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Friday, December 25, 2015

Apr29 SPX unbalanced Iron Condor

A new position was entered using Apr29 options:
I'm writing this article a day later as time was simply not available yesterday. Showing a couple Canadian friends around the Florida Peninsula, I ended up making this trade at an iHop in Palm Beach Gardens. Later on, there was too much booze involved and too many loud Cubans barking at mom's to be able to write anything decent.

Trade Details:
Sell 8 SPX Apr29 1725 Put @16.35
Buy 8 SPX Apr29 1700 Put @14.55
Sell 6 SPX Apr29 2250 Call @5.30
Buy 6 SPX Apr29 2275 Call @3.10

Net Credit: $2,760
Max Risk: $17,240
Days to Expiration: 127

Note to LTOptions members: I have been intensively back-testing these farther-out-in-time positions during the last few days and will continue to do so during the holidays. Even though most literature and sources out there suggest that it is best to sell options anywhere from 30 to 60 days from expiration (most preferring 45 days), my own tests and those of this clever trader indicate something different and against common accepted wisdom. I'm working on a documentation update which you will receive during the month of January. You don't need to be jumping from system to system to be profitable, and that is certainly not my intention. But when the evidence is so strong, it just can't be ignored. We better take advantage, improve, evolve.

SPX Chart at market close for future reference
(Click on image to enlarge)

April SPY Long Puts
In addition to this SPX position, new portfolio insurance was bought:
6 contracts were purchased. Total debit of $462

Current Portfolio

January SPX 1865/1875/2200/2210 unbalanced Iron Condor
$2,300 credit. 3 weeks to expiration. Looking very safe with SPX at 2060.99 and a 93% probability of expiring worthless.

January SPY 169 Long Puts
Portfolio anti-crash protection.

March IWM 112/112/120 Synthetic Stock Hedged
Around the break-even mark at the moment after the recent market rebound. Max risk on this play is only $520.

April29 SPX 1700/1725/2250/2275 unbalanced Iron Condor
$2,760 credit. The first trade discussed in this article.

April SPY 161 Long Puts
Portfolio anti-crash protection discussed in this article.
Trade Update
Closed SPY Puts on January 4 for 1.23. Entry was 0.77, so it's a 0.46 gain or $276 in 6 contracts.

Current exposure is 36%. The portfolio is 64% in cash and it is already up +1.25% for 2016.

Trade Updates for the Apr29 SPX unbalanced Iron Condor discussed in this article:

Trade Update - January 8, 2016
Closed the 2250/2275 Call side for 0.40 debit. Entry was 2.20 credit, so it's a 1.80 gain or $1,080 (6 contracts) in 2 weeks.

Trade Update - January 20, 2016
Closed the 1725/1700 Put side for 5.95 debit. Net loss of 4.15 per spread for a total of 4.15 * 8 * 100 = -$3320. Balance between this loss and the Call side win is 1080-3320 = -2240.

A new Apr29 1475/1450 Credit Put Spread was deployed right after taking the loss. Credit of 1.80 was obtained, 8 spreads in play. Total credit of $1,440 to further reduce the previous loss.

Trade Update - February 18, 2016
The  Apr29 1475/1450 Credit Put Spread position is closed for 0.70 debit. For a Net gain of 1.10 per spread ($880 total in dollar terms).

The final balance for the whole position (originally a 1700/1725/2250/2275 unbalanced Iron Condor) was an overall $1,360 loss, or 1.36% on a 100K portfolio:
$1,080 gain on the 2250/2275 Call side
$3,320 loss on the 1700/1725 Put side
$880    gain on the 1450/1475 Put side

If you are interested in a responsible and sustainable way of trading options for consistent income and a smooth equity curve. If you are interested in learning how to buy Portfolio Insurance effectively: which strike prices to select, how many contracts, how many days out, and how to manage this insurance over time, consider acquiring LTOptions, my options trading system revealed to the last detail.

Check out 2016 Track Record

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