***Closed***SPY iron condor initiated on 19 Jan 2010
19 Feb 2010: Expiration
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 19 Jan 2010
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
19 Feb 2010
SPY at 111.27 (+0.36)
0 days to expiration
Action: Do nothing, let remaining options expire worthless.
Profit or Loss: -$88 per entry.
*****Trade History*****
10 Feb 2010: Close Put Spread
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 19 Jan 2010
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
10 Feb 2010
SPY at 106.78 (-0.45)
9 days to expiration
Action: Close put spread
Buy to close SPY Feb 112 Put
Sell to close SPY Feb 110 Put
For a net price of $1.77-1.78 debit or better.
Analysis
The breakeven point for this trade was 111.1 on the downside. After such a big fall, it seems more and more unlikely that the SPY can climb back up to 111 level in the coming 9 days. Technically we can wait for a couple more days before we make a decision on this trade. To put it another way, we are risking almost a dollar for a dollar, a 50% chance is enough to make this trade a good risk to undertake. However, the longer we hold on to this trade without the SPY climbing up back to 111 level, the bigger the loss we’ll suffer when we finally decide to close the put spread. As time value erodes, this put spread will cost more and more. Its full value at expiration will be $2.00 if both the options remain ITM.
After seeing how the rally fizzled out yesterday, we’re of the view that it’ll be better for us to close up the put spread at this moment and take the small loss before it gets bigger.
Good trading,
Gary
*****Trade History*****
19 Jan 2010: Initate Trade
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 19 Jan 2010
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
19 Jan 2010
SPY at 114.59 (+0.95)
31 days to expiration
Action: Sell a new iron condor for Feb expiration.
Sell to open SPY Feb 117 Call
Buy to open SPY Feb 119 Call
Sell to open SPY Feb 112 Put
Buy to open SPY Feb 110 Put
For a net price of $0.90 credit or better.
Net margin required: $110 per entry
Analysis
This is our first trade for Feb. Our breakeven points are 117.9 on the upside and 111.1 on the downside. At current price, we have about 3.9 point of headroom for the SPY to go up and 2.9 points buffer for it to trade down. We have about 43.31% probability of success.
We’re risking $110 to make $90 for every entry. This gives us a risk/reward ratio of about 1.22. We’re still on the lookout for more new trades for Feb. Expect to have a few more trades in the coming days.
We’ll be in touch.
Good trading,
Gary
