MarketNeutralOptions.com

14 Dec 2007

RUT (Russell 2000 Index) Iron Condor initiated on 19 Nov 2007

Trade Summary

For a net price of $0.15-0.20 Debit or better.

Trade Analysis

This is another iron condor well done! This iron condor was an extra one for November. With the high IV and prices, this iron condor was irresistible! I hope some of you can get it filled at a lower price than $0.20.

There is simply no good reason to keep holding to this condor. By closing this position, we can free up much of our margin for new trades in Jan. We initiated this trade for $2.16 credit and we bought it back for $0.20. This trade makes a profit of $196 per position using $784 of margin. That is 25% returns! This trade will therefore cost you a mere $25.

We can be considered close for the month. We have only the put spread from SPY iron condor initiated on 21 Nov left for the month of December. We’ll most probably let it expire worthless to save on commission.

Have a great weekend! I know you will!

Gary

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

19 Nov 2007

RUT (Russell 2000 Index) Iron Condor initiated on 19 Nov 2007

Trade Summary

For a net price of $2.16 Credit or better.
Total margin required: $784.

Trade Analysis

This will be our second RUT iron condor for December. We were in the queue for two pending iron condors with SPY and IWM for December. But we weren’t able to get any of them filled. While waiting for the fill, we spotted another good trade with RUT. Last month, we didn’t make money with RUT, so hopefully this extra RUT iron condor will make up for the short-fall.

This iron condor is currently very neutral with a delta of 0.20. Of course, what we are seeing today is out-right bearish, not neutral! Well, we don’t the RUT to free fall all the way down. There will be some bounces and retracement attempts by the bulls. From the P&L chart below, we can see that this iron condor has about 70% chance of making money.With only 30 days left, as iron condor with such probability can at most give us $1.80-90 in credit normally. But now is not a normal time. Implied volatility is high and thus, prices are high too.

Our breakeven points are 832.16 on the upside and 677.84 on the downside. At current level, we are about 82 point away from the upper breakeven point and about 72 points away from the lower breakeven point. We have about 154 points for the RUT to move up and down. As long as RUT stays within this 154 points, this iron condor will be winner.

As usual we’ll place our alarm level at 30 points away from our short options. That is, we should be prepared to make adjustments when RUT breaches 800 on the upside or 710 on the downside. Although we can’t see a very clear support level, we can see an area of consolidation dated all the way back to July and August 2006. While the chart looks awfully bearish, the RSI reading is starting to show an indication of over-sold.

We’ll keep an eye on our RUT iron condors for Dec and inform you timely when there is a need to do any adjustments.

Good trading,

Gary

Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com

Past Trades