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RUT Iron Condor (Feb’07 Update)

Published on January 8, 2007

RUT Iron Condor (Feb’07 Update)

January 8, 2007

I have rolled up both the legs.
880/900 to 830/840 for $0.85 credit. Also reduced the spread from $20 wide to $10. I also rolled up 700 put to 710 for $0.90 credit and the similar to BCS also reduced it’s spread to $10.

With these adjustments, I have collected $3.20+$0.85+0.90= $4.95 (for my resulting 830/840/720/710 IC) and my current risk is only $5.05. If RUT remains between 720-830, my returns are going to be almost 98%.

 

13 Comments

  • Avatar TraderR says:

    Dear Option Pundit
    Rally nice blog…
    Can you share your thoughts on money management? I see from your other blog that you are tracking % returns on a $10K account.
    Realistically one cant trade RUT IC on a $10K account without risking a substantial % of trading capital.

  • Avatar optionpundit says:

    TraderR,

    Thanks for the compliments. The portfolio tracking is a simplified size of actual portfolio.

    One can very well trade an IC on RUT on a 10K account..a 10point leg will give you roughly $2 credit and you will have to keep $8 for margins(per my way). That yields 25% if all options expires worthless. If you have a $10K account, and you use only 50% of capital, you can have $5000/$800= 6 contracts (rounding-off).

  • Avatar optionpundit says:

    As of Jan 16th 1:53 US EST, the IC was selling for about $1.70.

    With this I have collected ($4.95-$1.70=$3.25) about 80% of overall premium. I shall look for opportunity for rolling or closing the trade.

  • […] I decided to buy back my bear call credit spread of $830/840 for $0.25 and release the margins. This bring my obverall profit from this trade which I originally initiated from past sevral months (find this link for 1st trade) are 88% and for the new feb trade (click here to follow discussion on 2nd trade) are 23.38%. […]

  • Avatar Simon says:

    Hi Optionpundit.

    “I have rolled up both the legs.
    880/900 to 830/840 for $0.85 credit.”

    Does this mean you changed your call side from short 880 to short 830?

    Looks like a good return. You could have gone further OTM…is there any reason why you sety our shorts where they are…delta or standard dev?

    Cheers

    Simon

  • Avatar optionpundit says:

    Hi Simon,

    Yes, I changed the shorts as you have mentioned above. I shifted towards a reasonable probability, generally 1 std dev or greater.

  • Avatar 3heart says:

    What’s you adjustment plan?

  • Avatar optionpundit says:

    3heart,

    This trade is closed for 1)88% and 2)23.38% profits.

    Cheers,
    OptionPundit

  • Avatar 3heart says:

    Mr. OP,

    My question is what your adjustment point is if the market hurts the IC and how you adjust it.

    Regards,

    3heart

  • Avatar optionpundit says:

    Hi 3heart,

    Actually the adjustment points depends on several factors. But, as a general guideline I start to worry when delta of the short leg comes closer to 0.25-0.30. As I continue to write about Iron condors and shorts, I will time to time mention about adjustments to my trade.

    Cheers,
    OptionPundit

  • Avatar 3heart says:

    Thanks, OP. That’s what my adjustment point is too. I found rolling up( short call delta reaches 25) is a pain compared to rolling down because of the vertical IV skew. So how do you adjust in this case?

  • Avatar Simon says:

    3Heart…maybe try a butterfly (1-3-2 or 1-2-1) instead of rolling up the bear csll spread.

  • Avatar AK says:

    Simon

    Can you please give an example how to turn a bear call into butterfly. I have a 810/820 bear call spread on RUT for feb

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