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BookingAlpha Option Trading Advisory

Wednesday, March 5, 2014

RUT trades during market rally (March 4, 2014)

These were my trades yesterday March 4.

First I sold a RUT 1240/1250 Credit Call Spread, probably a little early as RUT kept going up all day:
Sell 2 RUT March 1240 Call @3.00
Buy 2 RUT March 1250 Call @1.60

Credit 1.40 ($280)
Max risk: 8.60 ($1720)
Max return on risk: 16.28%
Days to expiration: 17

As the market kept rallying I had to adjust the existing RUT Iron Condor that I had in April.
This was a 1020/1030/1245/1255 initially entered for 1.40 credit. I closed it for 3.50 debit for a 3.50 - 1.40 = 2.10 loss (or $420 for 2 contracts per leg). I opened a new Iron Condor with April options in RUT right away using 1080/1090/1280/1290 as the new strikes:

Buy 3 RUT April 1080 Put @4.50
Sell 3 RUT April 1090 Put @5.10
Sell 3 RUT April 1280 Call @3.20
Buy 3 RUT April 1290 Call @2.20
Credit 1.60 ($480)
Max risk: 8.40 ($2520)
Max return on risk: 19.05%
Days to expiration: 44

A chart of RUT at market close yesterday:
(Click on image to enlarge)

To sum up, these are the current positions in the portfolio:
March SPY 159/161/191/193 Iron Condor. $319 credit.
March RUT 940/950/1240/1250 Iron Condor. $460 credit.
April RUT 1080/1090/1280/1290 Iron Condor. $480 credit.

There is a good chance to have a solid March expiration cycle. April positions started with the wrong foot but there's time to recover.

Check out 2014 Track Record

Related Articles
Weekend Portfolio Analysis (March 8, 2014)
Weekend Portfolio Analysis (March 15, 2014)
Weekend Portfolio Analysis (March 21, 2014)
Weekend Portfolio Analysis (March 30, 2014)
Weekend Portfolio Analysis (April 5, 2014)
Adjusted 1080/1090/1280/1290 RUT Iron Condor down to 1055/1060
Weekend Portfolio Analysis (April 11, 2014) 

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  1. Your trades look great. What I would do differently is not place that March RUT bear call spread until the last hour of the day and go with the 1250/1260 for less credit.

    When you initially placed your April RUT iron condor, I thought the bear call spread was a bit aggressive. I would have sold the 1260/1270 on the bear call side. If you had done that, you could have waited a bit longer before making an adjustment.

    Your current April iron condor is perfect. I would have added a few more contracts to each side to take in more credit to make up for the loss of adjusting.

    February and March is beginning to look a lot like what happen in 2013 when our bear call spreads were constantly being pressured by a surging market. Iron condors are harder to make money with a surging bull market.

    Good luck.

  2. Yeah, I selected a conservative Put side, farther away than usual and I was a bit aggressive on the Call Side. I did enter the new Condor using three contracts per leg. The original only had two. And with a $480 credit it will cover the loss. I will still need to make something else in April on top of this in order to have a decent month. But I'm cool, my losses are manageable. Here's an Iron Condor that went wrong but didn't cause me a 20% portfolio drawdown or anything like that and I'm pretty confident I can turn April around or at least mitigate the drawdown, which is my goal for losing months.

    Hope you're doing good with your trades and not getting burned on the call side.

    As usual, thanks for the feedback.


    1. I didn't realize you increase your contract size on this adjustment. I am getting burned a bit on the call side. Just when I though it was safe to sell some bear call spreads, I get caught with my pants down again. At least this time, I am not increasing my short bets.

      Why don't you trade NDX?

    2. Ahh the Call side over and over again my friend. The bull market will eventually come to an end.

      I dont do NDX for any special reason. I simply never look at it too much and RUT and SPX keep me busy enough.