RUT March Iron Condor

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2 responses to “RUT March Iron Condor”

1. 

   MikeN

   February 21, 2007

   On 2/26 I put on the trade for a $2.13 credit. If I’m expecting RUT to break 852, I could buy an 850/860 call vertical @ $1.25, leaving me a net credit of $.88. This will cap my profit at $88 per position on the upside and increase my risk by $88 on the downside.

   I’m inclined to “let it ride”. It was a good trade, well thought out and put on at a fair price. I didn’t risk more than I am comfortable losing for a 68% probability of making at least $.01 on the trade, it had a wide market and, although in an upward trend, we bought it when the trend had slightly “flattened out” so I realized the potential for RUT to continue the uptrend.

   As I learned with Tom Preston’s Monkey Brains monthly SPX condors in Feb, iron condors can be nail biters up until a settlement price is announced. For condors, Preston advocates finding a good, fairly priced trade and sticking with it.

   On the other hand, an $88 return is still acceptable based on my personal risk/reward matrix, so I’d like to hear other thoughts.

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2. 

   chiu

   February 22, 2007

   Mike, you put on a trade on 2/26 with Iron Condor for a $2.13 credit. You make money with time decay when the underlying stays within the two sell leg range.

   If the underlying makes a slow move towards either sell leg, your position is still ok as the time decay is helping you. If the move towards either sell leg is rapid, even it has not touched the sell leg, your position will show paper loss (delta is against you). So it is not the case that you will always have net credit when it moves.

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