***Closed***SPY iron condor initiated on 2 Nov 2009
23 Nov 2009: Options expire worthless
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 20 Oct 2009
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
23 Nov 2009
SPY at 109.43
0 days to expiration
Action: Do nothing, let remaining options expire worthless.
Profit or Loss: -$95.14 per entry
*****Trade History*****
18 Nov 2009: Close Call Spread
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 2 Nov 2009
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
18 Nov 2009
SPY at 111.04 (-0.299)
2 days to expiration
Action: Close call spread.
Buy to close SPY Nov 107 Call
Sell to close SPY Nov 109 Call
For a net price of $1.88-1.89 debit or better. [All TOS autotrade participants were filled at $1.86.]
Analysis
This market is difficult to trade. The moment I sent out the advisory to close the call spread, the SPY started heading lower. We decided to close up the call spread to minimize the loss. For 2 full days, the SPY closed above 110, which is an important level, both technically and psychologically. Today’s market started with a downside move (similar to yesterday’s) but the SPY began to creep back up steadily. We’re not sure where the SPY will close today but judging by recent history, we’re not expecting a massive downward move today.
But a long red candle is exactly what we need at the moment. Looking at the way the market is moving, we’re not expecting a huge selloff soon. A huge selloff will happen soon, we’re confident of that, but right now, we’re not confident that it’ll happen soon enough to save this trade. There are talks about the coming double dip, that this rally is fueled by nothing buy air.
If we close this call spread tomorrow or on Thursday, it’ll trade closer and closer to its full value of $2.00 unless the SPY suffers a massive selloff to below 107.97 level. Looking at things as they are now, we’re not too sure if it’ll happen soon enough.
By closing this call spread today for $1.86, we’re locking in a loss of $89 per entry. If we delay close this spread now, we risk losing $103 by Thursday or Friday. The difference is $14 per entry to bet that the SPY will trade below 107.97 before Friday. Of course it could happen and we’ll give ourselves a good kick if that happens. By closing the call spread today, we’re saving ourselves $14 per entry if the SPY trades above 107.97 by Friday.
To summarize things, we’re stuck between a rock and a hard place. How we view the market now could be summarized by the first line of this analysis. The market is difficult to trade now. It’s hard to be a bull when you know that there is not much substance to keep the rally going indefinitely.
Good trading,
Gary
*****Trade History*****
2 Nov 2009: Initiate Trade
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 2 Nov 2009
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
2 Nov 2009
SPY at 104.23 (+0.67)
18 days to expiration
Action: Sell a new iron condor for Nov expiration.
Sell to open SPY Nov 107 Call
Buy to open SPY Nov 109 Call
Sell to open SPY Nov 101 Put
Buy to open SPY Nov 99 Put
For a net price of $0.97-1.00 credit or better. [All TOS autotrade participants were filled at $0.97.]
Net margin required: $103 per entry
Analysis:
The volatility is back! What we’re seeing in the market now could be the beginning of a protracted downward move. We’re not trying to predict where the market will go next but the odds are now in favor of the bears. No one knows what bad news tomorrow will bring but we can tell that the market is feeling jittery now (see what happned to the VIX).
We decided to add another SPY iron condor as a complement to our existing iron condor. The SPY iron condor initiated on 20 Oct 2009 is a little too bullish for comfort at this point. With 18 days to expiration, we’re hoping for an up day to close up the put spread for less than $0.98. This new SPY iron condor is slightly more bearish in nature, with a delta of -3.98 per entry. Our breakeven points are 107.97 on the upside and 100.03 on the downside. It is very likely that the SPY would trade around this range in the coming days.
Like I mentioned earlier, we’ll be waiting for an up day to try to close up the older SPY iron condor initiated on 20 Oct 2009. We believe that this additional trade gets us covered on the downside while the older iron condor gets us covered on the upside. As long as the SPY trades between 105 and 107 in the coming days, we could even boost our profit by adding on this trade. The VIX is telling us to be prepared for volatility in the market. We’ll be watching for suitable time to close certain legs to maximize our profit potential and minimize our risk exposure.
Good trading,
Gary
