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Friday, February 22, 2013

April 2013 $SPX Iron Condor

Today I entered the first April 2013 position. A 1375/1380/1580/1585 SPX Iron Condor as follows:

BUY 4 April 1375 Put (@5.90)
SELL 4 April 1380 Put (@6.30)
SELL 4 April 1580 Call (@3.10)
BUY 4 April 1585 Call (@2.65)

Credit: 0.85 ($340)
Margin: 4.15 ($1660)
Days to expiration: 55
Probability of success: 74%

(Click on image to enlarge)


This will be the core April position and will trade the rest around it. No plans to enter anything else at this point until the market makes a sizable move to one of the sides (3% or more).

Finally, as usual a snapshot of the SPX index at market close today, Friday February 22, 2013

(Click on image to enlarge)



Check out 2013 Track Record

Related Articles
Weekend Portfolio Analysis (02-23-2013)
Weekend Portfolio Analysis (03-01-2013)
Weekend Portfolio Analysis (03-10-2013)
Handling SPX Positions. Managing a threatened Iron Condor, plus taking profit on a Bull Put spread
Weekend Portfolio Analysis (03-16-2013) 

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3 comments:

  1. I noticed you like to trade multiple contracts spy/rut spreads at $5 wide each side. Are there any reasons not trading $20 wide spreads which is equivalent to 4 contracts of your $5 wide spreads.
    It seems to me you could save both commissions and transaction costs. For SPX, my transaction cost is usually $0.10 above mid price for iron condor per contract. It could save $30 for 4 contract by transaction cost alone. Do it make sense to you? Do you get filled at mid price for spx n rut.
    Thanks
    Charles

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  2. Hey Charles,

    Well the width of the strikes is something I have certainly thought about a lot. Sure, wider strikes mean you need less contracts.But shorter distances between the strikes generally offer a better return on investment even after considering higher commissions costs. For example:

    Right now an April SPY 154/155 Credit Call Spread is priced at 0.39 (You risk $61 to make $39, max return 39/61 = 63.93%)

    An April SPY 154/156 Credit Call Spread is priced at 0.72 (You risk $128 to make $72, max return 72/128 = 56.25%)

    Obviously, with the 154/155 you would have to trade twice the number of contracts if you wanted to take your investment close to the $128 dollars invested using only 1 contract in the 154/156 version. So that would be:
    2 April SPY 154/155. Total credit $78, max risk $122. So even though the commission cost will be higher, still, you are making more profit (or similar after commission cost) but with less risk. That is, a higher ROI even after considering higher commission costs.

    You other question on how I choose the price, well if it is an ETF, like SPY, IWM I go for the middle. I never hit the bid or the ask let alone try a market order. But if it is a big index like SPX I would enter my price 0.05 below, that is for example this SPX trade ws entered for 0.85 when the natural price was 0.90. This is a necessity, specially with SPX due to liquidity and huge bid - ask differentials.

    By the way, nice work on your blog. Just added it to my To Follow list.
    Thanks

    ReplyDelete
    Replies
    1. You're correct! $5 wide strikes do offer higher ROM. I just double checked with my April positions for spx n rut.
      I thought I had examined this before. Apparently you've done a good job on it.
      Thanks for your comment about my blog. Your blog is one of my favorite too.
      Charles

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