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BookingAlpha Option Trading Advisory

Saturday, June 7, 2014

July 2014 SPX Iron Condor adjustment

With the market making new high after new high, I conservatively adjusted the Call Spread side of the July SPX 1735/1740/1975/1980 Iron Condor. The market hasn't hit 1950 yet (25 points away from the short Call option), but with 6 weeks to expiration and a 30% probability of expiring in the money, it was time to act before things got out of hand. Here's my original tweet sent yesterday.

I closed the 1975/1980 Call spread for 1.60 debit. That spread had been entered for 0.50 credit. So, there's a 1.10 debit loss there or $440 in 4 contracts per leg. At the same time I deployed a new Credit Call Spread much further up and using more contracts:

Sell 5 July SPX 2014 Call @3.20
Buy 5 July SPX 2014 Call @2.70
Net Credit: 0.50 ($250 in 5 contracts)
Max Risk: 4.50 ($2250)
Days to expiration: 41

So the final Iron Condor is now 1735/1740/2010/2015, with $120 credit on the Put side and $250 on the Call side for a total of $370. That means, if the new position is a full winner, it will mitigate the $440 loss caused by the original 1975/1980 Call spread. The final balance on the whole position, adjustment included would be a less than 1% draw-down for the portfolio. The market's now looking short term overbought and due for some consolidation (according to the usual indicators I follow), so I think the new position has pretty good chances.

I'm glad I closed the 1965/1970 Call side of the June Iron Condor last week, as a measure to prevent the loss on two Call spreads at the same time. Those Calls would be taking some heat now and in need for adjustments as well.

A chart of SPX for future reference
(Click on image to enlarge)

After closing the Call side of the July 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 1735/1740/2010/2015 Iron Condor $370 credit
July SPY 191 Put Calendar Spread with around $300 max profit potential

Check out 2014 Track Record 

Related Articles:
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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1 comment:

  1. Good move Henrik. I think we are near a short-term overbought condition. I don't see the SPX going to 2000 this month. I will look to roll my July 2000/2005 in the next 2 weeks if we are still hoovering above 1900. Just because we think it is overbought doesn't mean the market can't go higher.