that there are various resistance points at 825 and 845-855 level. On the other hand, there are several support that we can see at the 770 and 750 level.
We feel that this iron condor has a high chance of being a winner given the wide profitable range. We are able to collect such high premiums largely due to the heightened implied volatility. As usual, we will set up our alarm 30 points away from our short options. More specifically, we will keep a lookout for RUT to trade above 830 and below 670. Depending on the number of days left to expiration and the market conditions then, our adjustments will vary. It may be useful to note that the last time RUT traded near 700 level was in August 2006. As of now, it seems like both our short options are rather far away. However, we must remember the reason we are able to collect much more credits for this position. Higher implied volatility means higher prices means higher risk means violent fluctuations.
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
