***Closed***SPY (Standard & Poors Dep Rec) Iron Condor initiated on 21 Jan 2009
20 Feb 2009
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 21 Jan 2009
Trade Summary
SPY at 76.62 (-1.541)
0 days to Feb expiration.
Do Nothing! Let existing options expire worthless.
Profit or Loss: +$54 per entry
Trade Analysis
As it turned out, the profit from this iron condor is mostly derived from the call spread. We would have done roughly about the same even without the put spread.
In retrospect, closing the put spread 10 days ago on 10 Feb turned out to be a wise move. SPY was trading at 82.75 then and we were short the Feb 79 put and long Feb 77 put. Today, the SPY is down at 76.62! We would have had a loss on our hands now if we didn’t close the put spread in good time.
We traded carefully and lightly in Feb and this strategy has so far managed to keep us profitable. Going forward we will continue to trade lightly and carefully. We are stalking a few potential setups for Mar now but everytime we send in the order, the market takes a dive lower, changing our risk and reward. We have canceled many unfulfilled orders so far.
Technically, we are looking at even lower levels before any bounce is possible. We are looking at multi-year new lows for all major indexes. We will try to time our trades for March. That is the only way we can get any reasonable profits for March.
Currently we have only 1 open position for March (RUT put spread). Although the trade worked well during its first few days, it is now in the red. Call spreads are really cheap now so we’ll have to wait for a suitable time to sell the call spread to complete the iron condor. At the rate that the RUT is falling, we may even have to adjust our put spread soon.
To close up our Feb, this iron condor made $54 per entry with a net margin of $105. That is a 51.43% profit! Let’s hope we can have 1 or 2 similar trades for March.
We’ll be in touch really soon.
Good trading,
Gary
*************************Trade History**************************
10 Feb 2009
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 21 Jan 2009
Trade Summary
SPY at 82.56 (-4.5)
10 days to Feb expiration.
Buy SPY Feb 79 Put
Sell SPY Feb 77 Put
For a net price of $0.40-0.41 Debit or better. [All TOS auto-trade participants were filled at $0.41.]
Trade Analysis
What a day! We were prepared for a major move (both up and down). But we didn’t expect it to be a more than 4% move across the board! With such a selloff today, it won’t be too surprising to see the selloff continues tomorrow. Although this SPY iron condor is in pretty good shape at the moment, we decided to close up the put spread to protect ourselves against more downside risk.
This wasn’t an easy decision because we are closing this condor prematurely. With 10 days left, we can easily make $0.20 or even $0.30 more in profit if the SPY fluctuates between the breakeven points of 89.95 and 78.05. However, I’m not too sure when or where this down draft will end up. If the SPY were to drop another 2 or 3 points, this put spread will cost alot higher than the $0.41 that we lock in now.
In times of high volatility like now, it will be wiser to close up a trade and lock in profits as soon as we can.
We hope we can let the remaining call spreads expire worthless on expiration day. We shall see.
Good trading,
Gary
********************Trade History***************************
30 Jan 2009
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 21 Jan 2009
Trade Summary
SPY at 83.34 (-1.19)
21 days to Feb expiration.
Sell SPY Feb 79 Put
Buy SPY Feb 77 Put
For a net price of $0.43-0.44 Credit or better. [All TOS auto-trade participants were filled at $0.43.]
Net margin required: $105 per position.
Trade Analysis
We missed a few chances to sell this put spread when the SPY was lower. The reason was we were not too sure if the SPY will go down lower then. Today, we are still not sure if SPY can test the recent low of 80.57 on 20 Jan. But what we are pretty sure today is that this iron condor offers us a good chance for profitability.
After we complete this iron condor, we are now short 89 call, long 91 call, short 79 put and long 77 put for a total of $0.95 credit. As such, our breakeven points are 89.95 on the upside and 78.05 on the downside. We are risking $105 to make $95 for every position we put up. This gives us a risk/reward ratio (R3) of 1.11, we are almost risking a dollar for a dollar.
As shown in the P&L chart below, this iron condor currently has a probability of about 50% to be profitable.
This exact same iron condor can be sold for only $0.82 credit while we actually got it for $0.95 credit. This is one good example of well-timed legging into an iron condor. This is surely worth the wait.
Our risk management stance on this trade will be more lax since we have a low R3. We will allow more time for this trade to become profitable. We will keep watch to make sure that our breakeven points are not breached. We don’t normally set a mental stop for a low R3 iron condor like this one because of its narrow profitability range. Instead we set a mental price. Since we collected $0.95 credit for the trade, we should be ready to take our losses when the position costs more than $1.20 to close. This is roughly about 24% loss.
As it is, we are already in a better position than one who enters this trade without legging in for $0.82 credit. We will continue to keep a look out when the time comes to close this trade.
Good trading,
Gary
**********************Trade History**************************
21 Jan 2009
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 21 Jan 2009
Trade Summary
SPY at 82.75 (+2.17)
30 days to Feb expiration.
Sell SPY Feb 89 Call
Buy SPY Feb 91 Call
For a net price of $0.50-0.51 Credit or better. [All tos auto-trade participants were filled at $0.52.]
Net margin required: $150 per position.
Trade Analysis
Good day folks! Sorry for the little error earlier. It should have been Feb calls that we are talking about! Jan is over! I hope I haven’t caused too much confusion to you.
We are initiating a new SPY trade for Feb expiration. We are intending to leg-in into a full iron condor in a few days’ time. We are really taking advantage of the rally today. As far as we can predict, trading volume for today will be lower than yesterday’s and a rally on low volume does not inspire much strength considering the bad earnings we will be seeing in the coming days. As such, we are suspecting that today’s rally may not last too long. We may be wrong (of course) so we will be watching this trade closely.
As it is now, it is merely a bear call spread and we are risking $150 to make $50 which translates into a risk/reward ratio (R3) of 3. Therefore, we will classify it as a high risk, low probability trade for now. See chart below.
We are hoping for a correction in a few days’ time when the rally fizzles out. When the bears come in numbers, VIX will rise and we will try to sell a put spread to complete this iron condor. Well, this is the plan. Market does not move according to my plan. Whether we will/can put in the put side to complete the iron condor depends on the market conditions.
Again, market remains jittery. Good news will drive the market higher while bad news will crash it. We will continue to trade small number of positions.
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
P/S: Our blog in finally functional again! We have posted our latest closed trades for Jan on the blog for archive purposes. Please click here to have a look and feel free to leave comment.
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