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BookingAlpha Option Trading Advisory

Friday, April 7, 2017

May 2017 RUT Unbalanced Elephant

Trade Details:

20 RUT 1230/1240 Credit Put spreads 0.62 Credit ($1240)
 8  RUT 1450/1460 Credit Call spreads 0.93 Credit ($744)


2/20 IWM 126/146 Unbalanced Long Strangle (0.74 debit for the 126 strike Puts, 0.21 debit for the 146 strike Calls. Total debit paid: $568 )

Net Credit: $1,416
Days to Expiration: 42

Note: A small account could have created a similar risk profile picture for example by playing a regular Iron Condor 1230/1240/1450/1460. Two contracts per leg, and adding 5 long IWM 146 Calls.

I initially planed an Unbalanced Iron Condor. However, seeing RUT below its 50-day average and how this market defies logic over and over again, I decided to go with an Elephant, which, as you all know, suffers much less during rallies. The May 2017 cycle is therefore special as it is the first time I don't use any Iron Condor position and two Unbalanced Lazy Elephants (An SPX Lazy Elephant was entered a couple of weeks ago using May expiration options).

Profit picture:
(Click on image to enlarge)

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

Trade Update - April 25, 2017

I had to close the Call side of the Elephant today:

Closed 8 RUT 1450/1460 Credit Call spreads 2.15 debit.
Original credit was 0.93. Net loss of 1.22 per spread (-$976 total)

Closed 20 IWM 146 Calls, 0.34 credit.
Original debit on these Calls was 0.21. Net gain of 0.13 per contract ($260 total gain)

Combining both, this was a loss of $716

The Put side of the Elephant remains in play and it is a larger credit than today's loss and almost a sure winner at this point.

Trade Update - May 19, 2017

- Put side of the Elephant, May RUT 1230/1240 expires for max profit (0.62 in 20 vertical spreads = $1,240)
- At the same time, the 2, IWM 126 Long Put hedges will expire worthless tomorrow (0.74 debit, 2 contracts = -$148)

Combining both, the Put side of the Elephant is a $1092 winner.

Now, combining the Call side loss from April 25 ($716), with today's win of $1092, this Elephant resulted in a small $376 winner. The Lazy Elephant strategy, therefore, remains unbeaten since introduced in late 2016. Not a single losing Elephant position.

For details about the management of Unbalanced Elephant positions consider an membership, where there is also material that discusses how to put this type of position in small accounts too.

Check out 2017 Track Record

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