Crazy Down!

Yesterday the markets (since I'm currently exposed to the Russell 200 and S&P 500 a general reference to the markets means the RUT and SPX) were down 3-4%. That's huge. A huge move like that does not bode well for an Iron Condor as that trade profits when the underlying remains between the two short strikes.

Here's where I currently stand:
RUT: current price = 695, my short put is at 680 which gives me around 2.2% of a downward cushion.
SPX: current price = 1277, my short put is at 1245 which gives me around 2.5% of a downward cushion.

This may not sound like much, but given that we had such a big move yesterday, and a smaller continuation of that move today gives me some comfort. In my opinion, it would be rare for an index to move 4% and then another 2.5% in the same direction within a month. Can it happen? Sure, and if it does I will then likely purchase a put or roll the condor down, but given where the market currently is, I would expect a slight bounce next week which would put the underlying in a much more favorable position closer to the middle of my short options.

Hello Again

It has been far too long since I last posted on this blog and gave an update. I am back now and will hopefully find the time to continue posting. Here are some updates:

The ADBE Straddle did not work out in the near-term months. Then January 09 contracts netted around 10 bucks, but basically the increase in IV was not enough to overcome time-decay.

Amazon's Earnings Release is on July 23. IV has not yet started to climb so I am still holding off on purchasing a straddle. In the future I will not look in to trading straddles as they really are more of a speculative play that is not going to fit with my goals (I am still developing my goals, but I am leaning towards a goal of 5% total portfolio return per month).



I never did place the IWM Iron Condor that I had mentioned as my order didn't get filled and I lost interest in it.

The Jun RUT Iron Condor (IC) expired worthless, thereby achieving max profit for a return on risked capital of around 10%.

I have alread placed another RUT IC (670/680/800/810) for Jul expiration that has a max profit of $165 on $835 risked for a return on capital of 19.7%. As long as the RUT (currently at $720) remains between 680 and 800 by July expiration, the full 19.7% will be realized.

I am looking at placing another Jul IC on the SPX index. Here is the risk profile:

You can see this is 1235/1245/1400/1410 Iron Condor. That max profit if the SPX settles at expiration between 1245 and 1400 (currently at $1318) is almost 30% ($235 on $770 risked).

I am surprised I can sell this IC for 2.35 (not sure how well spliting the bid/ask works on this product), but this is pretty close to 1 standard deviation wide. So I will place this trade tomorrow and we will see what happens

Iron Condor's - RUT and IWM

I've become fascinated with Iron Condors. It may seem odd to place an Iron Condor on the RUT and the IWM at the same time (the IWM is the Mini ETF version of the RUT), but the more I trade, the more I learn.

I got filled today on my Jun RUT 680/690/790/800 Iron Condor @ 1.05


Tomorrow I will look to place an Jul IWM 66/67/81/82 Iron Condor @ .24 (for a 31.5% max ROI). Here's what it looks like:

Cheers

Russel 2000 Jun Iron Condor

Quick Updates
ADBE Volatility Straddle - P&L currently showing a small loss for the nearer-term options, while the long dated Jan 09 42.5 Straddle has a small profit. ADBE has not yet experienced a significant increase in IV:AMZN Volatility Straddle - IV has not started to increase yet so I am still in a good position and continue to wait till the middle of June to purchase an ATM Straddle:

Over the weekend, I did a lot of research on selling a Russel 2008 Iron Condor. An Iron Condor is basically made up of two vertical spreads: a Bull Put and a Bear Call. The particular strikes I'm interested in are the 790/800 Bear Call Spread (sell the 790 call, cover myself with an 800) and the 690/680 Bull Put Spread (Sell 690 put, buy the 680 put).

With RUT closing out Friday (after the DOW dropped 400 points(!)) at 740, this particular spread would allow for a movement of plus or minus 6.8%. It would reach maximum profit of 1.05 per contract if upon expiration, the RUT closes anywhere between 691 and 789. The margin requirement for this trade is 8.95 per contract, resulting in a return of 11.7% over 2 weeks. I'm going to be looking at what the market does on Monday, given Friday's activity and look to open up this position.

Cheers.

ADBE Volatility Straddle Update - 13 days remaining

Not much to update you on. Still just waiting patiently for the increase in Implied Volatility. Volatilities did increase today as the Underlying took a hit. I was surprised to such a skew in the Implied Volatilities after today. The near month Jun 42.5 Straddle increase almost a full 2 points while the farther-out expirations only increased on average a half point. It does make sense, given that earnings are released a few days before the Jun expiration Friday, however, I did not expect to see such a difference. This doesn't hurt us, but it is leading me to question my previous assumption that the farthest-out straddles would benefit from this Volatility Straddle strategy. Given that the Jul 09 42.5 straddle has the highest Vega (will benefit the most from an increase in Implied Volatility - which will happen as we approach earnings release), it will only benefit if in fact the put and call actually do experience the run-up.

Overall today the straddles lost some value. This is due mainly to the Delta, as it has increased as the underlying approached the Upper Breakeven point (the Puts were losing money, and the Calls were increasing by more than enough to offset the Puts). This doesn't bother me, as I'd be fine if the Stock settled right at 42.5 (which is NOT what you want if you are Long a straddle and planning to hold till expiration with no other catalyst to boost Implied Volatility). Additionally, the two days over the weekend gave us a hit with our Short Theta exposure which is almost entirely offset by Vega's helpfulness.

For now we sit tight and wait for our expected rise in IV. Overall, since we are pretty much flat in terms of P/L right now, I won't say that I should've placed the trade a week later, but if I play ADBE before Earnings again, I will enter into the straddle probably at least a week later than I did this time around--no need to tie up capital.

Cheers.