***Closed***IWM iron condor initiated on 2 Mar 2010
18 Mar 2010: Close call spread
IWM (iShares Trust Russell 2000 ETF) Iron Condor initiated on 2 March 2010
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
18 Mar 2010
IWM at 68.42 (+0.59)
1 day to expiration
Action: Close call spread.
Buy to close IWM Mar 65 Call
Sell to close IWM Mar 67 Call
For a net price of $1.99 debit or better.
Analysis
Similar to SPY iron condor initiated on 23 Feb 2010. Basically there is not much to add. The situation is about the same. The bears seem to be gathering a bit of strength today. But it’s too late to save our condor and we had quite a few such false alarms before. So we should just close up and move on. It is unlikely that the IWM will drop by more than 2 points by tomorrow.
Good trading and let’s look forward to a better April!
Gary
*****Trade History*****
2 March 2010: Initiate Trade
IWM (iShares Trust Russell 2000 ETF) Iron Condor initiated on 2 March 2010
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
2 Mar 2010
IWM at 64.85 (+0.59)
17 days to expiration
Action: Sell a new iron condor for Mar expiration.
Sell to open IWM Mar 65 Call
Buy to open IWM Mar 67 Call
Sell to open IWM Mar 63 Put
Buy to open IWM Mar 61 Put
For a net price of $0.95-0.96 credit or better. [All TOS autotrade participants were filled at $0.96 credit.]
Net margin required: $105 per entry
Analysis
This is our second trade for March. We’re coming into the month pretty late because we’re having a hard time getting fills. Technically, the market can go either way now. The IWM is trading very near its prior high of 64.85 (on 19 Jan 2010). This 65 level provides the most obvious and current resistance. Like I said earlier, it can go either way. It can breach this 65 resistance level and soar higher in the coming days or it can tumble after hitting the ceiling. As our trade suggests, we’re betting on the latter.
We’re risking $104 to make $96 for each entry. As such we have a risk/reward ratio (R3) of 1.08. We’re risking about $1 for $1. Technically, odds are on our side. However, this is a real trade with real risk of losing. Our breakeven points are 65.96 on the upside and 62.04 on the downside. This is about the same as 659 and 620 on the RUT. As long as the RUT trades within this 40-point range for the next 2 weeks, we’ll be having a good profitable trade.
Each of this trade carries a negative delta of about 16.65. We can’t predict what will happen next but there are signs that the current bullish sentiment is beginning to wear out.
For now there is not much we can do but to sit and wait for time decay to work its magic. We’re still hopeful of initiating another trade for March. We’ll see what happens next and decide our best course of actions.
Good trading folks!
Gary
