RUT Iron Condor (Feb’07 Update)

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%.

 


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13 responses to “RUT Iron Condor (Feb’07 Update)”

  1. TraderR Avatar
    TraderR

    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.

  2. optionpundit Avatar

    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).

  3. optionpundit Avatar

    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.

  4. […] 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%. […]

  5. Simon Avatar
    Simon

    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

  6. optionpundit Avatar

    Hi Simon,

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

  7. 3heart Avatar
    3heart

    What’s you adjustment plan?

  8. optionpundit Avatar

    3heart,

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

    Cheers,
    OptionPundit

  9. 3heart Avatar
    3heart

    Mr. OP,

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

    Regards,

    3heart

  10. optionpundit Avatar

    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

  11. 3heart Avatar
    3heart

    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?

  12. Simon Avatar
    Simon

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

  13. AK Avatar
    AK

    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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