OptionPundit

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  • RUT Iron Condor (update-profit 27.6%)

    This is to update that I have closed one of the Iron condors on RUT earning $2.10 credit on $7.60 risk. That gives me kool 27.6% for 1 month holding. Attached below is my transaction details.


    I still have another IC that is 720/710/810/820 that I had sold for $2.15. It is currently selling for $0.30. I have earned $1.85 already; that is $1.85 over $7.85 i.e. another 23.5%.

    Currently RUT is at 764 and that is 96% of expiring worthless as it is about 50 points away from my short legs.

    Profitable trading,
    OptionPundit

  • SPY Dec/Jan DD

    Risk $2200/Reward $954 with upside potential

    I am reviewing few trades for the next month play..following is one of those. It is a double diagonal for SPY.

    Short Dec call (141) and Put (133), Long Jan call (143) and Put (131) for debit of $0.20/contract.

    It is quite market neutral trade with a bias for IV rise. For every 1% increase in IV this will earn, $6.7/contract. My break even points are $131/$142. As long as SPX remains between 1320 and 1420, I am fine. I will lose money if IV drops further by more then 2%. As per current IV, my investment is $2,000 for 10 contract + $200 for the debit. The maximum rewards as per current IV are $954 in one month. I will have Chance to roll double calendar around December expiration which will result in $2 wide Iron condor.Based on above volatility chart, it seems the IV is at lowest level i 1 year. I have buffer of IV going down by another 2% before this position starts to lose money. To note though, if IV rises by simply 3%, I will easily be making nice 5-6% quickly on this trade.

    Profitable trading

    OptionPundit

  • Phelps Dodge BCS Nov 06

    Phelps Dodge.

    After roughly 6th attempt to cross 52wks high $102-103, PD slipped back. Based on my opinion it is forming a double repo. If true, the imminent fall is there. Just to recap, few days back PD had announced earnings as well where it had missed the expectation. The stock kept going North due to speculation play. Today the price is dropping while volume is rising.

    Based on my bearish bias, I am opening a Bear Call spread for 100/105 strikes. I was filled for $1.20 credit and hence my risk reward is 1.2/3.8 i.e. 1:3 roughly

  • Nov CMI BCS/6.4% Profit

    As mentioned y’day, CMI dipped to as low as $124.1 today (till 10:50am US EST). I didn’t get a fill to buyback at $0.70/contract, so decided to bid a bit higher at purchased at $0.85/contract. That results in $0.25/$3.90 in 1 night holding period i.e. 6.4% profit.

  • Nov CMI BCS

    Last night when CMI reported bad results (missed on both Revenues and Earnings, The company also reiterated its 2006 profit guidance of $14 to $14.20 per share. Analysts, on average, expect a profit of $14.35 per share.) it gapped down, I started to analyze it further for a bearish play. Though best would have been to play after 11th candle, but there was equivalent buying and selling pressure and hence less confidence to go in. The leading indicators were already suggesting it to touch $124.5-125.5 area and true to its form it did and then bounced back. This downward move came with huge volume spike.

    After it bounced back, I decided to get in for a speculative play for a very short period of time i.e. 1wks or 15-10% profit. I was filled for $1.10 for a Nov 130/135 BCS. I am looking for it to either touch 124.5-125.5 again or penetrate that level to south of it.

  • RUT Iron Condor (Nov’06)

    November Iron Condor:

    • October 11, Filled 690/700 Bull Put RUT spreads for $1.40 credit.
    • October 13, Filled 810/820 Bear Call spread for $.90 credit then again got filled on Oct 16 for $1.10 credit.
    • Ocotber 20, filled 720/710 Bull Put spred for $1.15 credit

    These multiple credit spread completed my Nov’06 Iron condor for a total of $4.55 credit @ total risk of $15.45. If all options expires worthless by November 16th, i.e. RUT remains between 720 and 810, I shall earn full credit i..e $4.55

    The returns will be $4.55/$15.45 = 29.4% in 1 month.

    As of October 30, this is how the chart looks like:


    And the transaction are: