***Closed***RUT (Russell 2000 Index) Iron Condor (leg-in) initiated on 12 Feb 2009
10 Mar 2009
RUT (Russell 2000 Index) Iron Condor (leg-in) initiated on 12 Feb 2009
Trade Summary
RUT at 362.67 (+19.42)
9 days to Mar expiration.
Buy RUT Mar 320 Put
Sell RUT Mar 310 Put
For a net price of $0.65-0.70 Debit or better.
Profit or Loss: -$195 per entry
Trade Analysis
It’s time to close this losing trade once and for all. We have rolled enough and we’re not going to roll down further just to find ourselves in trouble a few days later. There is no need for me to remind you that there had not been many up days for the past weeks. Our mental stops had been breached again and again. While our original plan did not work the way we envisioned on 12 Feb (which feels so long ago) and indeed, the market moved against us for weeks, we did not suffer catastrophic loss on this trade.
We entered this put spread in the hope of adding a call spread to complete an iron condor on 12 Feb. We collected a mere $1.25 in credit for half the iron condor.
The call spread did not come. In fact, on 25 Feb, we were forced to roll our put spread down when the RUT breached our mental stop at the price of $1.35 debit.
Our hope for an up-day to add the call spread to redeem this trade was dashed on 3 Mar when the RUT once again breached our mental stop and we were forced to roll down again at a price of $1.15 debit this time.
Between then and now, the RUT came as close as 20 points away from our short strike a couple of times making closing this spread very costly. With the market extremely oversold, we believed that a bounce could happen anytime. We planned to close up this put spread once and for all on the cheap when the bounce happens. That day finally happens today.
As such, we are making use of this rally to close this spread on the cheap (fyi, just yesterday, this put spread was trading around $1.70 debit).
In summary, we collected $125 (for every entry) on 12 Feb, we paid $135 and $115 on 25 Feb and 3 mar respectively to roll. The rolls resulted in a loss of $125 [125-135-115=125]. Today, we close up this trade for $70. This brings the total loss on this trade to $195 [125+70=195].
We don’t like losses too. But we must accept the fact that losses are part and parcel of trading. If there is no losses at all, you should be worried! Only Madoff can do that! The key to successful trading is to keep losses small and manageable. No single loss will wipe us out. That is the most important rule.
Currently we still have 2 more open positions which are looking healthy still. We may still be net profitable in March with these 2 open trades.
Good trading,
Gary
***********************Trade History************************
3 Mar 2009
RUT (Russell 2000 Index) Iron Condor (leg-in) initiated on 12 Feb 2009
Trade Summary
RUT at 363.48 (-4.32)
16 days to Mar expiration.
Buy RUT Mar 340 Put
Sell RUT Mar 330 Put
Sell RUT Mar 320 Put
Buy RUT Mar 310 Put
For a net price of $1.15 Debit or better.
Trade Analysis
This put spread is not working to say the least. The initial plan was to sell a put spread and then sell a call spread on an up day to form a complete iron condor. Not only we did not have a chance to sell the call spread to complete the iron condor, the RUT drops like a rock! Pull out a daily chart on the RUT and you’ll see what I mean.
This is the second adjustment we have to make for this trade. We initiated this trade on 12 Feb for $1.25 credit, we rolled down our put spread on 25 Feb for $1.35 debit and today we rolled it further down for $1.15 debit. So far, this trade is a loser. We are currently sitting on a loss of $125 per entry.
We decided to roll down further today because the RUT is trading a mere 20+ points away from our short strike of 340. Should the RUT drop another 10 points, this roll will be very costly. We decided not to close the spread because closing it today will incur an even greater loss. Of course we can’t predict how low the RUT can go and we don’t pretend that we can. We are on the defense now for this trade. Damage control is the priority now. If we can reduce our loss, we will. If we have a chance, we may sell a call spread against this put spread to collect some premiums on the upside to reduce our current loss.
As of now, we have a loser on hand.
Good trading,
Gary
****************Trade History**********************
25 Feb 2009
RUT (Russell 2000 Index) Iron Condor (leg-in) initiated on 12 Feb 2009
Trade Summary
RUT at 399.57 (-13.00)
22 days to Mar expiration.
Buy RUT Mar 370 Put
Sell RUT Mar 360 Put
Sell RUT Mar 340 Put
Buy RUT Mar 330 Put
For a net price of $1.20-1.35 Debit or better. [All TOS auto-trade participants were filled at $1.35 debit.]
Trade Analysis
This half-condor is not working the way we wanted. Well, that’s life isn’t it. If you remembered, we were supposed to wait for a chance to complete this iron condor (see below). However, we did not have that chance because the RUT did not have any decent up day.
The RUT threatens to drop past 395 not just once. According to our defense mental stop, we should close or roll when the underlying is trading about 20-30 points away.
It is a good idea to make the roll today when we can get it at a good price. We entered this trade for $1.25 credit and we roll it lower for $1.35 debit. That leaves us with a $0.10 loss per entry.
At this moment, we’ll just leave this spread alone as it is. However, we are still actively looking for a chance to sell a call spread against this margin.
Good trading,
Gary
********************Trade History*********************
12 Feb 2009
RUT (Russell 2000 Index) Iron Condor (leg-in) initiated on 12 Feb 2009
Trade Summary
RUT at 440.54 (-7.41)
35 days to Mar expiration.
Sell RUT Mar 370 Put
Buy RUT Mar 360 Put
For a net price of $1.28-1.35 Credit or better. *Price revised to $1.25 credit or better.
Net margin required: $872 per entry.
Trade Analysis
This is our first trade for March. We wanted to do a regular iron condor as usual but decided the premiums we get from the call spread is too little. Although we are not bullish, we believe there could be a oversold rally in the coming days and we want to catch the inflated premiums for the call spreads then.
As of now, we are risking $872 to make $128. Not very good risk/reward ratio of course, at least not yet. I’m hoping to complete this iron condor with a call spread for another $1.00 or more. Then that will give this iron condor more bang for the buck!
I will provide a more relevant and detailed analysis and update on this trade in the next few days when we manage to get a call spread. Till then, that’s all for now.
Good trading,
Gary
Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com
