***Closed***SPY iron condor initiated on 25 Aug 2009
15 Sep 2009: Close Call Spread
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 25 Aug 2009
Trade Type: Low Probability, High Reward Iron Condor (ETF iron condor)
Trade Summary
15 Sep 2009
SPY at 105.70 (+0.42)
3 days to expiration
Action: Close call spread.
Buy to close SPY Sep 106 Call
Sell to close SPY Sep 108 Call
For a net price of $0.48-0.49 debit or better.
Profit or Loss: +$47 per entry
Analysis
This iron condor has performed pretty well. We’ll close the call spread today to avoid any upside risk and to lock in profit. This iron condor made a profit of $47 per entry on $105 of margin. This translates to about 44.76% returns.
*****Trade History*****
25 Aug 2009: Initiate Trade
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 25 Aug 2009
Trade Type: Low Probability, High Reward Iron Condor (ETF iron condor)
Trade Summary
25 Aug 2009
SPY at 103.84 (+0.88)
24 days to expiration
Action: Sell a new iron condor for Sep expiration.
Sell to open SPY Sep 106 Call
Buy to open SPY Sep 108 Call
Sell to open SPY Sep 100 Put
Buy to open SPY Sep 98 Put
For a net price of $0.98-1.00 credit or better.
Net margin required: $102 per entry
Analysis
This is only our first new trade for the month of September. We had been waiting for a suitable price to initiate our trades for September but because volatility has been drifting lower and lower each day, the trades were simply not attractive. We are hoping to put up to 3 trades for September but it all depends on whether we can get it filled. So do keep a lookout for these coming trades in the next few days.
For this iron condor, we are risking $102 to make $98. This gives us a risk/reward ratio (R3) of 1.04. Our breakeven points are 106.98 on the upside and 99.02 on the downside. This iron condor has a probability of about 44.75% to be successful.
At this point in time, the market is showing mixed signals. There are basically 3 ways the market can go: up, down or sideway. Usually whether it moves up or down, it moves within a certain range. But now we know how the market can slice across the one standard deviation mark with ease and continue on in that same direction. For the moment, it seems equally likely that the market can move in either of the 3 scenario.
The bulls have been showing resilience for the past weeks. Although the market does seem a little over-stretched, it seems like there is nothing stopping the bulls in charging into new highs. The bears, on the other hand, have been yearning for a “it’s about time” pullback. It seemed that it was beginning to happen last week when the market did pull back significantly but whatever that was lost was quickly recouped before the week was up. Neutral traders like us will of course see it slightly differently. We would like to think that whether the market moves up or down, it will be trading in a range of values. While this theory generally works, we had also seen how this perceived range was easily violated in the past few weeks.
The only way to find out is to wait and see. But wait and see is not a strategy that can produce profits. Some risk has to be taken to profit. We are trying to find potentially profitable trades with relatively low risk to ride out this period.
That’s all for now, we’ll be in touch again soon once we can get the fill we want for the upcoming new trades. We’re expecting a RUT iron condor and either another ETF iron condor or bonus trade.
Good trading,
Gary
