RUT Iron Condor May 2007
Even though markets are little shaky currently, here is my thought for my bread-n-butter strategy i.e. Iron Condor.
- Underlying: Russell 2000 index ($RUT)
- Price: RUT @ 800
- BUY: Call - May 07 880 call; PUT - May 07, 730
- Sell: Call – May 07 870 call; PUT – May 07, 740
- Credit: $2.35 or better.
- Margin: $7.65
- ROM: 30%
Why this trade:
- The chart seems to be telling a different story than what I am looking for a potential trade. In my opinion, resistance areas are 810(minor) and 830(major). Key support areas are 800, 795, 770 and 750. Based on this, my potential trade seems to be quite resilient to cover 130 point rang. [92% (call side) and 83% (put side) expectation of expiring worthless].
- IV on the call side is pretty low, seems like traders are expecting for RUT to go down vs. going up. While IV on the put side is roughly double of call side.
- There is a general saying “Sell in May and go away”. Though I don’t want to rely on history but history is also a good teacher. In May, Japanese will return from long holidays, called “Golden Week” holidays. Last year’s meltdown was triggered right after that, from Japan. Recent Feb meltdown was triggered from China. Net, Asia will affect US market as well and Japan is influential.
- Even though I can tighten the range to get more credit, but we are already on shaky grounds and going into shaky times, so 30% ROM seems to be good returns for 6-7wks holding period.
Enjoy, waiting for fill, OptionPundit
iron condor, Trade Ideas6 Responses to “RUT Iron Condor : May 2007”
Leave a reply
About this blog
OptionPundit© (OP) is designed for novice as well as serious option traders. It is a stock & option trading blogsite that is dedicated to the following objectives: read more ⇒
OPN Performance
This assumes a $10,000 starting and fully invested capital. The current phase started when OPNewsletter was re-opened in Jan'08 for Feb'08 expiration. OPN Month is counted as 3rd Friday of each month same as US Equity option expiration day. Comparison with S&P500 or Dow is not shown as it's unfair to expect from such large institution to deliver high returns. I would rather compare with my own target.
AP Biz News
- Stocks end mostly higher after mortgage deal
- Stores' dismal December means prices should fall
- Obama: Congress must act boldly and now on economy
- Prosecutors say Madoff was ready to send out $173M
- Chevron sees lower profit in fourth quarter
- Schlumberger to cut up to 1,000 jobs
- Finding a new job becomes harder as layoffs mount
Stay Informed (RSS or Mobile)
Been There, Done That
3heart
April 2nd, 2007 at 3:28 pm
OptionPundit,
is it filled? Looks like impossible.
OptionPundit
April 2nd, 2007 at 11:07 pm
3heart, it was not filled. The best I could get was $2.25…so i changed my fill requirement, even that was not filled. I have extended my travel in India but have slow internet connection, so couldn’t really monitor dynamic pricing well.
Net, no fill. Will try again today.
Raheal
April 3rd, 2007 at 10:22 am
HI,
Do you find such trade at the end of each day after market close? Is it a time driven trade? i.e. from 49 day, you search such trade until 20 days…then stop..and wait for another cycle…
How about Double Diagonal? How do you find such trade? time driven again?
Serious learner
azamaniac
April 4th, 2007 at 10:27 am
how do u decide the exit point when the trade goes against u?-when up and and when down.
thanks
Rapheal
April 6th, 2007 at 7:08 pm
Hi,
How do you resize your graph in TOS? I cannot overview my graph properly.
Can you share with us how to find this trade? What is the adjustment plan? I have watched a video from CBOE that they are using “1.5 time” rule to adjust the IC when it hits the short strike. i.e. close the original IC and open a new IC with 1 SD if we still have 20 days or more. However, it is less than 20 days, what happen?
OptionPundit
April 8th, 2007 at 4:07 am
Rapheal, yes these are time sensitive, but not like that it has to be 49days or 20days or so. I generally look for any thing between5-7weeks and it depends on IV, premiums and RUT’s absolute as well. So no straight answer to this question, one needs to evaluate several parameters before entering into a trade (same goes for DD as well).
Azmaniac, pls browse iron condor category for earlier comments on adjustments for RUT Iron condors.