SPY (Standard & Poors Dep Rec) Iron Condor initiated on 30 Dec 2008
Trade Closed on 16 Jan 2009.
16 Jan 2009
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 30 Dec 2008
Trade Summary
SPY at 84.38 (-0.05)
0 days to Jan expiration.
Do nothing, let remaining options expire worthless.
Profit or Loss: +$46 per entry.
Trade Analysis
Well, now it seems clear that we could have earned more profits if we didn’t do the adjustment on 14 Jan. We can’t really predict today’s actions 2 days ago can we? Nevertheless, this trade is profitable. We made $46 for every entry on a risk of $106. That translate to a return of 43.4%. As such, this trade will cost $43.40 for your Jan’s bill.
Have a great weekend!
Gary
14 Jan 2009
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 30 Dec 2008
Trade Summary
SPY at 84.17 (-2.94)
2 days to Jan expiration.
Buy SPY Jan 83 Put
Sell SPY Jan 81 Put
For a net price of $0.48-0.51 Debit or better. [All tos auto-trade participants were filled at $0.48.]
Trade Analysis
If we were just a day earlier, we could have closed this entire iron condor for $0.25 debit. This will give us an additional $23 in profit per entry. Just yesterday, we could have closed this for $0.25 debit. What was I waiting for? Well, besides being distracted by the unfillable RUT iron condor, I was hoping to close it at $0.20 by waiting for another day.
As we should probably be used to by now, market crashes happen without warning. We are closing only the put spread to save on some unnecessary commissions. We are closing the put spread to lock in our profits and to eliminate all downside risks. As it is, we don’t know how low the SPY can go for today and tomorrow. Of course, if it were to rally above 85 by the end of today or by tomorrow, then we’d have made a wrong move to close it today. But if it continues to go lower and eventually go below 83 by Friday, we’ll be glad we did what we did today. The problem is we don’t really know where it will go in the coming few days. As such, we feel that we should take our profits off the table now. The alternative will be to risk ending up with a loss for a higher profit. We feel that the risk of becoming a loser for an additional $40+ is not worth it. Hence we decided to take and secure a smaller profit today.
Some subscribers may disagree with our stance. We understand. Ultimately, the decision is yours to make unless you are on auto-trade (then you’d have closed for $0.48).
It is highly likely that we can let the call spread expire worthless on Friday. So this trade is as good as close. If nothing unusual happens (like the SPX rallies more than 90 points tomorrow or Friday), the call spread will expire worthless. We would have made a profit of $46 per entry, which is a 43.4% returns on investment. It could have been better but hey, this is pretty decent too.
We will continue to keep watch on the call side of things and update you accordingly if there is any actions necessary.
Good trading,
Gary
******************Trade History***********************
30 Dec 2008
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 30 Dec 2008
Trade Summary
SPY at 87.84 (+0.93)
17 days to Jan expiration.
Sell SPY Jan 92 Call
Buy SPY Jan 94 Call
Sell SPY Jan 83 Put
Buy SPY Jan 81 Put
For a net price of $0.94-0.95 Credit or better.
Net margin required: $105 per position.
Trade Analysis
This is only our second trade for Jan. Part of the reason is the thin trading volume that we are seeing that makes fills difficult. Nevertheless, we got filled for this trade.
With only 17 days to expiration and a risk/reward ratio of almost 1:1 (1.11), we feel that this trade gives us a good chance for a winner.
We are risking $105 to make $95 for every entry. Each trade is -2.65 delta and has a 48.18% chance of being profitable. (See P&L chart below).
Of course, with a risk/reward profile like this, we don’t expect a very wide profitable range. Our breakeven points are 92.95 on the upside and 82.05 on the downside. This roughly translates into about 100 SPX points-wide. As long the SPX trades between this 100 point-range for the next week or so, we should be able to lock in a decent profit with this trade.
This may well be our last trade for Jan. It won’t be surprising to see a big swing in either direction after the New Year when all the traders return. The market has the potential to continue to make wild swings like what we have seen a few months ago.
We will try to lock in our profit as soon as we can.
Good trading,
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
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