RUT (Russell 2000 Index) Iron Condor initiated on 8 Apr 2008
5 May 2008
RUT (Russell 2000 Index) Iron Condor initiated on 8 Apr 2008
Trade Summary
RUT at 724.28 (-1.48)
10 days to May expiration.
Buy RUT May 780 Call
Sell RUT May 790 Call
Buy RUT May 650 Put
Sell RUT May 640 Put
For a net price of $0.25 Debit or better.
Profit or loss: +$205 per entry.
Trade Analysis
This condor is ready for harvest. We’re in this trade for a total of 27 days and came out with a $205 profit per entry. This is a return of 26.62% [205/770]. As such this trade will cost you $26.62 for your May’s bill.
We still have 3 more open positions. We will be entering new trades for June in the coming days. We’re now about 45 days away from June expiration. You should be hearing from me soon.
Good trading,
Gary
************************Trade History*******************************
8 Apr 2008
RUT (Russell 2000 Index) Iron Condor initiated on 8 Apr 2008
Trade Summary
RUT at 710.18 (-2.50)
37 days to May expiration.
Sell RUT May 780 Call
Buy RUT May 790 Call
Sell RUT May 650 Put
Buy RUT May 640 Put
For a net price of $2.30 Credit or better. [all TOS auto-trade participants were filled at $2.30]
Total margin required: $770 per entry.
Trade Analysis
This is our first shot for May in this volatile market. If you have too much of your funds locked up in trades for April to participate in this new trade, you may choose to close up some of the remaining puts spreads from the 7 Mar RUT iron condors to free up your margin. However, please inform your broker of your actions if you are on auto-trade.
This trade is currently very neutral, with a delta of -0.20. Our breakeven points are 782.3 on the upside and 647.70 on the downside. I suspect that it may take a while for you to get filled for this trade because I had my order queued for more than 2 hours! So be patient, as long as the mid-price is trading at or above $2.30, you have a good chance of getting it. To increase your chance of getting filled quicker, you may try lowering your price by $0.05 or $0.10.
We have about slightly more than 70% chance of being profitable with this trade currently. We are risking $770 to make $230 for each position we enter. As such, this trade has a risk/reward ratio (R3) of 3.35 [770/230]. We have a profitable range of about 130 RUT points. As long RUT trades between these 130-point range, we’ll have a winner.
The market hasn’t been moving much since the 1st April rally. Whether or not this rally will turn out to be an April fool’s joke we’ll have to wait and see. Not forgetting that the earnings season has just started. So we expect some wild swings in the coming weeks.
Looking at the daily chart of RUT, we can see how the market has been digesting the 1st April rally. That rally and the lack of any substantial pullback immediately after the rally turned the short and near term outlook bullish. However, do note that we are still in a longer-term bearish market. What we are seeing today as well as yesterday was the first testing of the critical 100-day MA resistance level. Today’s market close should provide us some hint as to whether the near-term bullish sentiment is sustainable.
Since this trade has a R3 of more than 3, we have to be pro-active in our risk management for this trade. We will set up a mental stop at 750 and 680 levels, which are 30 points away from our short strikes. These 30 points buffer will provide us time and space to activate our adjustment plans.
We will have a few more set-ups for May coming soon. We still have 4 open positions for April. 2 of the untouched trades are currently showing good profits. (The SPX IC initiated on 19 March and the RUT IC initiated on 26 March.) We’ll close them as soon as we have squeezed the most of their value out.
We’ll be in touch.
Good trading!
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
