***Closed***SPY Iron Condor initiated on 25 May 2010
17 June 2010: Close call spread
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 25 May 2010
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
17 Jun 2010
SPY at 111.34 (-0.631)
1 day to expiration
Action: Close call spread
Buy to close SPY Jun 110 Call
Sell to close SPY Jun 112 Call
For a net price of $1.40 debit or better.
Profit or Loss: -$17 per entry.
*****Trade History*****
25 May 2010: Intiate Trade
SPY (Standard & Poors Dep Rec) Iron Condor initiated on 25 May 2010
Trade Type: Low Probability, High Reward Iron Condor
Trade Summary
25 May 2010
SPY at 105.91 (-1.80)
24 days to expiration
Action: Sell a new iron condor for June expiration.
Sell to open SPY Jun 110 Call
Buy to open SPY Jun 112 Call
Sell to open SPY Jun 103 Put
Buy to open SPY Jun 101 Put
For a net price of $1.21-1.23 credit or better.
Net margin required: $79 per entry
Analysis
This is our second trade for June and we’re taking advantage of the high volatility to enter this trade for a higher premium. We’re risking about $79 to make $121 per entry. This gives us a risk/reward ratio (R3) of 0.65. This is very low risk. But of course, it means very low probability. Currently we’re looking at a probability of about 33% of success. However, our breakeven points are 111.21 on the upside and 101.79 on the downside. This is about a range of 9 plus SPY points which is similar to about 90 SPX points. As long as the SPY trades between these 9 points for the next 20 plus days, we’ll have a pretty good profit.
At the current price of SPY (105.91), we are about 5 points away from our upside breakeven point and about 4 points away from our downside breakeven point. It is of course possible for the SPY to trade pass these levels but because our risk is low, we can afford to wait slightly longer for this trade to be profitable. The maximum loss we can incur is $79 per entry.
We’ll wait for a few days before we enter any new trades.
Good trading,
Gary
