***Closed***SPY iron condor initiated on 1 Jun 2009
30 Jun 2009: Expiration notice
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 1 June 2009
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
30 Jun 2009
SPY at 91.60 (-1.1)
0 days to expiration (30 Jun 09, last day of Jun)
Action: Do nothing, let remaining options expire worthless.
Profit or Loss: +$33 per entry.
Analysis
This 29-day-long iron condor has served us pretty well. We initiated this iron condor on 1 June with 29 days to expiration for $0.99 credit. We closed the put spread on 16 June to eliminate all downside risk and today we’re letting the call spread to expire worthless.
On hindsight, if we hadn’t closed the put spread on 16 June, we could have profited the full $99 per entry today. However, on 16 June, there was a high risk of SPY going further down and thus I traded on the safe side and closed the put spread and remained profitable.
We made $33 for every entry we entered. Using a margin of $101 per position, we made about 32.7% on this trade. Not bad at all for a short 29 days. Putting up 10 positions would have cost you $1010 in margin and netted you $330 (before commissions, of course).
This is the last trade for June. We will be tabulating the results for June and update our performance page soon!
Good trading,
Gary
*****Trade History*****
16 Jun 2009: Close put spread
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 1 June 2009
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
16 Jun 2009
SPY at 92.11 (-0.79)
14 days to expiration (30 Jun 09, last day of Jun)
Action: Close the put spread to lock in profit.
Buy to close SPY Jun (quarterly) 91 Put
Sell to close SPY Jun (quarterly) 89 Put
For a net price of $0.66 debit or better. [All TOS auto-trade participants were filled at $0.68 debit.]
Analysis
Although we are 14 days away from expiration, I feel that now is a good time to lock in our profits. We have no clear indication how low will the market go from here. Like the way the market rallied for the past weeks (or months?), this downward move could be equally persistent.
Going forward, if the SPY continues to slide down, this put spread will get more expensive in the coming days. And if the downward pressure is as persistent as the way up, the put spread could stay expensive until expiration.
By closing the put spread at this moment, we are getting rid of all our downside risk. As of now, we are locking in a profit of about $33 per entry.
We will continue to keep an eye on this trade and keep you posted accordingly.
Good trading,
Gary
1 Jun 2009: Initiated trade
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 1 June 2009
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
1 Jun 2009
SPY at 95.09 (+2.57)
29 days to expiration (30 Jun 09, last day of Jun)
Action: Sell a new iron condor for June (Quarterly options) expiration.
Sell to open SPY Jun (quarterly) 98 Call
Buy to open SPY Jun (quarterly) 100 Call
Sell to open SPY Jun (quarterly) 91 Put
Buy to open SPY Jun (quarterly) 89 Put
For a net price of $0.99-1.00 credit or better. [All TOS auto-trade participants were filled at $0.99 credit.]
Net margin required: $101 per entry
Analysis
This is our fourth trade for June. However do note that we’re using the quarterly options for this trade. Quarterly options expire not on the third Friday of each month but the last trading day of the month. In our case, this iron condor expires on the 30th June 2009.
Please make sure you enter this trade with the correct options.
The reason we’re using the quarterly options for this trade is obvious: more time.
We have another 29 days to expiration instead of just 17 days with the normal June options. The P&L chart shows that we have about 43.88% probability of being profitable with this trade. This iron condor is slightly negative on delta (-4.06) and its breakeven points are 98.99 on the upside and 90.01 on the downside.
SPY iron condor
We are risking $101 to make $99 for this trade. As such, the risk/reward ratio (R3) is 1.02. We can afford to be more patient with this trade and wait slightly longer for time decay to do its magic. However, we should always be nimble with our risk-taking. We will adjust accordingly when this position trades for more than $1.30. We don’t want to lose more than $0.50 for this trade. Likewise, we will keep a close look at this trade and close when we can lock in a decent profit.
Good trading,
Gary
