**Closed**RUT (Russell 2000 Index) Iron Condor initiated on 13 Jan 2008
9 Feb 2008
RUT (Russell 2000 Index) Iron Condor initiated on 13 Jan 2008
Trade Summary
RUT at 470.22 (-0.48)
10 days to Feb expiration.
Buy RUT Feb 550 Call
Sell RUT Feb 560 Call
Buy RUT Feb 380 Put
Sell RUT Feb 370 Put
For a net price of $0.30-0.35 Debit or better.
Profit or Loss: +$210 per entry.
Trade Analysis
This was our first trade for Feb. The good news is that it works perfectly. The bad news is that not many of you got it filled. In fact, none of our auto-trade participants were filled on this trade. And as promised, this trade will not be chargeable for your Feb bill.
I will still provide a short commentary on this trade for those of you who are following this trade.
It seems like the market is looking at a high chance of rallying in the coming days due to the stimulus package. The market could also go down very quickly once the news is digested and the market realized the futility of the package since corporate earnings are still going to be ugly. Personally, I think there is a 50/50 chance of the market going up or down.
Since this trade is showing nice profit at the moment, we decide that it would be a good idea to close up this trade and lock in the profit. There is not much value to hold on to this trade going forward.
We entered this trade for 2.45 credit and we close it today for $0.35 debit, this means a $210 profit per entry. Using a margin of $755 per entry, this trade made a profit of 27.8%.
This is a good iron condor, let’s hope our remaining 2 iron condors will be in the same league.
Good trading,
Gary
*****************Trade History******************
13 Jan 2008
RUT (Russell 2000 Index) Iron Condor initiated on 13 Jan 2008
Trade Summary
RUT at 476.21 (+7.41)
37 days to Feb expiration.
Sell RUT Feb 550 Call
Buy RUT Feb 560 Call
Sell RUT Feb 380 Put
Buy RUT Feb 370 Put
For a net price of $2.20-2.30 Credit or better. Revise price to $2.10 – $2.30. I got filled 3 trades at $2.45! But I have a hard time trying to get $2.20 for the rest! Good luck!
Net margin required: $780 per entry.
Trade Analysis
This is our first trade for Feb. This 170-point-wide iron condor is very neutral at the moment, generating only -1.58 delta per entry. We expect the market to trade in a narrow range for the coming days barring some news-driven events.
The breakeven points for this trade is 552.2 on the upside and 377.8 on the downside. As you can see from the P&L chart below, this trade has a 74.09% chance of being successful.
In summary, we are risking $780 to make $220. This gives us a risk/reward ratio (R3) of 3.55. This R3 figure gives us a good idea of the risk we are undertaking. In simple terms it actually tells us we are risking $3.55 for every dollar we make. Of course, with a R3 this high, we expect to have pretty high probability of success as well.
And with a R3 number like this, we are going to make sure we don’t suffer the maximum loss. It will take 3 winners to cover 1 maximum loss. That is why we set up our mental stop when we place in the trade. Since we are short 550 call and 380 put, we should set our mental stop at 500 on the upside and 430 on the downside. This 50-point buffer from our short strikes is useful to buy us some time to review the market and space to adjust our position.
As usual we will trade carefully in this uncertain times. We are scouting for a few more trade set-ups for Feb so be prepared for another alert soon!
Good trading,
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
