SPX (S&P 500 Index) Iron Condor initiated on 17 Apr 2008
8 May 2008
SPX (S&P 500 Index) Iron Condor initiated on 17 Apr 2008
Trade Summary
SPX at 1397 (+4.57)
7 days to May expiration.
Buy SPX May 1455 Call
Sell SPX May 1465 Call
Buy SPX May 1280 Put
Sell SPX May 1270 Put
Close remaining complete iron condor.
For a net price of $0.25-0.30 Debit or better.
Trade Analysis
We decided to close this trade for $0.30 to free up our margin to be ready for the upcoming trades for June. I see not much value to hold up our margin for another $5-$10. This iron condor didn’t work as well as we hoped it would but nevertheless, it is still a profitable trade.
We initiated this iron condor on 17 April for $2.15 credit. We close half our call spreads for $1.35 debit on 29 April to reduce our upside risk. The put spreads left over by this adjustment is still open.
After the 29 April adjustment, we were left with the 1445/1455 call spreads and double the number of 1280/1270 put spreads. On 2 May, we rolled up our remaining call spreads. After the roll, we were left with:
-1 May 1455 call
+1 May 1465 call
-2 May 1280 put
+2 May 1270 put (assuming you put on 2 entries in the beginning).
Today, we close the 1455/1465/1280/1270 iron condors. We will let the remaining 1280/1270 put spreads expire worthless next week.
I’ll send a final report on this trade after expiration.
Good trading,
Gary
P/s: The price for this close suddenly spiked after I sent out the email alert. I personally got filled at $0.30 just moments ago. We’ll wait for $0.30.
*****************************Trade History******************************
2 May 2008
SPX (S&P 500 Index) Iron Condor initiated on 17 Apr 2008
Trade Summary
SPX at 1408.77 (-0.57)
13 days to May expiration.
Buy SPX May 1445 Call
Sell 2X SPX May 1455 Call
Buy SPX May 1465
Roll the remaining call spreads up. Enter this trade as a butterfly.
For a net price of $0.80 Debit or better. [All tos auto-trade participants were filled at $0.80]
Trade Analysis
Market is not showing obvious signs of direction. It seems like it can’t decide which way to go. Just look at today’s action and you’ll know what I’m talking about. The Fed rally was really a bull trap but the rally yesterday (the day after) was definitely a shock to the bears!
I suspect the market may take a while to decide which way to go and at the mean time trade in a small range. This was why this decision to roll up our call spread was a difficult decision. I set a mental stop at 1410, which is 35 points away from our short call of 1445. SPX trades above 1410 and then below, basically hovering around that region. So the question came in and out: “to adjust or not to adjust?”
I decided to play on the safe side and roll up our call spread by 10 points. No doubt this roll will reduce our credit collected by $0.80 and in turn increase our risk exposure by the same amount. But I feel that in this kind of uncertain market condition where moves are unexpected and wide, it is always a good idea to play safe. Another 20 or 30 points of up move will turn this profitable trade into a loser. A smaller profit is always better than a loss. I’m sure everyone agrees with that.
Also, with this roll, we all can enjoy our weekend without worrying about this position!
Have a great weekend!
Gary
*********************Trade History******************************
29 Apr 2008
SPX (S&P 500 Index) Iron Condor initiated on 17 Apr 2008
Trade Summary
SPX at 1392.13 (-4.24)
16 days to May expiration.
Buy HALF SPX May 1445 Call
Sell HALF SPX May 1455 Call
Close HALF of all call spreads you have. For example, if you have 10 positions for this trade, close 5 of your call spreads. If you have only 1 position for this trade, close the call spread.
For a net price of $1.35-$1.40 Debit or better.
Trade Analysis
Similar to the RUT iron condor we adjusted just moments ago, this SPX iron condor is making me a little uncomfortable. The SPX had been trading above our mental stop of 1385 for a couple of days now. But it is still about 50 points away from our short call of 1445.
I believe it will be a good idea to close up half of the call spreads that we have to eliminate half the upside risk while at the same time avoid being stopped out prematurely.
We’ll set up a new mental stop at about 1410. We’ll close up the remaining call spreads once SPX trades pass 1410. By reducing our upside risk by half, we are also locking a some profit which we can use for further adjustments when the need arises.
Good trading,
Gary
*******************************Trade History*********************************
17 Apr 2008
SPX (S&P 500 Index) Iron Condor initiated on 17 Apr 2008
Trade Summary
SPX at 1361.78 (-2.85)
28 days to May expiration.
Sell SPX May 1445 Call
Buy SPX May 1455 Call
Sell SPX May 1280 Put
Buy SPX May 1270 Put
For a net price of $2.05-$2.15 Credit or better. [All tos auto-trade partcipants were filled at $2.05]
Total margin required: $795 per entry.
Trade Analysis
This is our fourth trade for May and mostly likely to be the last for May. I got filled at $2.15 credit. Then the price dropped to $2.00 and now, as I’m typing this commentary, it is at $2.35! Hopefully those of you who are not auto-traders can manage to get a good fill. $2.15 or more is as good as it can get for now. For those of you under auto-trade, $2.05 is still a good trade. 
For this iron condor, we are risking $795 to make $205. This gives us a risk/reward (R3) reading of 3.88 [795/205]. As you can see form the P&L chart, this trade has a 70.65% chance of being successful.
Our breakeven points are 1447.05 on the upside and 1277.95 on the downside. Since we are risking significantly more than what we can make, with R3 more than 3, we must adopt a more stringent risk management style.
Since we are short 1445 and 1280, we will set our mental stop or alarm at about 60 points away, which is about 5% of the SPX. As such, our alarms should be set at 1385 and 1340. We should be alert and ready to adjust this trade when the SPX breaches any of these levels.
As you can see from the daily chart above, our alarm levels are set at a rather tight range. As such, we may delay making any adjustment when the SPX triggers the alarms to avoid being stopped out prematurely. As long as the SPX trades within these 165 points for the next 29 days or so, we should have a good outing with this iron condor.
Good trading,
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
