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Thursday, December 1, 2016

January 2017 RUT Unbalanced Iron Condor

Today I initiated a January 2017 Unbalanced Iron Condor in RUT:


Trade details:

BUY  20 January RUT 1170 Put @5.08
SELL 20 January RUT 1180 Put @5.88
SELL 15 January RUT 1410 Call @3.01
BUY  15 January RUT 1420 Call @2.31


Total  Credit received: $2,650 (0.70 from Calls * 15 + 0.80 from Puts * 20)
Days to expiration: 50


A RUT chart for future reference and self-study:
(Click on image to enlarge)

Trade Update - December 7, 2016

Today I purchased 2 additional January 1420 Calls at a debit of 4.50 early in the morning (So, a $900 debit investment). Because I made the transaction early in the day, the 1410 short Call of the Unbalanced Iron Condor were at the 18 delta mark only and my long Calls were not too expensive.

This now turns the position into an Unbalanced Elephant and basically allows me to delay my adjustment to around 1,390 without significantly increasing losses. At that point the 1410 short Calls will have around 40 deltas. In exchange for this peace of mind, the maximum potential profit in the position has been reduced from $2,650 to $1,750.

Here's the new profile picture:

A RUT Chart at market close for future reference:

Trade Update - December 9, 2016

Closed the RUT 1410/1420 Credit Call spread 4.00 debit.
Original Credit was 0.70.
Net Loss is 0.70 - 4.00 = -3.30. In 15 spreads that is -$4950

This is a larger than usual loss due to the fact that I delayed the adjustment until the 40 delta mark was reached by the short 1410 Calls

But, the only reason why I delayed that adjustment was because I had purchased additional 1420 Calls in the previous Update reflected here 2 days ago.

The 1420 Calls were purchased at 4.50 debit and they were sold today for 16.40 credit. Net gain is 16.40 - 4.50 = 11.90. In two contracts that is +$2,380.

So, the real loss today is $2,380 - $4,950 = -$2,570

This is the loss derived from closing the 1410/1420 Call spread and the additional 1420 long Calls. The Put side (1170/1180) is still in play. All its 20 contracts that were sold for 0.80. So, there is a total credit of $1,600 on that side which should be a winner without problems. That would help mitigate today's loss to $970 (2,570 - 1,600) or less than 1% of the portfolio. But that is, if we don't do anything else. Which, of course won't be the case:

SELL 15 January RUT 1480 Call (3.40)
BUY 15 January RUT 1490 Call (2.60)
Net Credit Received: 0.80 ($1,200 in dollar terms)

The end position is now a RUT 1170/1180/1480/1490 unbalanced Iron Condor.
Number of contracts: 20/20/15/15 respectively.
The Total Credit in this position is $2,800 ($1,600 from the Put side, plus $1,200 from the Call side). There is also, a $2,570 loss which is the result of closing the 1410/1420 CCS for a loss along with the additional 1420 Long Calls that had been purchased as hedge.

If the current 1170/1180/1480/1490 is a full winner, those gains can totally eclipse the previous loss.
The only reason why I am surviving this unstoppable rally is:

1- Playing the Iron Condor position as an Unbalanced one at the beginning.
2- Turning the Position into an Unbalanced Elephant early as an upside risk hedge.

Had I not done those two things, the losses would be more severe and there would be no chance to turn this position into a winner. It is not a winner yet, and who knows if RUT decides to rally up to 1,500 tomorrow. But, there is a good chance that I will get to see a winner now that will cover all the losses, and this, without doubling down on my bets and therefore without increasing risks.

Initial potential profit was: $2,650
That potential decreased to $1,750 after I hedged with the two 1420 additional long Calls
The max potential profit is now only $230 after today's update ($2800 current credit, minus $2570 loss). All before commissions, but there is still a chance to make money, despite the unstoppable, historical rally we've fought.

Trade Update - December 13, 2016

Closed the RUT 1170/1180 Credit Put spread 0.20 debit.
Original Credit was 0.80
Net Gain is 0.80 - 0.20 = 0.60. In 20 spreads that is +$1,200

To recap:
- December 1st: RUT 1170/1180/1410/1420 Unbalanced Iron Condor initiated

- December 7th: Additional 1420 Calls are purchased as a hedge

- December 9th: 1410/1420 Credit Call spread closed for a loss along with the additional long 1420 Calls which are closed for a gain. Overall loss when combining both was $2,570

- December 9th: A new RUT 1480/1490 Credit Call spread is deployed

- December 13th: 1170/1180 Credit Put spread closed for $1,200 gain.

So, at this point all we have left is the 1480/1490 Credit Call spread, 15 contracts per leg and 0.80 credit each, which is $1,200 credit in dollar terms. We also have a combined closed loss of $1,370 (2570 - 1200). The 1480/1490 Credit Call spread should be a winner. With its $1,200 credit it would decrease the current loss even more, but this trade won't be a winner overall at this point. At least we can still make it a very small loss as % of the overall account. 

Trade Update - January 20, 2017

The RUT 1480/1490 Credit Call spreads expires for max profit. 15 contracts, 0.80 credit each = $1,200 gain.

To recap:
- December 1st: RUT 1170/1180/1410/1420 Unbalanced Iron Condor initiated

- December 7th: Additional 1420 Calls are purchased as a hedge

- December 9th: 1410/1420 Credit Call spread closed for a loss along with the additional long 1420 Calls which are closed for a gain. Overall loss when combining both was $2,570

- December 9th: A new RUT 1480/1490 Credit Call spread is deployed

- December 13th: 1170/1180 Credit Put spread closed for $1,200 gain.

- January 20, 2017: RUT 1480/1490 Credit Call spreads expire for a $1,200 gain

Final balance for the entire play was -$2,570 + $1,200 + $1,200 = -$170

This is the RUT Unbalanced Iron Condor that was affected by the "Trump" rally. Today's gain pretty much makes it all a scratch. But, this last piece that expired today is booked as a gain in 2017.


Check out 2016 Track Record 

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