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Sunday, May 25, 2014

July 2014, SPX Iron Condor

After 28 days without entering new trades, I finally entered a new position on Friday May the 23rd. With 8 weeks to July expiration, this was the trade:

Buy 4 SPX July 1735 Put @5.40
Sell 4 SPX July 1740 Put @5.70
Sell 4 SPX July 1975 Call @2.95
Buy 4 SPX July 1980 Call @2.45

Credit: 0.80 ($320)
Max risk: 4.20 ($1680)
Days to expiration: 56

Chart of the SPX after market close for future reference
(Click on image to enlarge)

Volatility is very low right now. But, remember, when selling options, volatility is not the only component that helps you make money. Theta decay helps too, and I have it in my favor. Regardless of the low volatility, NOBODY knows when volatility go up. Trying to predict volatility movement is like trying to predict market direction. From April 17 to May 23 the SPX has oscillated in a 2% range between 1860 and 1900. That's almost a tenth of the year where you wouldn't have sold options. I like this Iron Condor 8 weeks to expiration because those options have a lot of time premium in them. Time premium that allows me to go relatively far out of the money to levels I feel comfortable with. Those probability numbers are incredibly accurate over time. Yes, I know if vol goes up it will temporarily affect me, but if it goes up let's say in 2 or 3 weeks guess what? I will already have some theta decay in my favor that will mitigate that vol increase.

These are the current positions after this trade:
June RUT 920/930 Bull Put Spread $120 credit
June SPX 1710/1715/1965/1970 Iron Condor  $320 credit
July SPX 1735/1740/1975/1980 $320 credit

Check out 2014 Track Record


Related Articles:
Call side adjustment up to 2010/2015
Weekend Portfolio Analysis (June 7, 2014)
Weekend Portfolio Analysis (June 14, 2014)
Weekend Portfolio Analysis (June 21, 2014)
Weekend Portfolio Analysis (June 29, 2014)
Weekend Portfolio Analysis (July 12, 2014) 
Adjusted 1735/1740/2010/2015 Iron Condors expires successfully for max profit 


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3 comments:

  1. I tried to get into the same trade but all the premiums were gone. With VIX at a 52-week low, I am going to wait it out until a better oppty appears. Sometimes the best trade is the one you don't take. I am not going to make a trade just to have a trade.

    ReplyDelete
  2. It is true. If you dont get the fill for the credit you wan. It is better to move on. Specially if you're just selling Puts, then a low vol is not good. When selling Calls I dont mind the low vol, as I expect an overbought market for that which is usually accompanied by low vol.

    LT

    ReplyDelete
  3. Very true. Only sell calls when we are overbought, otherwise, your positions can be in danger if market keeps on rising like it did in 2013.

    ReplyDelete