RUT Iron Condor : May 2007

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.

rut-may-2007-ic.png   rut-april-07-chart.png 

Enjoy, waiting for fill, OptionPundit







6 responses to “RUT Iron Condor : May 2007”

  1. 3heart Avatar


    is it filled? Looks like impossible.

  2. OptionPundit Avatar

    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.

  3. Raheal Avatar

    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

  4. azamaniac Avatar

    how do u decide the exit point when the trade goes against u?-when up and and when down.

  5. Rapheal Avatar

    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?

  6. OptionPundit Avatar

    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.

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