Closed 1965/1970 Call side of June 1710/1715/1965/1970 Iron Condor for 0.05 profit. Will reload if market keeps going up
— The Lazy Trader (@lazytrading) May 29, 2014
Now, why did I close that spread?
The main problem is the fact that I have a 1735/1740/1975/1980 Iron Condor in July, and that Call spread in July could be threatened at the same time if the market keeps moving up.
Based on some simple simulations using TOS, if SPX goes up to 1945 next week (just 1.33% above current levels), the July 1975 short Call option would reach a 30% probability of being the money due to all the time that is left until July expiration. But if that 1945 level was hit next week, then the June 1965 short Call would also be showing a number around 30% probability in the money. Even though its expiration is closer in time, it is also 10 points lower than the July Call option. To sum up, I would end up next week with two Call spreads in need for adjustment.
Obviously, many traders would criticize this move. I admit I like to adjust my positions early. Other traders prefer to wait a little more. I don't mind having more adjustments and smaller profits in order to avoid huge draw-downs. I'm a fairly conservative guy.
The Call spread was closed for 0.45 debit. It was initially entered for 0.50 credit. Profit = 0.05 or $20 in four contracts per leg. That small profit is the least important point. The most important point to me is the fact that I avoided a potential scenario where I had to defend two threatened call spreads at the same time in a low vol environment.
The Put side (1735/1740) is still in play, and the RUT 920/930 Put spread is also in play with June options. Both positions look pretty safe at this point. I have the potential to finish the June expiration cycle with a +2% portfolio growth or 24% annualized and I take that any day without complaints.
After closing the Call side of the June SPX Iron Condor, this is how current positions look:
June RUT 920/930 Bull Put Spread $120 credit
June SPX 1710/1715 Bull Put Spread $120 credit
July SPX 1735/1740/1975/1980 Iron Condor $320 credit
July SPY 191 Put Calendar Spread with around $300 max profit potential
Chart of SPX after market close for my own future reference:
(Click on image to enlarge)
Check out 2014 Track Record
Put side of Iron Condor successfully taken to expiration (June 21, 2014)