BUY 2 March RUT 1050 Put @20.00
SELL 2 March RUT 1040 Put @17.70
Net Debit: 2.30 ($460 for 2 contracts per leg)
The spread was originally entered for 0.60 credit. Closing it for 2.30 represents a 1.70 loss or $340 for 2 contracts per leg. I redeployed capital in the 950 zone adding one more contract as follows:
SELL 3 March RUT 950 Put @6.20
BUY 3 March RUT 940 Put @5.60
Net Credit: 0.60 ($180 for 3 contracts per leg)
RUT closed today at 1094. I think the 950 area is pretty safe.
To sum up, this is the whole picture of the initial 1040/1050/1250/1260 Iron Condor:
The 1250/1260 Call side was closed for a locked in $120 profit on January 27.
The 1040/1050 Put side was closed today for a $340 loss.
A new 950/940 spread was opened for a credit of $180.
If the 950/940 Put spread ends up being a winner, the final balance would be $120 - $340 + $180 = $40
A loss of $40 dollars (plus commissions of course). That's not bad at all for an Iron Condor that went wrong. As a credit spread / Iron Condor seller, it's in these trades where much of the year end result is defined. These type of positions have an unfavorable risk/reward and to me, controlling your losses on them is vital. If it takes you 10 winners to recover 1 loss, the progress of your equity growth may be severely affected. Yes, you can wait, and adjust when you feel more threatened, but the loss is going to be larger at that point. By waiting longer you give yourself more time to be right and you are bound to have more winners in the year, but the few losses will be more serious losers.
I also have the SPY 159/161 Bull Put spread in March, so I'm still confident that the March expiration cycle will end up in positive territory overall.
Finally a chart of RUT at market close for future reference:
(Click on image to enlarge)
Check out 2014 Track Record
Weekend Portfolio Analysis (February 8, 2014)
Weekend Portfolio Analysis (February 23, 2014)
Weekend Portfolio Analysis (March 1, 2014)
Weekend Portfolio Analysis (March 8, 2014)
Weekend Portfolio Analysis (March 15, 2014)