**Closed**RUT (Russell 2000 Index) Iron Condor initiated on 15 Jan 2008
11 Feb 2009
RUT (Russell 2000 Index) Iron Condor initiated on 15 Jan 2009
Trade Summary
RUT at 445.12 (-0.65)
8 days to Feb expiration.
Buy RUT Feb 520 Call
Sell RUT Feb 530 Call
Buy RUT Feb 360 Put
Sell RUT Feb 350 Put
For a net price of $0.20-0.25 Debit or better.
Profit or Loss: +$210
Trade Analysis
This is another good iron condor for Feb. We entered this trade on 15 Jan for $2.35 credit, we closed it today for $0.25. This trade makes a profit of $210 per entry. On a margin of $765, this is a 27.45% profit. As such, this trade will cost you $27.45 for your Feb’s bill.
There is not much to comment or analyze on for today’s closure. At $0.25, there is not much value for us to hold on to this trade any longer. Furthermore, we should lock in profits as soon as we can in these volatile times.
We are looking for new trades for March at the moment. We should be able to initiate one in a few days’ time.
Good trading,
Gary
****************************Trade History********************************
15 Jan 2009
RUT (Russell 2000 Index) Iron Condor initiated on 15 Jan 2009
Trade Summary
RUT at 443.43 (-9.74)
35 days to Feb expiration.
Sell RUT Feb 520 Call
Buy RUT Feb 530 Call
Sell RUT Feb 360 Put
Buy RUT Feb 350 Put
For a net price of $2.35 Credit or better. [all TOS auto-trade participants were filled at $2.35.]
Net margin required: $765 per entry.
Trade Analysis
This is our second attempt at our regular RUT iron condor. We got a fill problem with the first one so that was scrapped but I will continue sending you the updates on that trade since (who knows?) some subscribers may have somehow managed to get it filled and I surely don’t want to have people being left up on their own. I figure that there may be some possible confusion going forward since there will two RUT iron condors for Feb. So please take note of the date that the trade was initiated when you get an update (13 Jan for the first one and 15 Jan for this current one).
The bad news is: the market seems to be rallying and this iron condor is trading at a higher price than what we got just minutes ago! So some of you may be able to get a better fill than me!
Ok, let’s dissect this trade. This is a 160-point-wide iron condor. Our breakeven points are 522.35 on the upside and 357.65 on the downside. Each iron condor had a very near-zero delta of -0.85 (at the time of trade, it is more negative now that the RUT is going up). As you can see at the P&L chart below, it had a probability of about 70.11% to be profitable (again, this figure might have changed since we got filled).
We are risking $765 to make $235. That gives us a risk/reward ratio (R3) of 3.26. As such, we should keep a close watch on this trade going forward. We will set up a mental stop at 490 on the upside and 410 on the downside. As before, a 50-point buffer from our short strikes will offer us time and space to reassess our positions and market conditions. The best scenario is for the RUT to trade between 410 and 490 for the coming days or even weeks.
Of course, we must be realistic and be prepared to adjust if things don’t go according to our liking. We will keep you informed when there is any update necessary for this trade.
Just so you know, we are looking for some more new trades for Feb. We expect a wild ride ahead. The market is badly oversold so any good news (or not so bad news) will push the market up easily 2 or 3%. Again, volatility has returned. We will trade carefully and lightly. We may also go down further on news of more bad earnings. So really, we don’t really know! Just brace ourselves for a wild ride ahead and watch our risk! TARP part 2 is on the way. If it passes, we may see a major rally. If it fails, we may see a new bottom. So if you have traded your own positions, watch your risk folks!
Good trading,
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
