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Wednesday, July 29, 2015

Closed Put side of RUT unbalanced Iron Condor

Just a couple of days after selling an SPX 1925/1930 Credit Put spread using August options I got rid of an old RUT August 1150/1160 Credit Put spread.


Trade Details

Sell to close 2 August RUT 1150 Put @2.03
Buy to close 2 August RUT 1160 Put @2.58

Debit: 0.55

This Bull Put spread was part of the 1150/1160/1350/1360 unbalanced Iron Condor position initiated back in June 23, more than a month ago. I had originally obtained 0.60 credit for it, so it is a small 0.05 winner, which after commissions is basically just a scratch.

The Put spread by itself was not looking terrible with RUT currently at 1229 and in fact, if this Iron Condor was the only thing I had, I wouldn't have touched it. But, it is all about major disasters prevention at the portfolio level when you have 3 Put spreads on and there is considerable time left until expiration. This 1150/1160 Put spread was close to needing adjustments twice: right after I started the position a month ago and now this past Monday. By getting out of it, I am left with two Put spread positions in the portfolio still offering nice potential for good profits and my concern about downside risk has been drastically reduced with this defensive move.


You may wonder, if you were so concerned about downside risk, then why did you sell SPX 1925/1930 two days ago?

Two days ago all the short term extreme pessimism indicators were signaling a perfect condition for Out of the money Put selling. I never want to miss an opportunity like that which you can only see 3 - 6 times a year. The 1930 SPX strike price with 20 something days to expiration is just a very comfortable position to be in. So, I added the third Put spread but immediately started thinking about potentially removing one of the complicated ones in RUT, and that is what I did today.

So, basically all I did was change one Put spread for a safer one in another symbol.
I originally had the 1150/1160/1350/1360 August Iron Condor in RUT. Now I have a much safer 1925/1930 Put spread in SPX and a 1350/1360 Call spread in RUT.

The 1930 SPX strike price when beta-weighted against the Russell index represents roughly 1100 RUT points. So combining the SPX Put spread with the RUT Call spread, it is as if right now I am playing the August 1090/1100/1350/1360 Iron Condor in RUT instead of the old 1150/1160/1350/1360 that I had this morning. The best part: I could make this swap without any harm on the portfolio at the first chance that I had.


Current Positions in the Portfolio

August RUT 1350/1360 Credit Call Spread
$134 credit, 98% probability of success. No concerns.

August SPX 1925/1930 Credit Put Spread
$120 credit, 99% probability of success. Looking great.

September RUT 1120/1130/1330/1340 unbalanced Iron Condor
$235 credit and 82% probability of success. Looking more comfortable now after two consecutive up days.

Thanks for dropping by.

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1 comment:

  1. You did the right thing. Not losing money is more important to me than making money.

    ReplyDelete