***Closed***RUT iron condor initiated on 19 Oct 2009
23 Nov 2009: Options expired worthless
RUT (Russell 2000 Index) Iron Condor initiated on 19 Oct 2009
Trade Type: High Probability, Low Reward Iron Condor
Trade Summary
23 Nov 2009
RUT at 593.93
0 days to Nov expiration
Action: Do nothing, let remaining options expire worthless.
Profit or Loss: -$0.45
*****Trade History*****
27 Oct 2009: Close Put Spread
RUT (Russell 2000 Index) Iron Condor initiated on 19 Oct 2009
Trade Type: High Probability, Low Reward Iron Condor
Trade Summary
27 Oct 2009
RUT at 589.1 (-4.58)
23 days to Nov expiration
Action: Close put spread.
Buy to close RUT Nov 570 Put
Sell to close RUT Nov 560 Put
For a net price of $2.50-2.60 debit or better. [All TOS autotrade participants were filled at $2.55.]
Analysis
Our mental stop of 600 was hit since yesterday but we were waiting for a confirmation as well as perhaps a chance to close the put spread on the cheap when it rebound some. The rebound didn’t happen today and it seems certain that the RUT is going lower by the hour. We have to take action to control our downside risk. By closing our put spread at this point, we’re eliminating all downside risk.
As it stands now, we took a credit of $2.20 when we initiated the trade and today we’re paying $2.55 debit to close up the put spread. This adjustment made this trade in the red by $0.35. We’ll continue to watch this trade to see if there is any way we can sell another put spread to collect more credit. The market is showing signs of indecision and wariness. The rally seems to be running out of steam. But for the past few times this happened, more buyers stepped in to push the market even higher. We’re not too sure if history will repeat itself this time or we’re seeing the beginning of a down trend.
Good trading,
Gary
*****Trade History*****
19 Oct 2009: Initiate new trade
RUT (Russell 2000 Index) Iron Condor initiated on 19 Oct 2009
Trade Type: High Probability, Low Reward Iron Condor
Trade Summary
19 Oct 2009
RUT at 623.73 (+7.54)
31 days to Nov expiration
Action: Sell a new iron condor for Nov expiration.
Sell to open RUT Nov 670 Call
Buy to open RUT Nov 680 Call
Sell to open RUT Nov 570 Put
Buy to open RUT Nov 560 Put
For a net price of $2.10-2.20 credit or better.
Net margin required: $790 per entry
Analysis
This is our first trade for November. Our breakeven points are 672 on the upside and 568 on the downside. We have about 70% probability of success with this trade. The risk/reward ratio (R3) stands at about 4. This means that we’re risking $4 to make $1. As such, we’ll have to be nimble to do necessary adjustments when the need arises. We will set our mental stop at 640 and 600. These mental stops provide us with an early warning signs. When the RUT trades near or pass these points, we should be ready to make adjustments to protect our trade.
As you can see from the P&L chart below, each of this trade has a delta of -1.36 only.
We’re trying to find more viable trades for November. We will keep you in touch.
Good trading,
Gary
