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BookingAlpha Option Trading Advisory

Monday, March 11, 2013

Handling SPX Positions. Managing a threatened Iron Condor, plus taking profit on a Bull Put spread.

The Call side of the March 1445/1450/1560/1565 Iron Condor in SPX was closed today for 1.30 debit. This spread was originally opened for a credit of 0.35, so the final balance on this 1560/1565 Bear Call spread is a 0.95 loss (or -$475 for 5 contracts per leg). I remember when the trade was initially opened I thought this 1560 would be impossible for the SPX index in a month, but there you have it, we're pretty close to that value.
Right after that, another trade was entered. A new SPX 1445/1450/1610/1615 Iron Condor as follows:

BUY 5 April 1445 PUT @ 3.60
SELL 5 April 1450 PUT @3.90
SELL 5 April 1610 CALL @2.30
BUY 5 April 1615 CALL @1.85

Credit: $0.75 (0.75 * 100 * 5 = $375)
Margin: $4.25 (4.25 * 100 * 5 = $2125)
Break-even points: 1449.25 and 1610.75 (SPXwas around 1554 when I entered the trade)
Probability of success: 78.17%
Days to expiration: 38
Max return on margin: 17.65%
Commissions: $30.00 (Assuming a very unfavorable $1.50 per contract)

I don't plan to hold this Iron Condor until expiration. It was opened with the VIX bellow 13, so, a less than ideal situation, only for the purpose of mitigating the March 1560/1565 Call Credit spread loss.

The March 1445/1450 Put Credit Spread side will be left to expire worthless on Friday. A 100 point loss for SPX seems unlikely in expiration week, so, I'll milk what is left there and will also save in commission costs.

March expiration will be over by Friday, and in spite of the unstoppable uptrend and the low volatility, there is still a good chance to finish this cycle without a loss, and even a small profit. The RUT 825/830/955/960 Iron Condor is still in play and could yield full profit. We'll see.

Finally, I also closed the April 1375/1380 Bull Put spread initially entered back in February 22 as part of this Iron Condor. A small $140 return. The idea is to redeploy another Bull Put spread once the market retraces and volatility goes back up. Yes, I know, I've been sounding like a broken disc about "the market pulling back" so far this year. But, it just will happen. Only a question of when. For perspective the SPX is up +9.12% this year. That is 9.12% in exactly 70 days so far this year. If it were to keep this pace, SPX would end the year up +47%. Does that even make sense? So, folks, the risk is to the downside. The upside will be slow, the downside, whenever it comes, will be meaningful.

Check out Track Record for 2013

Related Articles:
March 2013 SPX Iron Condor
March 2013 RUT Iron Condor
April 2013 SPX Iron Condor
Weekend Portfolio Analysis (03-16-2013)
Weekend Portfolio Analysis (04-07-2013)
Weekend Portfolio Analysis (04-13-2013) 

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