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BookingAlpha Option Trading Advisory

Tuesday, February 19, 2013

SPX March Put Credit Spread Roll Up to book profits

Today I rolled up the March SPX 1355/1360 Credit Put Spread to 1445/1450. Essentially closing the 1355/1360 trade for a profit and trying to get some new credit for the new 1445/1450 one as the market keeps headed higher.

SELL March SPX 1355 PUT
BUY March SPX 1360 PUT
Debit 0.05

This trade had been entered for 0.40 Credit . 0.35 has been locked for a 0.35 * 5 * 100 = $175 profit.

SELL March SPX 1445 CALL
BUY March SPX 1450 CALL
Credit 0.30

This new Bull Put spread simply substitutes the old one, and there is still an Iron Condor position when combined with the existing 1560/1565 Bear Call side:

(Click on image to enlarge)

A 68% probability of success, 23 days to expiration. And total credit of 0.65 in this Iron Condor.

Check out 2013 Track Record

Related Articles:
March 2013 SPX Iron Condor
Weekend Portfolio Analysis (02-23-2013)
Weekend Portfolio Analysis (03-01-2013)
Weekend Portfolio Analysis (03-10-2013) 

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  1. You did not book any profits.

    The iron condor is the position, and as long as it remains open, no profits can be booked.

    What you did was increase downside risk for an additional credit of 25 cents. Or you can say that you added 25 cents of protection to the upside - but I hope you will not say that because the protection is so tiny that it is meaningless.

  2. Hey Mark,thanks for your comment.
    I think it depends on how you want to look at it.
    There remains an Iron Condor open.
    But, the SPX 1355/1360 Bull Put spread was closed for a profit. Done. Gone with the wind. How is that not booking a profit? (At least on that credit spread?)

    Now, Im not talking about the whole Iron Condor. Obviously there is an Iron Condor in play. But the SPX 1355/1360 was closed for a profit.

    Maybe the verb is not "lock". But that's just a technicality.

    I agree with you in that The Iron Condor as a whole cannot be considered a winner yet.
    But I was just specifically talking about the 1355/1360 spread.

    1. The reason that this concept is important is that I believe it is necessary to be sure that new iron condor traders adopt a good way of thinking about iron condors. It is important they they do not rush to 'lock in a profit' on one half the position and think of it as a good thing.

      It is not 'booking a profit' on the put spread because your position was not two separate credit spreads. The position was, and remains, an iron condor. we agree on that.

      Here is how I perceive this situation:

      The put spread is sold as a hedge against the call spread.
      The call spread is sold as a hedge against the put spread.

      Neither spread is sold with the intention of earning a profit. That may be the difficult part for newer traders. However, closing one spread 'at a profit' is inconsistent with the trade plan. Closing it for other reasons - well that is a different story. I do not want to get newbies thinking that exiting one side is making money.

      Instead the objective is to earn a profit from the entire iron condor. As long as one side remains open, and especially when that side is underwater hre are no profits.

      I note that you rolled the puts to a higher strike (for a small premium). To me that is an adjustment, or hedge, rather than locking in a profit.

      Not a big deal in the scheme of things, unless it confuses beginners. And as a teacher of beginners, I want them to adopt a winning mindset.

      Thanks for the discussion.