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Fall is good, sometimes for some

Published on February 27, 2007

Fall is good, sometimes for some

February 27, 2007

Being an income trader has its own advantages and disadvantages. Disadvantage is that your gains are limited and pretty small compared to directional trades. Advantage is that your losses are also small compared to directional trades.

This was a welcome move for my income portfolio (sorry to disappoint bulls, at least for tonight). Recall previous posts, I opened 2 double diagonal IWM and DIA. Double diagonals are vega play and it gains with the rise of IV. Tonight was beautiful for both of these trades as IV is rising temendously for both trades lifting my overall profit curve. Call spread is declining invalue and put diagonals are gaining two folds (Rise of IV and Fall of market). That’s not it all, double diagonals are calendar spreads imbeded as well so it makes maximum money if the underlying expires at one of the short strikes. For IWM that is 79 and for DIA it is 123. DD on VMC is fine too and therefore no need for adjustments at least for the timebeing. So sometimes red is a beautiful color too.

I had opened a March RUT Iron condor 750/760/850/860. I bot back 750/760 for $0.20 and with today’s fall 850/860 is trading at $0.35. This means I have already collected $2.25-$0.20-$0.35=$1.70, 21% returns,not bad for 4wks.

The only trade that is losing money right now is RUT bull put spread (800/790) that I opened after closing 750/760 put. I have my adjustment plans in place in case it is about to fall too close for that bull put spread.

NKE was on my list, so congratulations to those picked NKE at FXI as soon as these two hit the Fib supports. Nice gains short very tight gains. Since I am not playing directions and I was fully invested so I didn’t violate my portfollio guidelines, and therefore kept watching and smiling.

MER, BKX are fine. I have adjusted greeks for those.

Cheers and profitable trading, OptionPundit

One Comment

  • Avatar OptionPundit says:

    I am not comfortable with the way IV has risen and the way I am looking at technical indicators, coupled with the issues of rapid fill. I think instead of playing with adjustment in such an environment and risking fill to market makers, I’ll better take the BPS off the portfolio. This Iron condor then finall netted out without profit/loss as the BCS drop paid of for the loss in BPS.

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