***Closed***RUT iron condor initiated on 27 Aug
16 Sep: Close entire trade ***RESEND*** (for TOS autotrade participants)
RUT (Russell 2000 Index) Iron Condor initiated on 27 Aug 2009
Trade Type: High Probability, Low Reward Iron Condor
Trade Summary
16 Sep 2009
RUT at 613.52 (+8.66)
1 days to Sep expiration
Action: ***RESEND*** Close call spread (close entire trade).
Buy to close RUT Sep 610 Call
Sell to close RUT Sep 620 Call
For a net price of $5.00-5.15 debit or better. [All TOS autotrade participants were filled at $5.15]
Profit or Loss: -$325 per entry.
Analysis
This is really tragic. Our timing to get out was good just before the trade becomes a loser. What would have been a good trade turned bad for most TOS autotrade participants. For those of you who managed to get it filled at yesterday’s target price of $1.85 to $1.90, you were lucky. My own personal account was filled at $1.85! (So, it was fillable!) Most of TOS autotrade participants were not filled yesterday. And lo and behold, the RUT flew higher and higher since the open today.
TOS has the best record for getting good fills. So we’re not sure what happened yesterday. The moment we sent out the advisory, the price of the spread was hovering around the target price. But as you know by now, the price simply went higher and higher thereafter.
While we’re sorry and we feel your pain that this has happened, nobody is really at fault this time. I believe that TOS tried their best to help us get the best price out there (like they always have).
This is really tragic. Just a few days ago, we were looking at a pretty nice profit for Sep. But now, for those of you affected by this no-fill problem, it is very likely that you’re facing a loss.
We have a few emails asking this same question and the answer is this: no, this no-fill problem doesn’t happen often (but yes it does happen from time to time). Whether there is any takers on the trading floor taking our orders is something beyond our control. We have a very principled rule when it comes to fills. We only send out advisory with the target price after we actually get it filled at that target price. So all the target prices that we sent out were all filled just moments before you read the advisory. This way we make sure that all our target prices are realistic and can be filled.
Of course we hope this never happen again.
Good trading,
Gary
*****Trade History*****
15 Sep: Close entire trade
RUT (Russell 2000 Index) Iron Condor initiated on 27 Aug 2009
Trade Type: High Probability, Low Reward Iron Condor
Trade Summary
15 Sep 2009
RUT at 602.41 (+2.38)
2 days to Sep expiration
Action: Close call spread (close entire trade).
Buy to close RUT Sep 610 Call
Sell to close RUT Sep 620 Call
For a net price of $1.85-1.90 debit or better.
Profit or Loss: +$15 per entry.
Analysis
The RUT made a turn for the better after I sent out this advisory to close up the remaining call spread. As such, the price of the call spread has risen. As far as we know, TOS autotrade participants are queuing to have their spreads closed at the target price.
The market is moving against our positions and while we don’t know how far can the market go this time, we’re not comfortable with the risk we’re facing at this point. The RUT is less than 10 points away from our short call of 610. Should the RUT make a gap up tomorrow and breach the 610 mark, we will be facing a pretty bad loss. And it is pretty likely that the upswing may continue for a while.
So, we decided to close up the call spread and therefore the entire trade at this moment for a small profit instead of a potential loss.
In summary, we initiated this iron condor on 27 Aug 2009 for $220 credit per entry. On 10 Sep, we closed the put spread for $15 debit per entry. And today, we closed the remaining call spread for $$190 debit. We made a $15 profit per entry with this trade. Not something to jump for joy but it sure beats a loss.
Our RUT iron condors haven’t been performing well lately. We will continue to closely monitor the market for good RUT trades that we have always enjoyed.
Good trading,
Gary
*****Trade History*****
10 Sep: Close put spread
RUT (Russell 2000 Index) Iron Condor initiated on 27 Aug 2009
Trade Type: High Probability, Low Reward Iron Condor
Trade Summary
10 Sep 2009
RUT at 592.85 (-6.63)
7 days to Sep expiration
Action: Close Put spread.
Buy to close RUT Sep 530 Put
Sell to close RUT Sep 520 Put
For a net price of $0.15 debit or better.
Net margin required: $780 per entry
Analysis:
We’re taking advantage of this current rally to close up our put spread for very little debit. There is a high chance that the rally will see a pullback pretty soon. We hope we can close up the call spread with an equally small debit.
Good trading,
Gary
*****Trade History*****
27 Aug: Initiate Trade
RUT (Russell 2000 Index) Iron Condor initiated on 27 Aug 2009
Trade Type: High Probability, Low Reward Iron Condor
Trade Summary
27 Aug 2009
RUT at 577.39 (-6.63)
21 days to Sep expiration
Action: Sell a new iron condor for Sep expiration.
Sell to open RUT Sep 610 Call
Buy to open RUT Sep 620 Call
Sell to open RUT Sep 530 Put
Buy to open RUT Sep 520 Put
For a net price of $2.20-2.25 credit or better. [All TOS autotrade participants were filled at $2.20.]
Net margin required: $780 per entry
Analysis
This is our first RUT iron condor for September. Volume has been thin and that is giving us a difficult time trying to get fills. With only 21 days to expiration, we can’t expect too much credit for the risk we’re taking.
As you can tell from the delta figure, this iron condor is a relatively bearish one. We’re not too sure about how the market will move in the coming days. But it does seem that the rally is over done and exhausted.
For this trade, we’re risking $780 to make $220 per entry. That gives us a risk/reward ratio (R3) of 3.55. This figure tells us we’re risking $3.55 to make $1 with a probability of success nearing 67%. This is a little less than the 68% (1 standard deviation) that we aim for every time.
Our breakeven points are 612.2 on the upside and 527.7 on the downside. But we cannot allow the RUT to trade near these figures because we’re risking a lot more than what we can possibly profit. We should never suffer the worst scenario of a maximum loss with this kind of trade. A maximum loss will wipe out months of profits.
As such, we tend to be more careful with these type of iron condors. Our mental stops shall be set at 680-690 on the upside and 550-560 on the downside. This leaves us with a very narrow range that the RUT can trade in before we have to make any adjustment. RUT is now trading at around 577, which is just 3 points below our mental alarm and about 17 points above our alarm. The best scenario will be for the RUT to trade between 680 and 560 for the next few weeks. That might not happen. One must always take some risk to make profits.
Although we avoid as much as we can to make any adjustment because any adjustment increases our risk and decreases our potential profit. But note that an adjustment is not a dirty word. Even with an adjustment, we can still be profitable, albeit a much smaller profit. But we need to be extra careful when we see an unstoppable move in a single direction. Some times we can avoid it, some times we can’t escape it. We hope that by entering this trade late into expiration, we can get out of this trade quickly to lock in a profit.
Good trading,
Gary
Gary, do you consider closing the put side to take advantage of this rally? I say its not a bad idea if one can close it for 0.15 or less.
Good trading,
Paulo