RUT (Russell 2000 Index) Iron Condor initiated on 14 May 2008
11 Jun 2008
RUT (Russell 2000 Index) Iron Condor initiated on 14 May 2008
Trade Summary
RUT at 725.74 (-6.88)
8 days to Jun expiration.
Buy RUT Jun 790 Call
Sell RUT Jun 800 Call
Buy RUT Jun 690 Put
Sell RUT Jun 680 Put
For a net price of $1.00 Debit or better.
Profit or Loss: +$135 per entry.
Trade Analysis
Although the alarm we set up for this trade hasn’t been tripped, it seems like a good idea to take the profit off the table before it becomes a loss. The market has be volatile to say the least. Price actions are wild and swing by a large margin from day to day. As such, our alarm of 720 can be easily breached in a single day and our profit will become a loss by then.
We sold this iron condor for $235 with a margin of $765 and now we’re buying it back at $100. We made $135 profit for this trade. That is a 17.65% profit. Not as good as what I expected but it is a profit nevertheless.
As such, this trade will cost you $17.65 for your June’s bill.
We are trying to close up the remaining positions as and when the market permits.
We’ll be in touch again soon!
Good trading,
Gary
**********************Trade History************************
14 May 2008
RUT (Russell 2000 Index) Iron Condor initiated on 14 May 2008
Trade Summary
RUT at 743.50 (+6.64)
36 days to Jun expiration.
Sell RUT Jun 790 Call
Buy RUT Jun 800 Call
Sell RUT Jun 690 Put
Buy RUT Jun 680 Put
For a net price of $2.35 Credit or better.
Total margin required: $765 per entry.
Trade Analysis
This is our second iron condor trade for June. For this iron condor we are risking $765 to make $235 for every entry. This gives us a risk/reward ratio (R3) of 3.26. As we can see from the P&L chart below, this trade has a probability of about 69.85% to be successful.
This condor has a slightly negative delta of -1.68, which will be somewhat beneficial since the RUT is going to face its 100-day moving averages and looks set to have a correction soon. Our breakeven points are at 792.35 on the upside and 687.65 on the downside.
Since we are short the 790 call and the 690 put, we shall set our mental stop at the 760 and 720 level. This 30-point buffer is about 4-5% of current price and will offer us time and space to decide on the appropriate adjustment strategies.
As long as the RUT trades between these 100 points, we should have a winner with this trade.
Good trading,
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
